Dell published results for the second quarter of fiscal 2027, which ended in July. Revenue rose 58% to a record $47 billion, and earnings per share rose 273%.
But this report is not well told by the revenue line, because the interesting part of it has not entered that line yet.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Three Numbers
Jeff Clarke, vice chairman and chief operating officer, put it this way in the release:
"That's clearest in our AI server business where we booked a record $60.9 billion in orders, recognized a record $16.4 billion in revenue and exited the quarter with a record $95 billion backlog."
| AI servers, second quarter | |
|---|---|
| Orders booked | $60.9 billion |
| Revenue recognised | $16.4 billion |
| Backlog at quarter end | $95 billion |
Orders were almost four times the revenue recognised in the same quarter. The difference went into backlog.
And to understand the scale of that backlog: $95 billion is more than twice the company's entire quarterly revenue, and about half its full-year revenue guidance.
What That Actually Means
A backlog is revenue that has been sold and not yet delivered. When it grows at this rate, it means the constraint is not demand but the ability to supply - component availability, manufacturing and installation capacity.
And that changes what should be tracked. In a business constrained by demand, quarterly revenue is the measure. In a business constrained by supply, revenue measures the rate of delivery - and orders measure demand.
And the Picture Across the Rest of the Company
Something the headlines rather swallowed: the growth was not only in AI servers.
| Year-over-year growth | |
|---|---|
| Traditional servers and networking | +122% |
| AI servers | +100% |
| Storage | +26% |
| Client devices | +20% |
Traditional servers grew faster than AI servers. That is a surprising figure, and it suggests the buildout around AI is dragging conventional computing infrastructure along with it - networking, storage and classic servers that have to sit alongside the accelerators.
Where the Profit Now Sits
| Segment operating income | 2025 | 2026 |
|---|---|---|
| Infrastructure segment | 1,470 | 4,781 |
| Share of segment operating income | 65% | 81% |
| Client devices segment | 803 | 1,142 |
| Share of segment operating income | 35% | 19% |
(in millions of dollars)
Dell was a personal computer company. Today the computer business produces 19% of its segment operating income.
And the Figure That Qualifies All of It
Cash flow from operations in the quarter was $2.2 billion - on revenue of $47 billion.
That is about 5% of revenue, and it is low. And the explanation is not a problem in the business but a direct consequence of what was described above: a backlog that grew by $44 billion in a single quarter is built on inventory, on component purchasing and on customer credit - and all of those consume cash before it comes back.
That is what a fast-growing assembly business looks like. It buys expensive components, assembles, delivers, and waits to be paid.
And the comparison sharpens it: Broadcom, which designs chips and does not manufacture them, reported in the same week free cash flow of 46% of revenue. The same AI wave, two entirely different cash economics - because one sells intellectual property and the other sells machines.
The Guidance
| Fiscal 2027 | Previously | Now |
|---|---|---|
| Revenue | $167 billion | $192 billion, +69% |
| AI server revenue | $60 billion | $74 billion, +200% |
| Diluted earnings per share | $24.37, +181% | |
| Adjusted earnings per share | $25.50, +148% |
Chief financial officer David Kennedy noted that the full-year outlook was raised by $25 billion. That is an increase the size of an entire mid-cap company, mid-year.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What I take from this report is a distinction between two kinds of record number, both of which appear in it.
$60.9 billion in orders is a demand measure. It says what customers committed to buy, and it is the closest thing available to an answer to "is AI investment continuing". $95 billion of backlog is an entirely different measure - it says how much of that demand has not yet been delivered, and how long it will take.
And a large backlog is both a comfort and a risk. A comfort, because it is revenue already sold. A risk, because the longer it stretches, the wider the window in which a customer can change their mind, delay, or find a supplier who delivers faster. I do not know the cancellation terms on those orders, and the release does not say - so that is an open question rather than a claim.
And the second thing, which I think matters more to a reader of financial statements: Dell's revenue line measures its rate of delivery, not demand for its products. Those are two different things, and they coincided for years because Dell could always supply almost immediately. The moment a $95 billion backlog opened, they separated - and anyone still reading only the revenue line is reading the less interesting of the two variables.
And what I will track: the ratio of orders to revenue next quarter. If orders remain several times revenue, demand is still ahead of capacity. If they converge, that could mean supply has closed a gap, or that demand has begun to moderate - and the rest of the report will be needed to tell those apart.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
