Dell's record $51.3B AI backlog fuels ISG growth as supply tightens

Dell Technologies reported a record $51.3 billion AI server backlog in fiscal Q1, driving Infrastructure Solutions Group revenue up 181 percent to $29 billion.

Dell Technologies reported a record $51.3 billion AI server backlog in fiscal Q1, driving Infrastructure Solutions Group revenue up 181 percent to $29 billion.

"Demand continues to exceed supply, with memory remaining the primary constraint," Dell management said, as the company booked $24.4 billion in AI orders during the quarter.

AI-optimized server revenue rose 757 percent year over year to $16.1 billion, while ISG operating income climbed 206 percent to $3.1 billion. Operating margin expanded 80 basis points to 10.5 percent, with AI-server profitability holding in line with Dell's mid-single-digit operating-income target.

Dell raised its fiscal 2027 AI-server revenue expectation to roughly $60 billion. Shares have gained 275.1 percent year to date, and the company reports fiscal Q2 results Sept. 1, with analysts projecting $4.91 earnings per share on $44.90 billion in revenue.

Backlog Signals Demand Beyond Near-Term Shipments

Dell's AI customer base surpassed 5,000, up more than 50 percent over six months, with traction across neocloud, sovereign and enterprise customers. The pipeline grew sequentially and remained multiples of backlog even after $24.4 billion in orders were booked, and Dell expects to exit the year with meaningful backlog.

To capture demand, Dell introduced PowerRack, a factory-integrated rack-scale system combining compute, networking and storage, and expanded support for NVIDIA's Vera Rubin architecture. The company is also upgrading PowerEdge servers, AI data platforms and storage lines including PowerStore Elite, ObjectScale and PowerFlex.

Competition Intensifies as NVIDIA, Cisco Expand AI Footprint

NVIDIA is capturing a growing share of AI infrastructure spending through its full-stack platform. Amazon Web Services plans to add more than 1 million Blackwell and Rubin GPUs, while GB300 delivered a 2.7-times throughput improvement and a 60 percent reduction in cost per token. Vera Rubin is expected to deliver up to 35 times higher inference throughput than Blackwell.

Cisco booked $9.3 billion in hyperscaler AI infrastructure orders in fiscal 2026 and expects $7.5 billion of related revenue in fiscal 2027, supported by Silicon One, Acacia optics and data-center networking.

Dell trades at a forward price-to-earnings ratio of 21.90 times, above the sector's 21.25 times, with a Zacks Value Score of D. The guidance raise signals management expects AI demand to keep accelerating. Investors will watch the fiscal Q2 report Sept. 1 for updated segment margins and backlog conversion.

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