DELL Set to Report Q1 Earnings: Buy, Sell or Hold the Stock?

Dell Technologies is expected to report fiscal Q1 2026 revenues between $22.5 billion and $23.5 billion, with non-GAAP earnings of $1.65 per share (+/- 10 cents), driven by strong demand for AI-optimized servers and an expanding partner base including NVIDIA and Meta. The Infrastructure Solutions Group (ISG) is projected to see revenue growth in the low teens, while the Client Solutions Group (CSG) is expected to be flat; however, investors remain cautious due to a slower-than-expected PC market recovery, competitive pricing, and rising trade tensions.

Analysis

Dell Technologies is scheduled to report its first-quarter fiscal 2026 results with revenue expectations between $22.5 billion and $23.5 billion, implying a 3% year-over-year growth at the midpoint, and non-GAAP earnings projected at $1.65 per share, indicating a 25% year-over-year increase at the midpoint. The Zacks Consensus Estimate is slightly more optimistic, forecasting revenues of $23.10 billion (3.86% YoY growth) and earnings of $1.71 per share (34.65% YoY growth), the latter having increased 1.7% in the past 30 days. A key driver for the quarter is expected to be robust demand for AI-optimized servers, with Dell anticipating 6% year-over-year revenue growth for its combined Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). Specifically, ISG revenues are forecast to grow in the low teens (Zacks estimate: $10.379 billion, +11.2% YoY), while CSG revenues are anticipated to be flat (Zacks estimate: $12.237 billion, +2.25% YoY). This AI focus is underscored by $1.7 billion in AI-optimized server orders in the fourth quarter of fiscal 2025, $2.1 billion shipped, and an AI server backlog of $4.1 billion, bolstered by partnerships with NVIDIA, Meta, and Advanced Micro Devices. Despite these positive developments and a favorable forward 12-month P/S ratio of 0.75X compared to the sector's 6.12X, Dell's shares have declined 2.7% year-to-date, underperforming the Zacks Computer & Technology sector's 3.6% gain. This stock performance is attributed to macroeconomic challenges, potential trade war impacts from tariffs, a slower-than-anticipated PC market recovery as consumers delay purchases, competitive pricing in CSG, and cautious enterprise spending. These factors, along with concerns about potential gross margin pressure from a higher mix of AI-optimized servers and increased competition in the AI data center market, contribute to Dell's current Zacks Rank #3 (Hold).

Key Decisions for Investors

• Investors should closely analyze Dell's upcoming Q1 fiscal 2026 earnings for confirmed strength in AI server demand and ISG segment growth, balanced against the projected flat performance in CSG and potential impacts on gross margins.
• Consider the stock's attractive valuation, as indicated by its low P/S ratio, but weigh this against persistent macroeconomic headwinds, competitive pressures in the PC market, and the financial implications of trade tensions, which underpin its Zacks Rank #3 (Hold) status.
• Monitor key metrics such as AI server backlog conversion rates, the pace of PC market recovery, trends in enterprise IT spending, and any shifts in Dell's gross margin trajectory to gauge the company's ability to navigate current market challenges effectively.