Dell's AI-Driven Data Center Boom Meets Prolonged PC Refresh Amid Windows 10 EOL

Dell’s latest quarter reads like a two-act play: a booming data‑center business buoyed by AI-optimized servers that pushed record revenue, and a more muted PC market that — despite an imminent Windows 10 end‑of‑life — is unfolding as a multi‑quarter refresh rather than a single sprint.

Background​

Dell Technologies reported record second‑quarter fiscal 2026 revenue of about $29.8 billion, driven overwhelmingly by its Infrastructure Solutions Group (ISG) and a surge in AI infrastructure sales. The ISG posted $16.8 billion in revenue, a year‑over‑year gain of roughly 44%, while Servers and Networking jumped about 69% to roughly $12.9 billion. Dell disclosed it had shipped roughly $10 billion of AI solutions in the first half of the fiscal year and raised its full‑year AI server shipment guidance to $20 billion. (dell.com, reuters.com)
At the same time, the Client Solutions Group (CSG) — Dell’s PCs and displays business — produced $12.5 billion in revenue, up only about 1% year‑over‑year, driven by commercial purchases while consumer sales declined. Dell’s executives signalled that the PC refresh prompted by the Windows 10 end‑of‑support on October 14, 2025 would be a drawn‑out event likely to extend into calendar 2026. (dell.com, insidermonkey.com)

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How Dell’s quarter breaks down​

Infrastructure Solutions Group: AI demand as the growth engine​

• Record ISG revenue: $16.8 billion, +44% year‑over‑year.
• Servers & Networking: $12.9 billion, +69% year‑over‑year.
• Storage: $3.9 billion, down modestly.

Dell’s management emphasized that the AI demand wave is not only increasing box sales but expanding the scope of what customers buy — from servers to racks, networking, integration, and deployment services. The company reported a healthy backlog and accelerating shipments, and raised its AI server shipment guidance to $20 billion for FY26 on the back of accelerating orders and shipments. Those figures were echoed across market coverage and reporting. (dell.com, reuters.com)

Client Solutions Group: steady commercial demand, weak consumer segment​

• CSG revenue: $12.5 billion, +1% year‑over‑year.
• Commercial clients: $10.8 billion, +2%.
• Consumer revenue: $1.7 billion, -7%.

Dell’s commercial PC business shows healthy pockets of demand — particularly enterprise and SMB fleets being refreshed for security and manageability — but consumer spending remains soft. Dell’s executives framed the PC market as “momentum continues, although not at the pace we expected,” and explicitly tied future PC growth to the Windows 10 end‑of‑life refresh that lies ahead. (dell.com)

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Why AI servers are booming — and why Dell is benefiting​

Two market forces are acting as an accelerant for Dell’s ISG:

• Enterprise and cloud providers are rapidly deploying large‑scale AI infrastructure for training and inference, which requires dense racks, high‑end GPUs, and integrated systems rather than commodity servers.
• Improved supply and channel execution have allowed OEMs like Dell to turn large AI orders into shipments at scale, shortening the path from backlog to revenue.

Analysts and reporters noted that Dell’s AI server revenue guidance was raised materially — from prior forecasts toward the new $20 billion figure — and that Dell has reported meaningful shipments and a sizable backlog that underpins near‑term revenue. Market coverage also highlighted that strong AI demand helped offset softness elsewhere in the portfolio. (reuters.com, investing.com)
Key implications:

• AI demand is increasing average selling prices and order size, favoring vendors that offer integrated hardware‑plus‑services.
• Margin dynamics can be favorable when solution integration and services are sold alongside hardware.
• Backlogs can be long but are less alarming when suppliers report rising shipment rates and improving supply chains.

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The Windows 10 deadline and the unfolding PC refresh​

Microsoft’s official lifecycle notice confirms that Windows 10 support ends on October 14, 2025, after which security and feature updates will cease for the platform. Microsoft has promoted upgrade paths to Windows 11 and introduced a consumer Extended Security Updates (ESU) program to ease the transition for users who cannot upgrade immediately. (support.microsoft.com, learn.microsoft.com)
Dell’s leadership — notably COO Jeff Clarke — framed the Windows 10 cutoff as a material but staggered demand driver: roughly half of the installed base that can run Windows 11 has reportedly already upgraded, leaving the remainder as the addressable pool for refresh through the end of 2025 and into 2026. Clarke told analysts that it was “highly unlikely” the remaining half would be fully migrated before October 14, and that the refresh would therefore extend into the next calendar year. This is consistent with comments by major distributors and OEMs that the migration window is broad rather than a single spike. (insidermonkey.com, dell.com)
Important context and nuance:

