DELL (DELL.N) released its fourth-quarter earnings report for FY2026 (ending January 2026) after the U.S. market closed on the early morning of February 27, Beijing time:

1. Core Performance: DELL reported revenue of $33.4 billion this quarter, up 39.5% year-over-year, exceeding market expectations ($31.8 billion). The company achieved a quarter-over-quarter revenue increase of $6.4 billion, primarily driven by AI server shipments.

Gross margin for the quarter was 20.2%, down 0.5 percentage points quarter-over-quarter, slightly below market expectations (20.4%). Compared to service revenue, products like AI servers have relatively lower gross margins. As revenue from AI server-related products increases, it structurally pulls down the overall gross margin.

2. ISG Business (Infrastructure Solutions Group): Revenue reached $19.6 billion this quarter, up $5.5 billion quarter-over-quarter, surpassing market expectations ($18.6 billion). The entire quarter-over-quarter increase came from AI server sales.

① AI Server Segment: Revenue from AI servers was approximately $8.95 billion this quarter, falling short of market expectations ($9.4 billion).

However, new AI orders reached $34.1 billion this quarter, far exceeding market expectations ($11 billion), with a backlog of $43 billion at the end of the quarter. Dolphin Tab estimates that the company's AI server revenue will exceed $13 billion next quarter, significantly surpassing original market expectations ($7.5 billion), contributing the primary increment for the next quarter.

② Other Segments: Excluding AI servers, performance remained relatively stable. Traditional server-related businesses contributed approximately $5.85 billion in revenue, up 27% year-over-year; storage contributed around $4.8 billion, up 2% year-over-year.

3. CSG Business (Client Solutions Group): Revenue was $13.5 billion this quarter, up 13.6% year-over-year, exceeding market expectations ($12.5 billion). Specifically: DELL's client business remains primarily focused on commercial customers. Revenue from commercial clients was $11.6 billion this quarter, up 16% year-over-year; revenue from individual consumers was only $1.9 billion, roughly flat year-over-year.

4. Next Quarter Guidance: The company expects revenue of $34.7-35.7 billion in the first quarter of FY2027, significantly exceeding market expectations ($29.2 billion). Considering the nearly $43 billion backlog this quarter, the upward revision in guidance is primarily driven by AI business growth (estimated at around $2 billion quarter-over-quarter). EPS (GAAP) for next quarter is projected at $2.55, better than market expectations ($2).

Dolphin Tab's Overall View: 'Explosive' AI Orders Accelerate Growth

DELL's performance this quarter was impressive, with a quarter-over-quarter revenue increase of $6.3 billion. The company's growth this quarter was primarily driven by ISG business (server) shipments.

① The company achieved $8.95 billion in AI business revenue this quarter, up $3.3 billion quarter-over-quarter. New AI orders reached a record $34.1 billion, far exceeding market expectations ($10-11 billion). The backlog at the end of the quarter increased by $43 billion, laying the foundation for future high growth.

② Compared to this quarter's data, the company's guidance is even more 'surprising.' Revenue is expected to reach $34.7-35.7 billion next quarter, with a midpoint increase of $2 billion quarter-over-quarter, significantly better than market expectations ($31.8 billion). Considering the backlog, Dolphin Tab estimates that the company's AI revenue next quarter could exceed $13 billion, up over $4 billion quarter-over-quarter, which is the primary reason for the upward revision in revenue guidance.

Previously, management raised long-term guidance (7-9% CAGR for revenue from 2026-2030), and the stock price once reached $165. It later declined again, primarily due to concerns over the following aspects:

a) Tighter Storage Market: Driven by demand for AI servers, storage prices began to 'surge' in the second half of 2025. Since PCs are one of the main end-use scenarios for storage, 'sustained storage price increases' directly impact the company's traditional PC business performance.

Combined with insights from vendors like Qualcomm, the current storage issue has escalated from 'price hikes' to 'shortages.' This means that even if vendors 'pay more,' they may not secure supplies, leading to relatively cautious outlooks for the PC market.

During this storage price hike cycle, the company's traditional CSG business (client solutions) will continue to face pressure.

b) AI Servers: With traditional businesses under pressure, AI progress is the company's biggest highlight.

Recently, major cloud service providers have raised their capital expenditure outlooks. Dolphin Tab estimates that the four core cloud vendors (Google, Meta, Microsoft, and Amazon) will have capital expenditures exceeding $660 billion in 2026, up 62% year-over-year.

If DELL's management does not raise AI guidance later, combined with previous guidance (20-25% CAGR for AI business from 2026-2030), it implies two possibilities: ① Capital expenditure growth will significantly slow down later; ② DELL's share in AI Capex will decline.

On the other hand, NVIDIA is a core partner for DELL's AI servers. As the focus of large language models shifts from 'training to inference,' products like ASICs will challenge NVIDIA's GPUs. If NVIDIA's competitiveness declines, the market will also worry about DELL's AI server growth.

Given the company's relatively focused business on enterprise and sovereign/government clients, it supports steady growth in its AI business.

DELL's current market capitalization is $80.5 billion, corresponding to approximately 9x PE for core operating profit after tax in FY2027 (assuming 29% revenue growth, 19.5% gross margin, and 18.5% tax rate).

Given the current 'price hikes and even shortages' in storage, industry outlooks for the PC market are cautious, which will continue to pressure the company's traditional business.

