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Buy Top-Ranked DELL, SMCI & HPE to Form a Powerful AI-Server Portfolio
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Key Takeaways
DELL reported 53% revenue growth as AI server revenues doubled to $16.4 billion in fiscal 2027's Q2.
SMCI expects AI-related solutions to exceed 80% of revenues, backed by a record backlog entering fiscal 2027.
HPE's AI systems backlog rose 14% sequentially to $6.8 billion, with AI systems orders reaching $2.4 billion.
AI infrastructure stocks are flourishing on Wall Street with more vigor. In order to support aggressive workloads, AI-driven data centers are aggressively demanding high-density rack space and direct-to-chip liquid cooling. An astonishing rise in demand for high-performance rack servers boosted stock prices of companies in this space.
Here, we have narrowed our search to three AI-server manufacturers with a top Zacks Rank for Investment. Their robust business model, industry-leading product portfolio and guidance will ensure the northward journey of these stock prices in 2027 and beyond.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
Dell Technologies Inc.
Dell Technologies reported blockbuster results for the second quarter of fiscal 2027. Revenues surged 53% and EPS skyrocketed 203% year over year in the reported quarter. Infrastructure Solutions Group revenue jumped 89% to $31.8 billion, led by a 100% increase in AI-optimized server revenue to $16.4 billion and a 122% surge in traditional server and networking sales to $10.5 billion.
AI Servers and Core Infrastructure Strength
In the second quarter of fiscal 2027, DELL booked a record $60.9 billion of AI orders and recognized $16.4 billion of AI server revenues. Orders totaled $131.7 billion over the past 12 months, while backlog rose to $95 billion from $51.3 billion at the end of first-quarter fiscal 2027. DELL expects roughly $19 billion of AI server revenues in third-quarter fiscal 2027.
On May 27, the Pentagon announced a five-year contract with Dell worth $9.7 billion for Microsoft 365 productivity services. As a result, management is hopeful that its fiscal 2027 AI server sales will reach $60 billion.
Integrated AI Portfolio
DELL’s expanding AI infrastructure stack supports customers that want compute, networking, storage and data management on infrastructure they control. DELL’s ecosystem includes NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices Inc. (AMD - Free Report) , OpenAI, Meta Platforms Inc. (META - Free Report) , Palantir Technologies Inc. (PLTR - Free Report) , Mistral AI, Alphabet Inc. (GOOGL - Free Report) , Reflection, Hugging Face and Glean.
Solid Estimate Revisions
Dell Technologies has an expected revenue and earnings growth rate of 72.6% and more than 100%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 32.3% over the last 30 days.
DELL has an expected revenue and earnings growth rate of 18.1% and 16.3%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 26.1% over the last 30 days.
Image Source: Zacks Investment Research
Strong Guidance
For the third quarter of fiscal 2027, Dell Technologies expects revenues of $49 billion, +/- $500 million, and non-GAAP earnings of $6.50 per share, +/- $0.10. DELL expects ISG revenues to grow roughly 145%, supported by about $19 billion in AI server revenues, while CSG revenues are expected to rise roughly 15%.
For fiscal 2027, management raised its revenue outlook by $25 billion to $192 billion, +/- $2 billion, and lifted non-GAAP earnings guidance to $25.50 per share, +/- $0.25. AI server revenues are now expected to reach $74 billion, or roughly three times the prior-year level, with traditional server growth forecast at just over 100%.
Attractive Valuation
Despite a year-to-date rally of more than 350%, the DELL stock still looks reasonably valued. It trades at a forward 12-month price-to-earnings (P/E) multiple of 22.42X compared with the industry average of 22.42X and the S&P 500 average of 17.89X. It trades at a price/sales (P/S) multiple of 2.39X compared with the industry average of 2.39X and the S&P 500 average of 2.92X.
Image Source: Zacks Investment Research
Super Micro Computer Inc.
Super Micro Computer’s fiscal 2026 revenues nearly doubled to $39.1 billion, while the company generated more than $60 billion in new orders during the fourth quarter, taking the backlog to record levels entering fiscal 2027.
The AI solutions represented about 60% of SMCI’s fourth-quarter fiscal 2026 revenues because several large projects shifted timing, but SMCI expects AI-related solutions to exceed 80% of revenues going forward based on backlog.
