Dell Technologies (DELL) reported its first-quarter fiscal 2026 results on Thursday, revealing a mixed performance as the company missed earnings estimates while surpassing revenue expectations. The tech giant’s earnings grew 17% year-over-year, but its non-GAAP earnings of $1.55 per share fell short of the Zacks Consensus Estimate by 9.88%.
Revenue Growth Driven by Product Segments
Despite the earnings miss, Dell’s revenue rose 5% year-over-year, totaling $23.38 billion, slightly exceeding analyst expectations. The revenue increase was mainly attributed to strong growth across its product segments. Product revenues, which rose by 9% to $17.59 billion, surpassed the consensus estimate by 4.43%. However, the services segment faced a decline, with revenues falling 6% year-over-year to $5.77 billion, missing estimates by 2.40%.
AI and Infrastructure Solutions Segment Performance
The Infrastructure Solutions Group (ISG) posted impressive results, with revenues growing 12% year-over-year to $10.31 billion. The strength came from server and networking revenues, which rose 16% year-over-year to $6.32 billion, driven by strong demand in AI and traditional servers. Storage revenues also saw growth, increasing 6% year-over-year to $3.99 billion.
Additionally, Dell saw a significant uptick in AI-optimized server orders, reaching $12.1 billion. The company shipped $1.8 billion worth of AI servers during the quarter, with a healthy AI server backlog of $14.4 billion. The Commercial Solutions Group (CSG) also saw a 5% increase in revenues to $12.50 billion, with the commercial client segment growing by 9%. However, consumer revenues dropped 19%, totaling $1.46 billion.
Operating and Cash Flow Performance
Operating income for the quarter reached $1.66 billion, reflecting a 10% year-over-year increase. The operating margin expanded by 30 basis points to 7.1%. Dell’s fiscal first-quarter non-GAAP gross profit grew 1% year-over-year to $5.05 billion, though its gross margin contracted by 80 basis points to 21.6%.
The company also demonstrated strong cash flow performance, with operating cash flow reaching $2.8 billion. Adjusted free cash flow stood at $2.23 billion. Dell returned $2.4 billion to shareholders, including $2 billion in share repurchases and $396 million in dividends.
Q2 and FY2026 Guidance
Looking ahead, Dell Technologies provided guidance for the second quarter of fiscal 2026, projecting revenues between $28.5 billion and $29.5 billion, with the midpoint suggesting 16% year-over-year growth. Non-GAAP earnings per share for Q2 are expected to be $2.25, marking a 15% growth at the midpoint.
For the full fiscal year, Dell expects revenues to range between $101 billion and $105 billion, with the midpoint indicating an 8% year-over-year increase. Non-GAAP earnings per share for fiscal 2026 are projected to be $9.40, reflecting a 15% increase at the midpoint.
Balance Sheet and Debt Levels
Dell Technologies reported a significant increase in cash holdings, with $7.70 billion in cash and equivalents as of May 2, 2025, compared to $3.63 billion at the end of January 2025. However, total debt also rose to $28.78 billion from $24.57 billion during the same period. The company’s debt-to-equity ratio is something to monitor as it works to balance cash reserves with its growing obligations.
Stock Performance and Zacks Rank
Following the earnings release, Dell’s stock saw a slight dip of 0.84% in pre-market trading. The company currently holds a Zacks Rank #3 (Hold). For investors seeking better-ranked stocks in the Computer & Technology sector, Amphenol (APH), Juniper Networks (JNPR), and Upwork (UPWK) are rated as Zacks Rank #1 (Strong Buy) stocks.