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September 8, 2025 • 3 min read
Dell Technologies just dropped its latest quarterly report, and it paints a fascinating picture of a tech giant capitalizing on the AI boom while navigating a mixed PC market. Let's dive into the numbers from their recent 10-Q filing to see what's driving the company's performance.
For the second quarter of its 2026 fiscal year (ending August 1, 2025), Dell reported a strong 19% year-over-year increase in total net revenue, reaching $29.8 billion. This top-line growth translated into a healthy 31% jump in net income to $1.2 billion, or $1.70 per diluted share.
To better understand how Dell generates its revenue and where the costs lie, the following flow diagram visualizes the company's income statement for the quarter.
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In the diagram, you'll notice a category for "Unallocated" revenue, which totaled $473 million for the quarter. This primarily consists of revenue from commercial agreements with previously owned companies, such as VMware, which Dell spun off in 2021.
The clear star of the show was Dell's Infrastructure Solutions Group (ISG), which provides the foundational hardware for data centers, including servers, networking equipment, and storage. ISG revenue skyrocketed by 44% to $16.8 billion.
The growth within this segment was almost entirely driven by its Servers and networking division, which saw a staggering 69% revenue increase to $12.9 billion. This powerful performance strongly suggests that businesses are investing heavily in Dell's hardware to build out their AI capabilities.
However, this explosive growth came at a cost to profitability. ISG's operating margin compressed, falling from 11.0% in the same quarter last year to 8.8%. This indicates that while demand for AI-ready servers is booming, they may carry lower margins than other products, a crucial trend for investors to monitor. In contrast, the Storage division saw a slight 3% decline in revenue.
On the other side of the business, the Client Solutions Group (CSG), which comprises Dell's well-known PC business (desktops, notebooks), showed more modest results. CSG revenue grew by just 1% to $12.5 billion. A closer look reveals a split in performance:
CSG's operating income dipped slightly by 2%, with its operating margin remaining relatively stable at 6.4%.
Dell's second-quarter performance highlights a significant strategic shift. The massive demand for AI infrastructure is reshaping the company's revenue mix, driving impressive overall growth. While this shift has put pressure on gross margins—which fell from 21.4% to 18.3% year-over-year—Dell has effectively managed its operating expenses, which decreased by 7%. This cost discipline allowed the company to boost its operating income by a robust 27%.
The company's financial health appears solid, with cash flow from operations for the first six months of the fiscal year more than doubling to $5.3 billion. Dell is successfully riding the AI wave, a testament to its strong position in the server market. The key challenge ahead will be balancing this high-volume, lower-margin growth with the more stable, but slower-moving, PC market.
Last updated: September 8, 2025