Dell's Q3 Earnings Call: AI Servers Firing on All Cylinders, But There's a Catch

Dell Technologies is about to drop Q3 fiscal 2026 results on Nov. 25, and here’s what matters: the company expects $27B in revenue (mid-point), translating to 11% YoY growth. EPS guidance sits at $2.45 per share, also up 11% YoY. Wall Street’s betting on $27.27B in revenue and $2.48 EPS—both suggesting solid execution.

The AI Server Boom Is Real

The real story? Dell’s riding the AI infrastructure wave hard. In Q2, the company shipped $8.2B in AI servers alone, with orders jumping $5.6B QoQ. More importantly, Dell exited Q2 with an $11.7B AI backlog—that’s recurring revenue waiting to be recognized. The ISG (Infrastructure Solution Group) is expected to grow in the low-twenties, with CSG chipping in mid-single-digit growth. That’s the AI premium at work.

Dell’s partnership ecosystem—NVIDIA, Microsoft, AMD, Meta—is turbocharging adoption. Recently they locked in a deal with IREN to supply NVIDIA GB300 racks, which will feed Microsoft’s new Texas data center cluster. This kind of infrastructure buildout typically runs for years.

The Headwinds Nobody Talks About

But here’s the rub: traditional server and storage demand in North America is cooling. Federal spending is sluggish. Competition is brutal. Dell’s stock is up only 3.6% YTD while the broader tech sector jumped 21.6%—that’s underperformance, even against HPE (down 3.5%).

Valuation Play

On the flip side, Dell’s trading at 0.71X forward P/S versus the sector’s 6.55X. That’s dirt cheap. The stock carries a Zacks Value Score of A, suggesting significant upside if the AI narrative holds.

The Verdict

Dell’s got momentum in AI, a backlog worth billions, and partnership tailwinds. But the macro headwinds and valuation compression tell a different story. Current Zacks Rank is #3 (Hold)—meaning wait for a better entry before going all-in. The AI opportunity is real; the execution risk remains.