Dell ISG revenue surges 181% as AI server backlog hits $51.3B

Dell Technologies' Infrastructure Solutions Group generated a record $29 billion in first-quarter fiscal 2027 revenue, up 181 percent from a year earlier, as enterprises race to deploy AI workloads on production-ready systems rather than assembling components themselves. Operating income rose 206 percent to $3.1 billion, reflecting the scale shift underway inside the Round Rock, Texas-based company.

"Customers increasingly prefer integrated, production-ready AI infrastructure rather than standalone hardware," Dell management said during the earnings call, a dynamic that has driven the company's market share gains against rivals assembling systems from discrete components.

The $16.1 billion in AI-optimized server revenue — a 757 percent year-over-year surge — accounted for more than half of ISG's total. Traditional server and networking revenue rose 92 percent, while storage grew 8 percent, led by PowerStore and PowerMax. Dell booked $24.4 billion in AI orders during the quarter and exited with a record $51.3 billion backlog. Management raised its fiscal 2027 AI server revenue forecast to $60 billion and guided total revenue to between $165 billion and $169 billion, with non-GAAP earnings of $17.90 per share.

The infrastructure refresh cycle provides additional tailwinds. Most of Dell's installed server base is seven years or older, management said, creating a significant replacement opportunity as AI inference workloads and agentic applications drive incremental demand for traditional compute. Visibility extends into parts of 2028, with demand continuing to exceed supply.

Dell faces intensifying competition from Super Micro Computer and Hewlett Packard Enterprise in the AI infrastructure market. Super Micro, often first to market with systems built on Nvidia's GB300 NVL72 and AMD's MI350 platforms, trades at 10.51 times forward earnings — roughly half Dell's 19.34 multiple. HPE reported $1.8 billion in AI systems orders and is expanding into orchestration and agentic workloads through its Juniper integration.

Dell shares have gained 213.2 percent year to date, outpacing the broader tech sector's 16.8 percent rise. The consensus estimate for fiscal 2027 earnings stands at $18.77 per share, implying 82.2 percent growth from fiscal 2026. At 19.34 times forward earnings, Dell commands a premium to both Super Micro and HPE, reflecting the market's confidence in its ability to sustain AI infrastructure momentum through the current cycle and into the enterprise refresh wave ahead.

This article is for informational purposes only and does not constitute investment advice.