⚠ The Quarterly Margin Swings Six PointsLow threat

Dell Technologies (DELL) — threat to the moat

ISG's operating margin has swung between 8.8% and 15.0% in five quarters, so one strong quarter proves little.

ISG's operating margin has been volatile in a way that should give investors pause. It was 9.7% in the first quarter of fiscal 2026, 8.8% in the second, 14.8% in the fourth, 10.5% in the first quarter of fiscal 2027 and 15.0% in the second123.

ISG operating margin by quarter (%)9.7Q1 FY268.8Q2 FY2614.8Q4 FY2610.5Q1 FY2715.0Q2 FY27Dell results releases, Q1 FY2026 to Q2 FY2027
Six points up and down.

Some of the swing is mix. A quarter heavy with large AI projects earns a thinner rate; one with more storage and conventional servers earns a richer one. Dell says the full-year decline in fiscal 2026 came from "a shift in mix towards our AI-optimized servers offerings"4. Some is timing: big deals are recognised when shipped and accepted.

A margin that moves six points in a quarter means one quarter's earnings are poor guidance to the next. The best quarter so far, 15.0%, came with operating income of $4,781 million, more than three times the $1,470 million a year earlier5.

A decade ago the range was lower but just as wide. ISG earned 8.4% of revenue in fiscal 2015, 7.0% in fiscal 2016 and 11.0% in fiscal 20176. The segment's margin has always moved with its mix, first with the arrival of EMC's storage business and now with the AI servers.

What tests this is the full-year rate. Fiscal 2027 finishing with an ISG margin nearer 11% than 15% would say the recent quarter was the exception, not the new level.

References
  1. ReportedIt was 9.7% in the first quarter of fiscal 2026, 8.8% in the second, 14.8% in the fourth, 10.5% in the first quarter of fiscal 2027 and 15.0% in the second.
    Dell Technologies first-quarter fiscal 2027 results release, Form 8-K exhibit 99.1. — Q1 FY2027 · publ. 28 May 2026 · source ↗
  2. ReportedIt was 9.7% in the first quarter of fiscal 2026, 8.8% in the second, 14.8% in the fourth, 10.5% in the first quarter of fiscal 2027 and 15.0% in the second.
    Dell Technologies second-quarter fiscal 2027 results release, Form 8-K exhibit 99.1 - segment results, AI orders and backlog, and full-year guidance - consolidated income statement. — Q2 FY2027 · publ. 1 September 2026 · source ↗
  3. ReportedIt was 9.7% in the first quarter of fiscal 2026, 8.8% in the second, 14.8% in the fourth, 10.5% in the first quarter of fiscal 2027 and 15.0% in the second.
    Dell Technologies fourth-quarter and full-year fiscal 2026 results release, Form 8-K exhibit 99.1 - AI orders, shipments and backlog for the year, capital returns and fiscal 2027 guidance. — FY2026 · publ. 26 February 2026 · source ↗
  4. ReportedDell says the full-year decline in fiscal 2026 came from "a shift in mix towards our AI-optimized servers offerings".
    Dell Technologies Form 10-K for fiscal 2026 (year ended 30 January 2026) - Item 7 MD&A and segment note: ISG and CSG revenue, operating income and drivers. — FY2026 · publ. March 2026 · source ↗
  5. ReportedThe best quarter so far, 15.0%, came with operating income of $4,781 million, more than three times the $1,470 million a year earlier.
    Dell Technologies second-quarter fiscal 2027 results release, Form 8-K exhibit 99.1 - segment results, AI orders and backlog, and full-year guidance - consolidated income statement. — Q2 FY2027 · publ. 1 September 2026 · source ↗
  6. ReportedISG earned 8.4% of revenue in fiscal 2015, 7.0% in fiscal 2016 and 11.0% in fiscal 2017.
    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 ↗
Sources
Generated September 26, 2026