With traditional business pressures 'unavoidable,' the company's biggest highlight is its AI business. This quarter, the company reported $34.1 billion in new AI server orders, far exceeding market expectations ($11 billion). The backlog reached $43 billion at the end of the quarter, laying the foundation for high growth in the company's AI business.

Management also provided full-year guidance for FY2027, projecting revenue of $138-142 billion, with AI revenue reaching $50 billion, doubling year-over-year and far exceeding market expectations ($35-40 billion). Driven by the doubling of AI business growth, the company's overall performance will also accelerate.

A more detailed value analysis has been published in the Changqiao App under the 'Dynamic-Depth (Research)' section in an article with the same title.

Here is a detailed analysis:

I. DELL's Overall Performance

1.1 Revenue

DELL achieved revenue of $33.38 billion in the fourth quarter of FY2026 (25Q4), up 39.5% year-over-year, exceeding market expectations ($31.8 billion). The company achieved a quarter-over-quarter revenue increase of $6.4 billion, driven by both ISG (Infrastructure Solutions Group) and CSG (Client Solutions Group) businesses, with AI revenue increasing by $3.3 billion quarter-over-quarter.

1.2 Gross Profit

DELL achieved gross profit of $6.73 billion in the fourth quarter of FY2026 (25Q4), up 15.5% year-over-year.

Gross margin for the quarter was 20.2%, down 0.5 percentage points quarter-over-quarter, slightly below market expectations (20.4%). The increase in the proportion of ISG business, which has relatively lower gross margins, had a structural dilutive effect on the overall gross margin.

1.3 Operating Expenses

DELL's operating expenses were $3.64 billion in the fourth quarter of FY2026 (25Q4), up 3% year-over-year. Due to scale effects, the operating expense ratio decreased to 10.9% this quarter.

1) R&D Expenses: The company's R&D expenses were $800 million this quarter, up 3% year-over-year, maintaining a growth trend. 2) Sales and Administrative Expenses: The company's sales and administrative expenses were $2.84 billion this quarter, up 3% year-over-year.

1.4 Net Profit

DELL achieved core operating profit of $3.1 billion in the fourth quarter of FY2026 (25Q4), up 34% year-over-year, with the core profit margin increasing to 9.3% this quarter. Profit growth this quarter was primarily driven by revenue growth and margin improvement.

II. DELL's Core Business Performance

From a segment perspective, driven by AI server growth, DELL's ISG business (Infrastructure Solutions Group) showed an upward trend, accounting for 58.7% this quarter.

Combined with the company's previous growth guidance, ISG business is expected to grow at a CAGR of 11-14% from FY2026-2030, significantly higher than CSG business (2-3%), with ISG's share continuing to rise.

ISG business is the company's most important segment, with the following breakdown:

2.1 ISG Business (Infrastructure Solutions Group)

DELL's ISG business achieved revenue of $19.6 billion in the fourth quarter of FY2026 (25Q4), up 72.7% year-over-year, exceeding market expectations ($18.6 billion).

Specifically: ① AI server business revenue was approximately $8.95 billion this quarter, up $3.3 billion quarter-over-quarter, contributing the primary increment to ISG business this quarter; ② Traditional server and related businesses achieved revenue of $5.85 billion this quarter, up 27% year-over-year; ② Storage business revenue was $4.8 billion this quarter, up 2% year-over-year.

ISG business growth this quarter was driven by AI servers, with AI business now accounting for over 40% of ISG revenue.

In addition to AI revenue for the quarter, the company's management also provided information on new AI orders and backlog, which are forward-looking indicators. New AI orders for the quarter reached $34.1 billion, significantly exceeding market expectations ($11 billion). The backlog at the end of the quarter reached $43 billion, laying the foundation for high growth in the company's AI business in fiscal year 2027.

As NVIDIA and Dell have a core partnership, there were concerns in the market about the impact of ASICs on Dell's AI servers within NVIDIA's supply chain. However, based on the progress of the company's AI business this quarter, Dell's AI business continues to improve. The company has even provided guidance of $50 billion in AI revenue for fiscal year 2027, implying a doubling of Dell's AI business and injecting clearer 'AI confidence' into the market.

2.2 CSG Business (Client Solutions Group)

Dell's CSG business achieved revenue of $13.5 billion in the fourth quarter of fiscal year 2026 (i.e., 25Q4), representing a year-over-year increase of 13.6%, which outperformed market expectations ($12.5 billion).

Specifically: Dell's client business remains primarily focused on commercial customers. Revenue from commercial customers reached $11.6 billion this quarter, up 16% year-over-year, while revenue from individual consumers remained relatively flat at $1.9 billion.

Based on global PC market data, global PC shipments reached 76.4 million units in the fourth quarter of 2025, up 11% year-over-year, showing a rebound. Among them, Dell's shipments reached 11.7 million units, up 17% year-over-year, outperforming the industry average and increasing the company's market share in the PC market to 15%.

Based on discussions with vendors such as Qualcomm, the current issue with storage has escalated from 'price increases' to 'shortages.' This means that even if vendors are willing to pay more, they may not be able to secure supply. Projections for the PC market remain relatively cautious.

Under these circumstances, Dell's PC products will, on the one hand, pass on some cost pressures to the downstream market through price increases (a unified price adjustment was already implemented on January 6, 2026); on the other hand, efforts will be made to secure more storage products to ensure supply chain security.

The former will affect end-user demand, while the latter highlights supply-side uncertainties. In the environment of 'storage shortages,' the company's CSG business will continue to face pressure.

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