DELL Expands Cloud Infrastructure Reach: A Catalyst for ISG Growth?

Core Insights - Dell Technologies is experiencing significant growth driven by increasing demand for cloud infrastructure, particularly within its Infrastructure Solutions Group (ISG) [1] Group 1: Financial Performance - ISG revenues grew 24% year over year to $14.10 billion in Q3 FY26, marking seven consecutive quarters of double-digit growth [1][9] - The company booked $12.3 billion in AI server orders in Q3 FY26, with year-to-date orders reaching $30 billion [2] - Dell ended Q3 FY26 with a record backlog of $18.4 billion in AI server orders, indicating strong demand for its AI solutions [2][9] - The Zacks Consensus Estimate for fiscal 2026 earnings is $9.89 per share, reflecting a 21.50% year-over-year growth [12] Group 2: Product and Market Position - Dell's AI server business is a key contributor to its cloud infrastructure growth, supported by a diverse customer base including Neoclouds and Tier 2 cloud service providers [2] - The company is enhancing its cloud infrastructure offerings through its Dell-IP storage portfolio, which includes products like PowerStore, PowerMax, and PowerFlex [3] - Dell announced a new supply deal for NVIDIA GB300 GPUs and data center equipment to support an AI cloud collaboration with Microsoft [4] Group 3: Competitive Landscape - Dell Technologies faces strong competition in the cloud market from major players like Microsoft and Alphabet [4] - Microsoft reported $49.1 billion in cloud revenues for Q1 FY26, a 26% increase, while Alphabet's Google Cloud saw a 46% sequential increase in backlog [5][6] Group 4: Valuation and Stock Performance - Dell's shares have gained 4% over the past six months, underperforming the broader Zacks Computer & Technology sector, which returned 19.7% [7] - The forward 12-month Price/Sales ratio for Dell is 0.68X, significantly lower than the sector average of 6.60X, indicating that Dell shares are undervalued [10]