Transformation Toward a Complete AI Infra Provider
Super Micro Computer is moving beyond stand-alone servers toward complete Data Center Building Block Solutions. This strategy integrates GPU and CPU servers, enterprise storage, direct liquid cooling, power infrastructure, high-speed switches, networking, data-center management software and lifecycle services. SMCI said the model is intended to reduce customer time-to-deployment and time-to-online by providing a more integrated data-center build.
Robust Clientele of SMCI
Some of the largest customers of SMCI include NVIDIA, Intel Corp. (INTC - Free Report) and Advanced Micro Devices. The company is a big beneficiary of the booming AI-empowered hardware market.
Solid Estimate Revisions
Super Micro Computer has an expected revenue and earnings growth rate of 71.8% and 22%, respectively, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 43.3% over the last 60 days.
SMCI has an expected revenue and earnings growth rate of 19.6% and 18.7%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 42.2% over the last 60 days.
Image Source: Zacks Investment Research
Strong Guidance
For the first quarter of fiscal 2027, Super Micro Computer expects net sales of $14.5-$15.5 billion, with non-GAAP adjusted earnings of $1.01-$1.10 per share. SMCI expects first-quarter fiscal 2027 non-GAAP gross margin to be between 10.4% and 10.8%.
For full-year fiscal 2027, SMCI expects net sales of $65-$72 billion compared with $39.1 billion in fiscal 2026. The outlook reflects continued AI infrastructure demand, record backlog and increasing contributions from enterprise, sovereign AI, NeoCloud and agentic AI opportunities.
Attractive Valuation
Super Micro Computer is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 8.82X, compared with the industry’s P/E of 10.67X and the S&P 500’s P/E of 17.89X. It has a price/sale (P/S) of 0.66X, compared with the industry’s P/S of 5.43X and the S&P 500’s P/S of 2.92X. SMCI has a price/book (P/B) of 2.29X, significantly lower than the industry’s P/B of 16.86X and the S&P 500’s P/B of 3.56X.
Image Source: Zacks Investment Research
Hewlett Packard Enterprise Co.
Hewlett Packard Enterprise is benefiting from a broader shift toward AI infrastructure, networking modernization and hybrid cloud. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9.0 billion, up 25% year over year, with a 17% operating margin.
Server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems. Record orders and backlog show demand is running ahead of shipments.
Enterprise AI Offerings Support Larger Solution Wins
Hewlett Packard Enterprise is packaging compute, storage, networking and cloud management into AI systems and Private Cloud AI solutions for inferencing and agentic workloads. In the third quarter of fiscal 2026, AI systems orders were $2.4 billion, up more than 30% sequentially, while AI systems backlog rose 14% sequentially to $6.8 billion.
Private Cloud AI orders increased triple digits year over year, showing wider adoption of HPE’s on-premises AI factory approach. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, adding evidence that enterprise AI deployments are moving beyond pilots.
Solid Estimate Revisions
Hewlett Packard Enterprise has an expected revenue and earnings growth rate of 17.4% and 19.9%, respectively, for next year (ending October 2027). The Zacks Consensus Estimate for next year’s earnings has improved 11.8% over the last 30 days.
Image Source: Zacks Investment Research
Strong Guidance
For the fourth quarter of fiscal 2026, HPE expects revenues of $13.9-$14.8 billion and non-GAAP earnings of $1.20-$1.30 per share. Networking revenues are projected to grow 11-13%, while Cloud & AI revenues are expected to increase 60-72%. For fiscal 2026, HPE raised its revenue growth outlook to 34-37% and non-GAAP earnings-per-share guidance to $3.75-$3.85. Free cash flow is now expected to be at least $3.75 billion.
For fiscal 2027, management raised its revenue growth framework to 13-17% and projected non-GAAP earnings-per-share growth of 16-20%. HPE expects a 14-15% non-GAAP operating margin and free cash flow of at least $5 billion, with Networking revenue growth of 14-17% and Cloud & AI growth of 14-18%.
Attractive Valuation
Hewlett Packard Enterprise is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 15.96X compared with the industry’s P/E of 21.21X and the S&P 500’s P/E of 17.89X. It has a price/sale (P/S) of 1.93X compared with the industry’s P/S of 7.79X and the S&P 500’s P/S of 2.92X. HPE has a price/book (P/B) of 3.03X, significantly lower than the industry’s P/B of 6.26X and the S&P 500’s P/B of 3.56X.
