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DELL · Forward model · Traditional servers and networking · Bull case

What has to happen in Traditional servers and networking

Model as of

This page changes Traditional servers and networking inside the complete DELL model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

DELL forward model
Horizon
Consolidated fair value $381.77 all other verticals held in this portfolio case
Final-quarter revenue $18.32B 28% of company revenue
Explicit segment contribution $23.53B EBITDA less segment capex, before corporate items

The order book keeps outrunning the shipments. Dell booked $24.4B of AI orders against $16.1B recognised, so the backlog GREW by $8.3B in a quarter in which the company shipped a record. Management said the pipeline remains multiples of that backlog even after converting $24.4B into orders, and the active AI customer count passed 5,000 having grown more than 50% in six months. If supply loosens - and the stated constraint is memory, not demand - the conversion rate rises against a book that is still growing.

Traditional servers and networking

Basis quarter$8.54B
Final quarter$18.32B
Implied CAGR+16%
Final revenue mix28%

The forgotten half of the ISG story and the better-margin one. $8,543M in the basis quarter, up 92% year over year on absolute server unit growth from datacentre modernisation and consolidation, plus early agentic-AI inference workloads landing on general-purpose compute. It shares the memory and CPU constraint with the AI line, and the same repricing.

Last four quarters
2026 Q4 $5.85B Reported
2027 Q1 $8.54B Reported
General-purpose PowerEdge serversNetworking
Sequential growth +6.0%/qtr decaying toward +1.0% ISG guided to roughly 75% growth in Q2 with AI servers down sequentially, so the non-AI ISG lines carry the balance.
Traditional servers and networking

Latest: $18.32B (2032Q1E)

Period Value
2026Q4 $5.85B
2027Q1 $8.54B
2027Q2E $9.17B
2027Q3E $9.76B
2027Q4E $10.31B
2028Q1E $10.84B
2028Q2E $11.34B
2028Q3E $11.82B
2028Q4E $12.29B
2029Q1E $12.75B
2029Q2E $13.20B
2029Q3E $13.65B
2029Q4E $14.09B
2030Q1E $14.54B
2030Q2E $14.98B
2030Q3E $15.44B
2030Q4E $15.89B
2031Q1E $16.36B
2031Q2E $16.83B
2031Q3E $17.32B
2031Q4E $17.81B
2032Q1E $18.32B

Assumptions & reasoning

  • Same two-quarter disclosure hole as AI servers, and the same refusal to fill it. Combined FY2026 Q2+Q3 traditional revenue is derivable at $9,220M; the split between the two quarters is not. The cross-check is exact: $13,849M AI plus $9,220M traditional equals $23,069M, which is the disclosed combined servers-and-networking revenue of $12,944M for Q2 plus $10,125M for Q3.
  • Growth starts at 6% sequential because ISG was guided to roughly 75% year-over-year growth in Q2 with AI servers guided DOWN sequentially, which means the non-AI ISG lines have to carry the balance. That is arithmetic on guidance, not enthusiasm.
  • A 92% year-over-year comparison laps itself inside four quarters. The decay is deliberately fast - 20% of the gap to a 4%-a-year terminal rate per quarter - because a refresh wave that is partly memory-driven price inflation cannot repeat itself.
  • The margin is ISG's blended 10.5% plus 1.7% D&A, the same figure the AI line carries, because Dell does not split ISG operating income by product line. Holding this line's terminal margin at 12.0% while the AI line glides to 10.0% is an assumption about mix inside ISG, not a reported difference.
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