The Cloud Buyers Who Build Their OwnThin moat

Dell Technologies (DELL) — moat facet

Half of all server revenue goes to contract manufacturers building to the cloud giants' own designs, and that is the business Dell cannot win.

The largest buyers of servers can skip Dell entirely. IDC counts servers built by contract manufacturers directly for the biggest cloud companies as ODM direct, and that category held 50.2% of worldwide server revenue in the first quarter of 2026, down from 64.1% a year earlier1.

ODM direct share of worldwide server revenue (%)64.1%Q1 202550.2%Q1 2026IDC via Electronics Weekly
Still half the market.

That is a competitor of a different kind: not a rival brand but a customer's decision to design its own hardware and hire a factory. Dell's value, delivery, integration, support and financing, matters less to a buyer that has its own engineers and runs its own data centres.

The 2026 shift helped Dell. As the ODM direct share fell by nearly fourteen points2, more AI capacity was bought from branded vendors, and Dell's share rose to 16.5%3. Dell describes its AI customers as "a relatively small number of large customers and cloud service providers"4, some of which are the kind of buyer that could return to building its own.

Dell itself uses contract manufacturers, often at single locations5; the difference is that it adds a brand, a warranty and a service organisation. For the largest buyers, that difference is worth less each year they build in-house expertise.

Dell has watched this shift before. In fiscal 2017 it reported a decline in volume of its own server units "as customer demand has shifted to cloud and hyperscale servers, which generally have a lower average selling price"6. The largest cloud buyers pulled volume away from branded servers for most of a decade; 2026 is the first time the flow has clearly run the other way.

The ODM direct share is the figure that decides this contest. At 50.2% it is still half the market7; a move back above 60% would mean the largest buyers have gone back to building their own, and Dell's recent share gains would reverse with it.

Moat trajectory: Widening

ODM direct share fell from 64.1% to 50.2% in a year.

The number that tests this moat
Third-party estimate
ODM direct share of server revenue (IDC)
50.2% (calendar Q1 2026), from 64.1%

How much of the market bypasses branded vendors; a return above 60% would reverse Dell's gains.

Source: IDC server market Q1 2026 (Electronics Weekly) ↗
References
  1. Third-party estimateIDC counts servers built by contract manufacturers directly for the biggest cloud companies as ODM direct, and that category held 50.2% of worldwide server revenue in the first quarter of 2026, down from 64.1% a year earlier.
    IDC worldwide server market, calendar Q1 2026, reported by Electronics Weekly - Dell first with 16.5% revenue share and 244.1% growth; Supermicro 7.6%, Lenovo 4.6%, HPE 3.0%; ODM direct share down from 64.1% to 50.2%. — Q1 2026 · publ. June 2026 · source ↗
  2. Third-party estimateAs the ODM direct share fell by nearly fourteen points, more AI capacity was bought from branded vendors, and Dell's share rose to 16.5%.
    IDC worldwide server market, calendar Q1 2026, reported by Electronics Weekly - Dell first with 16.5% revenue share and 244.1% growth; Supermicro 7.6%, Lenovo 4.6%, HPE 3.0%; ODM direct share down from 64.1% to 50.2%. — Q1 2026 · publ. June 2026 · source ↗
  3. Third-party estimateAs the ODM direct share fell by nearly fourteen points, more AI capacity was bought from branded vendors, and Dell's share rose to 16.5%.
    IDC worldwide server market, calendar Q1 2026, reported by Electronics Weekly - Dell first with 16.5% revenue share and 244.1% growth; Supermicro 7.6%, Lenovo 4.6%, HPE 3.0%; ODM direct share down from 64.1% to 50.2%. — Q1 2026 · publ. June 2026 · source ↗
  4. ReportedDell describes its AI customers as "a relatively small number of large customers and cloud service providers", some of which are the kind of buyer that could return to building its own.
    Dell Technologies Form 10-Q for the quarter ended 31 July 2026 - remaining performance obligations, debt, deferred revenue, purchase obligations, share counts and risk disclosures. — Q2 FY2027 · publ. 8 September 2026 · source ↗
  5. ReportedDell itself uses contract manufacturers, often at single locations; the difference is that it adds a brand, a warranty and a service organisation.
    Dell Technologies Form 10-K for fiscal 2026 (year ended 30 January 2026) - Item 1A risk factors, supply, ownership and control. — FY2026 · publ. March 2026 · source ↗
  6. ReportedIn fiscal 2017 it reported a decline in volume of its own server units "as customer demand has shifted to cloud and hyperscale servers, which generally have a lower average selling price".
    Dell Technologies Form 10-K for fiscal 2017 - the EMC acquisition, its financing and purchase price, and results for fiscal 2015-2017. — FY2017 · publ. March 2017 · source ↗
  7. Third-party estimateAt 50.2% it is still half the market; a move back above 60% would mean the largest buyers have gone back to building their own, and Dell's recent share gains would reverse with it.
    IDC worldwide server market, calendar Q1 2026, reported by Electronics Weekly - Dell first with 16.5% revenue share and 244.1% growth; Supermicro 7.6%, Lenovo 4.6%, HPE 3.0%; ODM direct share down from 64.1% to 50.2%. — Q1 2026 · publ. June 2026 · source ↗
Sources
Generated September 26, 2026