For the first quarter of fiscal 2027 (ended May 1, 2026), Dell reported total revenue of US$24.9 billion, up 11.8% year-on-year and above market expectations of US$24.2 billion. Earnings per share came in at US$2.48, significantly ahead of analyst forecasts of US$1.94.

The Infrastructure Solutions Group (ISG) generated revenue of US$13.9 billion, surging 49% year-on-year. Within ISG, server and networking revenue reached a record US$9.5 billion, representing growth of 68%, also marking an all-time high.

However, what truly surprised the market was Dell’s forward-looking indicators.During the earnings call, CEO Michael Dell revealed that AI server backlog orders had jumped from US$41 billion in the previous quarter to US$62 billion, representing an increase of more than US$20 billion in just one quarter.Included within that figure is a single “mega-order” worth US$6.5 billion.

Bloomberg later confirmed that the order came from Elon Musk’s xAI and will be used to expand AI server clusters for a hyperscale data center in Memphis powered by Nvidia’s Blackwell Ultra GPU architecture.

In addition, Michael Dell disclosed that the company is currently handling a potential order involving “one million AI GPUs.”Although he did not confirm whether the order has already been signed, the disclosure suggests that the current US$62 billion backlog figure could still increase further.The market reacted immediately.Dell shares surged more than 20% after earnings.

As of May 29 pre-market trading, the stock was changing hands around US$168, representing a gain of approximately 17.5% and pushing Dell’s market capitalization toward US$120 billion.

Year-to-date, Dell shares have already more than doubled.

Market Sentiment

Despite overwhelmingly bullish reactions, some analysts expressed caution following the earnings call.Their concerns center around three key issues.

First: The Conversion Pace of the US$62 Billion Backlog

Backlog orders represent signed contracts that have not yet been delivered.They do not automatically translate into current-quarter or next-quarter revenue.

AI server deliveries remain constrained by:

• Nvidia GPU supply schedules
• Data center power infrastructure construction
• Customer facility readiness

If a substantial portion of the US$62 billion backlog carries long delivery timelines, actual revenue realization could lag behind the expectations currently implied by the stock price.

Second: The Long-Term Margin Outlook

ISG delivered an operating margin of 15.7% this quarter, representing a meaningful improvement from previous periods.

However, AI server gross margins remain lower than those of traditional enterprise servers.CFO Yvonne McGill emphasized that Dell is increasing the service component embedded within AI server sales.While service revenue can support long-term margin expansion, the process is gradual.Service contracts are typically recognized over three to five years and therefore cannot fully contribute to profitability within a single quarter.

Third: How Much Pressure Will CSG Continue to Create?

The Client Solutions Group (CSG) generated revenue of US$11.1 billion this quarter, down 11% year-on-year.Within CSG, consumer PC revenue fell 25%.

Although ISG’s rapid growth is currently sufficient to offset CSG’s decline at the consolidated level, further deterioration in the PC market could drag Dell’s overall revenue growth back into single-digit territory.That would not align with the market’s preferred AI growth narrative.

What Comes Next for Dell?

The core question surrounding Dell’s future performance can ultimately be reduced to one issue:

Can the US$62 billion backlog efficiently convert into actual revenue and profit growth over the next two to three quarters?

Three major milestones will provide critical answers.

First: Quarterly AI Server Deliveries and Backlog Trends

This quarter, ISG generated US$13.9 billion in revenue while backlog orders increased by more than US$20 billion.

This clearly indicates that new demand is arriving faster than Dell can deliver products.

Demand currently exceeds supply.

The next key question is whether delivery volumes accelerate.

Investors must also watch whether backlog continues rising — signaling accelerating demand — or begins declining as supply finally catches up.

The implications for the stock are dramatically different depending on which scenario unfolds.

Second: GPU Supply and Pricing Power

The largest cost component within Dell’s AI servers remains Nvidia GPUs.

As Blackwell Ultra ramps production, investors will closely monitor whether supply constraints ease or intensify.

The answer will directly affect Dell’s delivery capacity and profit margins.

If Nvidia’s next-generation GPU supply remains tight and GPU values continue rising, Dell’s profitability as a systems integrator could once again come under pressure.

Analysts recommend paying close attention to Nvidia’s May 20 earnings report, particularly management commentary regarding Blackwell Ultra production ramp-up, as well as any changes in Dell’s future commentary regarding GPU supply conditions.

Third: Market Acceptance of the “Trillion-Dollar Valuation” Narrative

Dell currently trades at approximately 3.9x sales, compared with Nvidia’s roughly 20x sales multiple.This valuation gap has become a central pillar of the bullish thesis.

If investors begin viewing Dell as transitioning from a low-margin “PC + one-time hardware” business toward a high-growth “AI infrastructure + recurring services” platform, the potential valuation re-rating could be substantial.

However, this narrative requires at least two consecutive quarters of execution.

Revenue growth must continue accelerating while margins improve simultaneously.

If either of those two metrics weakens next quarter, the valuation gap itself could quickly become a bearish argument instead.