DELL Q3 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Up

Core Insights - Dell Technologies (DELL) reported non-GAAP earnings of $2.59 per share for Q3 fiscal 2026, exceeding the Zacks Consensus Estimate by 4.44% and reflecting a 17% year-over-year increase [1] - Revenues rose 11% year-over-year to $27.01 billion, slightly missing the consensus estimate by 0.98%, primarily driven by record AI server shipments [1][8] - Following the earnings announcement, DELL shares increased by 4.53% in pre-market trading [1] Revenue Breakdown - Product revenues increased by 16% year-over-year to $21.2 billion, missing the Zacks Consensus Estimate by 0.16% [2] - Services revenues declined by 5% year-over-year to $5.75 billion, surpassing the Zacks Consensus Estimate by 3.95% [2] - Infrastructure Solutions Group (ISG) revenues surged by 24% year-over-year to $14.10 billion [2] AI Server Performance - Servers and networking revenues reached $10.12 billion, growing by 37% year-over-year, driven by strong demand for both AI and traditional servers [3] - Dell shipped $5.6 billion worth of AI servers in Q3, with a healthy AI server backlog of $18.4 billion [4] - Year-to-date orders for AI-optimized servers amounted to $30 billion, with a notable increase of $12.3 billion in the reported quarter [3] Operating Performance - Non-GAAP gross profit for Q3 increased by 4% year-over-year to $5.68 billion, with a gross margin contraction of 140 basis points to 21.1% [5] - SG&A expenses decreased by 6% year-over-year to $2.72 billion, while R&D expenses rose by 1% to $752 million [5] - Non-GAAP operating income was $2.50 million, up 11% year-over-year, with an operating margin expansion of 10 basis points to 9.3% [6] Financial Position - As of October 31, 2025, DELL had $9.56 billion in cash and cash equivalents, up from $8.14 billion on August 1, 2025 [7] - Total debt increased to $31.24 billion from $28.68 billion during the same period [9] - The company generated cash flow from operations of $1.2 billion, with adjusted free cash flow of $1.67 billion in Q3 [9] Future Guidance - For Q4 fiscal 2026, revenues are projected to be between $31 billion and $32 billion, indicating a potential 32% year-over-year growth [10] - For the full fiscal year 2026, revenues are expected to range from $111.2 billion to $112.2 billion, suggesting a 17% year-over-year growth [11] - AI server shipments for the full year are anticipated to reach approximately $25 billion, reflecting an increase of over 150% [11]