View the Zacks #1 Rank List
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Buy Top-Ranked DELL, SMCI & HPE to Form a Powerful AI-Server Portfolio
Key Takeaways
AI infrastructure stocks are flourishing on Wall Street with more vigor. In order to support aggressive workloads, AI-driven data centers are aggressively demanding high-density rack space and direct-to-chip liquid cooling. An astonishing rise in demand for high-performance rack servers boosted stock prices of companies in this space.
Here, we have narrowed our search to three AI-server manufacturers with a top Zacks Rank for Investment. Their robust business model, industry-leading product portfolio and guidance will ensure the northward journey of these stock prices in 2027 and beyond.
The companies are: Dell Technologies Inc. (DELL - Free Report) , Super Micro Computer Inc. (SMCI - Free Report) and Hewlett Packard Enterprise Co. (HPE - Free Report) . Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
Dell Technologies Inc.
Dell Technologies reported blockbuster results for the second quarter of fiscal 2027. Revenues surged 53% and EPS skyrocketed 203% year over year in the reported quarter. Infrastructure Solutions Group revenue jumped 89% to $31.8 billion, led by a 100% increase in AI-optimized server revenue to $16.4 billion and a 122% surge in traditional server and networking sales to $10.5 billion.
AI Servers and Core Infrastructure Strength
In the second quarter of fiscal 2027, DELL booked a record $60.9 billion of AI orders and recognized $16.4 billion of AI server revenues. Orders totaled $131.7 billion over the past 12 months, while backlog rose to $95 billion from $51.3 billion at the end of first-quarter fiscal 2027. DELL expects roughly $19 billion of AI server revenues in third-quarter fiscal 2027.
On May 27, the Pentagon announced a five-year contract with Dell worth $9.7 billion for Microsoft 365 productivity services. As a result, management is hopeful that its fiscal 2027 AI server sales will reach $60 billion.
Integrated AI Portfolio
DELL’s expanding AI infrastructure stack supports customers that want compute, networking, storage and data management on infrastructure they control. DELL’s ecosystem includes NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices Inc. (AMD - Free Report) , OpenAI, Meta Platforms Inc. (META - Free Report) , Palantir Technologies Inc. (PLTR - Free Report) , Mistral AI, Alphabet Inc. (GOOGL - Free Report) , Reflection, Hugging Face and Glean.
Solid Estimate Revisions
Dell Technologies has an expected revenue and earnings growth rate of 72.6% and more than 100%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 32.3% over the last 30 days.
DELL has an expected revenue and earnings growth rate of 18.1% and 16.3%, respectively, for the next year. The Zacks Consensus Estimate for the next year’s earnings has improved 26.1% over the last 30 days.
Image Source: Zacks Investment Research
Strong Guidance
For the third quarter of fiscal 2027, Dell Technologies expects revenues of $49 billion, +/- $500 million, and non-GAAP earnings of $6.50 per share, +/- $0.10. DELL expects ISG revenues to grow roughly 145%, supported by about $19 billion in AI server revenues, while CSG revenues are expected to rise roughly 15%.
For fiscal 2027, management raised its revenue outlook by $25 billion to $192 billion, +/- $2 billion, and lifted non-GAAP earnings guidance to $25.50 per share, +/- $0.25. AI server revenues are now expected to reach $74 billion, or roughly three times the prior-year level, with traditional server growth forecast at just over 100%.
Attractive Valuation
Despite a year-to-date rally of more than 350%, the DELL stock still looks reasonably valued. It trades at a forward 12-month price-to-earnings (P/E) multiple of 22.42X compared with the industry average of 22.42X and the S&P 500 average of 17.89X. It trades at a price/sales (P/S) multiple of 2.39X compared with the industry average of 2.39X and the S&P 500 average of 2.92X.
Image Source: Zacks Investment Research
Super Micro Computer Inc.
Super Micro Computer’s fiscal 2026 revenues nearly doubled to $39.1 billion, while the company generated more than $60 billion in new orders during the fourth quarter, taking the backlog to record levels entering fiscal 2027.
The AI solutions represented about 60% of SMCI’s fourth-quarter fiscal 2026 revenues because several large projects shifted timing, but SMCI expects AI-related solutions to exceed 80% of revenues going forward based on backlog.
