Dell International LLC has been assigned a ‘BBB’ issue-level rating by S&P Global Ratings for its new senior unsecured notes, with EMC Corp. as co-borrower. The company plans to use the proceeds to redeem part of its outstanding 2026 notes, with any leftover funds going to general corporate purposes, including potential debt repayment.
Dell Technologies, the parent company, reported strong second-quarter fiscal results, with revenue reaching $29.8 billion, beating the high end of guidance. Growth was driven by AI server demand, with shipments totalling $8.2 billion in the quarter, up from $1.8 billion previously. Dell now expects full-year AI server shipments of $20 billion, up from $15 billion.
The Infrastructure Solutions Group generated $16.8 billion in revenue, a 44% increase year-over-year. Servers and networking revenue rose 69%, supported by Tier 2 cloud service providers and enterprise customers. However, traditional server sales were weak in North America due to lower federal spending, and storage revenue fell 3% despite strong performance in Dell’s owned IP products.
The Client Solutions Group grew 1% to $12.5 billion, with commercial revenue up 2% from Windows 10 refresh demand, while consumer revenue dropped 7%.
Margin pressures came from competitive pricing, supply-chain costs, and a higher mix of lower-margin AI revenue. This pushed the Infrastructure Solutions Group’s operating margin down to 8.8%, from 11% a year ago and a recent peak of 18.1% two quarters ago. Despite this, non-GAAP operating income in ISG rose 14%, showing AI servers remain profitable even if margins are temporarily diluted. Management expects margins to improve in the second half as one-time costs ease and higher-margin products attach to AI deployments.
Dell’s S&P-adjusted net leverage sits in the mid-1x range, providing a buffer below the 2x downgrade threshold. The company plans to return most of its free cash flow to shareholders, having repurchased $2.9 billion in shares in the first half of fiscal 2026.