• The statement that “about half” of upgrade‑capable machines have already moved to Windows 11 is a management estimate and not an independently audited installed‑base count. Treat it as a directional indicator rather than a precise measurement. (insidermonkey.com)
• Microsoft’s own guidance provides alternatives — free upgrades for qualifying devices, ESU options, and advice to replace unsupported devices — but adoption of those options will vary across enterprises, SMBs, government, and consumers. (support.microsoft.com, techradar.com)

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Channel and distribution signals: Ingram Micro and others​

Distributors are the canaries in the channel coal mine, and Ingram Micro’s public commentary is instructive. On its earnings call the distributor cited the Windows 10 end‑of‑life as a clear tailwind for notebook and desktop refresh, especially among commercial customers. Ingram Micro’s management also noted that while some pockets of AI‑driven refresh demand exist (GPUs and high‑spec devices), most of the PC refresh seen to date has been driven by aging systems and the Windows 10 phaseout rather than immediate AI requirements. (resource-recycling.com, investing.com)
What distributors are signaling:

• There is meaningful volume demand tied to Windows 10 EOL, concentrated in commercial and mid‑market segments.
• AI is emerging as a market influencer but has not yet been the dominant reason for mass PC replacement in most regions.
• Channel logistics and platform availability (e.g., Xvantage adoption, self‑service ordering) matter a great deal for conversion and fulfillment. (resource-recycling.com, investing.com)

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Practical timeline and what to expect in the market​

• Near term (through Oct 14, 2025): accelerated procurement by enterprises that require supported OSes for compliance and security; spotty consumer upgrades; increasing shipments of Windows 11 capable devices. (support.microsoft.com, dell.com)
• Short term (Q4 2025): an extended refresh window as many businesses and consumers defer migration while assessing AI‑capable hardware options; continued demand for commercial devices. (insidermonkey.com, resource-recycling.com)
• Medium term (calendar 2026): residual refresh activity that spills over as organizations that couldn’t complete migrations by the deadline either enroll in ESU, accelerate device replacement, or consider alternative OSes or device strategies. (learn.microsoft.com, windowscentral.com)

This means the PC market is more like a rolling tide than a single wave — a reality Dell, HP, and major distributors have all underscored publicly.

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Risks, headwinds and second‑order effects​

1) Consumer softness and margin pressure​

Dell’s consumer revenue declined, underscoring that while enterprise refreshes may be steady, consumer demand is fickle and price‑sensitive. OEMs face margin compression in consumer channels and must lean on commercial and high‑value segments for profitability. (dell.com)

2) Supply chain and fulfillment friction​

Backlogs for AI servers and high‑end GPUs can complicate timing, and some customers face long lead times. Dell reports improved shipments, but conversion of backlog to revenue depends on installers, datacenter readiness, and partner logistics. (reuters.com, ticker360.io)

3) Security and compliance churn​

Organizations that delay migration risk unsupported software exposure. Microsoft’s ESU program buys time but introduces added licensing and management complexity. Firms that remain on Windows 10 beyond the cutoff will need clear compensating controls or ESU enrollment. (support.microsoft.com, techradar.com)

4) Environmental and regulatory backlash (e‑waste)​

A large refresh cycle can generate a surge of retired devices. Regulators, NGOs, and consumers increasingly focus on responsible disposal, trade‑in, and refurbishment programs. OEMs and distributors that cannot offer credible trade‑in/recycling pathways risk reputational and regulatory headaches. Microsoft and industry partners have encouraged trade‑in and recycling programs as part of the migration narrative. (support.microsoft.com, resource-recycling.com)

5) Channel disruptions and incident risk​

Distributor outages, ransomware incidents, or logistics failures can interrupt fulfillment and erode customer confidence. Recent reporting of cybersecurity incidents at large distributors illustrates the operational risk the channel faces during busy refresh windows. This risk matters more when a concentrated fleet migration is underway. (crn.com)

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Opportunities and where companies can capture value​

• Integrated AI systems and services. OEMs that sell not just boxes but integration, testing, on‑site deployment and lifecycle services can extract higher margins and build stickier customer relationships. Dell emphasizes its ability to sell beyond the chassis into racks, networking and deployment services. (dell.com, ticker360.io)
• Commercial lifecycle services. For enterprises and MSPs, managed migration, image management, security hardening, and ESU orchestration are services with clear revenue potential during the migration window.
• Channel differentiation through sustainability. Companies that provide credible trade‑in, refurbishment and certified recycling can convert cost centers into revenue and claim ESG credibility while helping customers meet compliance and disposal needs. Microsoft and major distributors have called out trade‑in and recycling programs as part of migration guidance. (support.microsoft.com, resource-recycling.com)
• AI‑capable endpoint positioning. OEMs that provide clear guidance on which devices are “AI‑capable” and what workloads they support will help customers make future‑proofing decisions — a notable selling point for both commercial buyers and power consumers. Dell and others are launching AI PC SKUs targeted at organizations that want edge AI capability alongside data‑center acceleration. (dafinchi.ai, investing.com)