Transformation Toward a Complete AI Infra Provider
Super Micro Computer is moving beyond stand-alone servers toward complete Data Center Building Block Solutions. This strategy integrates GPU and CPU servers, enterprise storage, direct liquid cooling, power infrastructure, high-speed switches, networking, data-center management software and lifecycle services. SMCI said the model is intended to reduce customer time-to-deployment and time-to-online by providing a more integrated data-center build.
Robust Clientele of SMCI
Some of the largest customers of SMCI include NVIDIA, Intel Corp. (INTC - Free Report) and Advanced Micro Devices. The company is a big beneficiary of the booming AI-empowered hardware market.
Solid Estimate Revisions
Super Micro Computer has an expected revenue and earnings growth rate of 71.8% and 22%, respectively, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 43.3% over the last 60 days.
SMCI has an expected revenue and earnings growth rate of 19.6% and 18.7%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 42.2% over the last 60 days.
Image Source: Zacks Investment Research
Strong Guidance
For the first quarter of fiscal 2027, Super Micro Computer expects net sales of $14.5-$15.5 billion, with non-GAAP adjusted earnings of $1.01-$1.10 per share. SMCI expects first-quarter fiscal 2027 non-GAAP gross margin to be between 10.4% and 10.8%.
For full-year fiscal 2027, SMCI expects net sales of $65-$72 billion compared with $39.1 billion in fiscal 2026. The outlook reflects continued AI infrastructure demand, record backlog and increasing contributions from enterprise, sovereign AI, NeoCloud and agentic AI opportunities.
Attractive Valuation
Super Micro Computer is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 8.82X, compared with the industry’s P/E of 10.67X and the S&P 500’s P/E of 17.89X. It has a price/sale (P/S) of 0.66X, compared with the industry’s P/S of 5.43X and the S&P 500’s P/S of 2.92X. SMCI has a price/book (P/B) of 2.29X, significantly lower than the industry’s P/B of 16.86X and the S&P 500’s P/B of 3.56X.
Image Source: Zacks Investment Research
Hewlett Packard Enterprise Co.
Hewlett Packard Enterprise is benefiting from a broader shift toward AI infrastructure, networking modernization and hybrid cloud. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9.0 billion, up 25% year over year, with a 17% operating margin.
Server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems. Record orders and backlog show demand is running ahead of shipments.
Enterprise AI Offerings Support Larger Solution Wins
Hewlett Packard Enterprise is packaging compute, storage, networking and cloud management into AI systems and Private Cloud AI solutions for inferencing and agentic workloads. In the third quarter of fiscal 2026, AI systems orders were $2.4 billion, up more than 30% sequentially, while AI systems backlog rose 14% sequentially to $6.8 billion.
Private Cloud AI orders increased triple digits year over year, showing wider adoption of HPE’s on-premises AI factory approach. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, adding evidence that enterprise AI deployments are moving beyond pilots.
Solid Estimate Revisions
Hewlett Packard Enterprise has an expected revenue and earnings growth rate of 17.4% and 19.9%, respectively, for next year (ending October 2027). The Zacks Consensus Estimate for next year’s earnings has improved 11.8% over the last 30 days.
Image Source: Zacks Investment Research
Strong Guidance
For the fourth quarter of fiscal 2026, HPE expects revenues of $13.9-$14.8 billion and non-GAAP earnings of $1.20-$1.30 per share. Networking revenues are projected to grow 11-13%, while Cloud & AI revenues are expected to increase 60-72%. For fiscal 2026, HPE raised its revenue growth outlook to 34-37% and non-GAAP earnings-per-share guidance to $3.75-$3.85. Free cash flow is now expected to be at least $3.75 billion.
For fiscal 2027, management raised its revenue growth framework to 13-17% and projected non-GAAP earnings-per-share growth of 16-20%. HPE expects a 14-15% non-GAAP operating margin and free cash flow of at least $5 billion, with Networking revenue growth of 14-17% and Cloud & AI growth of 14-18%.
Attractive Valuation
Hewlett Packard Enterprise is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 15.96X compared with the industry’s P/E of 21.21X and the S&P 500’s P/E of 17.89X. It has a price/sale (P/S) of 1.93X compared with the industry’s P/S of 7.79X and the S&P 500’s P/S of 2.92X. HPE has a price/book (P/B) of 3.03X, significantly lower than the industry’s P/B of 6.26X and the S&P 500’s P/B of 3.56X.
Image Source: Zacks Investment Research