Dell reports tomorrow with an $18.4B AI server backlog and a margin story that finally started recovering
u/corenellius ·
Reddit — r/stocks
· February 26, 2026 at 04:20
· ⬆ 21 pts
· 💬 14 comments
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Summary
The post analyzes Dell's upcoming earnings report, focusing on the recovery of its Infrastructure Solutions Group (ISG) margins and the growth of its AI server business.
The author's thesis is that if Dell can maintain ISG margins above 12% while significantly increasing AI server shipments, it will strongly validate the long-term bull case for the stock.
Quality assessment: This is well-researched DD, providing specific data points (margins, backlog, memory costs) and a clear, focused thesis for evaluating the upcoming earnings report.
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Dell's Infrastructure Solutions Group (ISG) margins dropped to 8.8% earlier this year as the company aggressively priced early Blackwell deals and got hit with higher DRAM and NAND costs.
By Q3 that had recovered to 12.4%. Tomorrow is the first test of whether that holds while shipments accelerate to roughly $9.4B for the quarter.
The memory cost situation hasn't gone away. DRAM contract prices are up around 50% through 2025 and expected to rise another 20% into 2026, driven by suppliers diverting wafers to high-bandwidth memory for AI and tariff pressure on components. Richer AI configurations mean more memory per node, which keeps the margin math complicated.
Storage is also worth watching. It was down 1% YoY in Q3 and Street models only have it recovering to about 0.6% growth in Q4. The longer-term bull case requires storage and services to attach to AI infrastructure as enterprise customers deploy. If storage stays flat, the margin recovery story is more of a 2027 event than a 2026 one.
My read is the recovery is real but fragile. If margins hold at 12%+ while shipping $9.4B in AI servers, the bull case gets a lot stronger. That's what I'll be watching tomorrow.
Dell has an $18.4B AI server backlog and ISG margins recovered from 8.8% to 12.4% in Q3. The upcoming earnings report will test if this margin recovery is sustainable amid accelerating shipments and rising memory costs. If Dell's earnings report confirms that ISG margins are holding at 12%+ while shipping a high volume of AI servers (~$9.4B), it will prove the profitability of their AI strategy and strengthen the bull case significantly. The trade is to watch the earnings report for confirmation of sustained high margins in the ISG segment. A positive result would be a strong bullish catalyst for the stock. ISG margins could fall below 12% due to rising DRAM/NAND costs or aggressive pricing. A slowdown in the storage or services business could also delay the full margin recovery story, making it a 2027 event rather than a 2026 one.
This Reddit post, published February 26, 2026,
features u/corenellius
discussing DELL.
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