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What IT decision‑makers should do now — a concise checklist​

• Inventory and assess: identify machines that can and cannot be upgraded to Windows 11; prioritize based on security posture and business criticality.
• Evaluate ESU vs. replacement: calculate costs, compliance needs, and migration timelines for both options. Microsoft’s consumer ESU program and enterprise ESU alternatives are available as stopgaps. (support.microsoft.com, techradar.com)
• Prioritize data‑center and AI readiness: if AI initiatives are on the roadmap, align endpoint refresh decisions with data‑center GPU availability and integration windows.
• Contract lifecycle and disposal partners: secure trade‑in, refurbishment, and environmentally compliant recycling channels; consider certified ITAD services. (resource-recycling.com)
• Budget for support and services: migration projects are not free — include imaging, security, training, and disposal in TCO calculations.

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Environmental and secondary‑market considerations​

A mass replacement cycle creates both a sustainability challenge and a commercial opportunity for refurbishment markets. Well‑run trade‑in programs feed refurbished markets and certified recyclers, reducing e‑waste and recapturing value. Distributors with IT asset disposition (ITAD) capabilities or partnerships are positioned to help OEMs and enterprise customers manage this responsibly — and to monetize returned assets where possible. Microsoft and channel partners have been explicit in promoting trade‑in and recycling as part of migration planning. (support.microsoft.com, resource-recycling.com)

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What to watch next​

• Quarterly shipment cadence for AI servers. Dell’s ability to convert backlog into revenue and sustain elevated AI shipments will determine whether the elevated ISG growth rate is durable. Management is guiding to a $20 billion AI server shipping target for the fiscal year — a number investors and partners will monitor closely. (dell.com, reuters.com)
• PC market momentum into 2026. OEMs and distributors expect a protracted Windows 10 refresh that pushes material PC demand into calendar 2026, but the magnitude and timing remain estimates. Dell’s own management commentary suggests a sizable remainder of upgrade‑eligible machines will migrate after Oct. 14, 2025. Watch channel fill rates, corporate procurement schedules, and adoption of ESU for concrete signals. (insidermonkey.com, resource-recycling.com)
• Supply and geopolitical pressure on components. GPU availability, tariffs, and logistics constraints can all shift timing and margins for AI and PC products. Market commentary around inventory levels, shipping cadence, and component pricing will be important for forecasting. (reuters.com)
• Regulatory and NGO scrutiny on e‑waste. Policymakers are increasingly sensitive to forced obsolescence narratives; firms that do not provide responsible disposal and trade‑in options may encounter public and regulatory backlash. (support.microsoft.com, windowscentral.com)

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Final analysis — the good, the bad, and the unresolved​

Dell’s results show a clear bifurcation across its business lines: exceptional momentum in AI infrastructure and steady but unspectacular PC performance. The company’s raise in AI server guidance and record ISG numbers point to a meaningful secular shift in enterprise IT spend toward AI workloads. That is a strategic win for vendors who have the engineering, supply chain, and services capacity to deliver integrated AI stacks. (dell.com, reuters.com)
On the flip side, the consumer PC market remains challenged and the Windows 10 deadline is producing a prolonged, uneven refresh — not a neat, industry‑wide reset. That creates both operational complexity and channel opportunity. Distributors like Ingram Micro confirm that much of the refresh is driven by aged fleets and Windows EOL, while AI remains an emerging but not yet dominant driver for mainstream PC replacement. (resource-recycling.com, insidermonkey.com)
Several critical unknowns remain:

• The exact pace at which the remaining upgrade‑eligible installed base migrates to Windows 11 is management‑estimated and will vary by region, sector, and budget cycle. Treat the “half upgraded” figure as directional, not definitive. (insidermonkey.com)
• The effect of large distributor incidents, logistics constraints, and regional economic shifts could accelerate or delay refresh timing in unpredictable ways. Recent distributor security incidents highlight that operational risk can amplify during a concentrated migration. (crn.com)

For channel partners, enterprise IT teams, and OEMs, the immediate takeaway is pragmatic: capitalize on the AI infrastructure upswing while preparing for a longer, service‑intensive PC refresh cycle that will reward strong migration services, reliable fulfillment, and responsible lifecycle handling.

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Dell’s Q2 results are a snapshot of an industry in transition: a data‑center boom powered by AI on one side, and a slow‑burn client refresh triggered by software lifecycle on the other. The winners will be those that execute across both fronts — shipping complex AI systems at scale, and delivering end‑to‑end migration experiences for the hundreds of millions of endpoints that still need upgrading. (dell.com, reuters.com)

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Source: Resource Recycling, Inc. Dell expects PC refresh to extend into next year