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DELL Jumps 32% in 3 Months: Can Strong AI Demand Fuel More Gains?
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Key Takeaways
Dell's shares jumped 32.4% in three months as AI infrastructure demand accelerates.
Dell expects fiscal 2027 AI server revenues of $74 billion, roughly three times the prior-year level.
Dell raised fiscal 2027 revenue guidance to $192 billion as profitability expectations improve.
Dell Technologies (DELL - Free Report) shares have jumped 32.4% in the past three months, outperforming the broader Zacks Computer and Technology sector’s rise of 9.2%. The appreciation can be attributed to a combination of accelerating AI infrastructure demand, a broader data-center refresh cycle, improving profitability and a sharply higher fiscal 2027 outlook.
Year to date (YTD), DELL stock has jumped 338.7%, outperforming the broader Zacks Computer and Technology sector’s rise of 25.5%. DELL has also outperformed Super Micro Computer (SMCI - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) and HP (HPQ - Free Report) , shares of which have returned 47.5%, 184.6% and 41.2%, respectively, over the same time frame. So, what should investors do with DELL stock? Let’s find out.
DELL Stock’s YTD Price Performance
Image Source: Zacks Investment Research
DELL Shares Ride on AI Prospects
DELL is benefiting from strong demand for AI-optimized infrastructure. In the second quarter of fiscal 2027, AI server orders reached a record $60.9 billion, while revenues were $16.4 billion and ending backlog climbed to $95 billion. Importantly, demand is becoming more diversified. The AI customer base surpassed 6,500 across neocloud, sovereign and enterprise customers in the second quarter of fiscal 2027. Customers are replacing aging infrastructure to improve processing capacity, power efficiency, security and resiliency. A majority of Dell’s installed base remains on 13th-generation or older servers, providing a sizeable multi-year refresh opportunity.
DELL has stated that AI bookings totaled roughly $132 billion over the trailing 12 months and highlighted that enterprise AI adoption is growing the fastest on a percentage basis. Dell believes enterprises remain early in the adoption cycle, with only around 10-15% having undertaken meaningful AI or agentic modernization. This leaves substantial room for additional infrastructure deployment. Dell expects fiscal 2027 AI server revenues of $74 billion, roughly three times the prior-year level.
Dell’s ability to deploy complex AI clusters quickly is becoming an additional competitive differentiator. Dell can deliver “time-to-token” four to six weeks faster in some large deployments, an economically meaningful advantage for customers seeking to monetize expensive GPU infrastructure quickly. Dell also provides engineering, installation, ongoing support and financing around these projects.
Meanwhile, the company’s competitive position is expected to strengthen from industrywide component shortages. Demand for both traditional and AI servers continues to exceed available supply, and the company expects the supply-demand imbalance to become tighter next year. Dell’s scale, longstanding supplier relationships and ability to redirect components across its broad portfolio provide an advantage in obtaining and allocating scarce components.
DELL Rides on Improved Profitability & Raised FY27 Guidance
Dell is benefiting from improved profitability. In the second quarter of fiscal 2026, non-GAAP operating income jumped 160% year over year to $5.93 billion. The operating margin expanded to 12.6% from 7.7%, aided by higher revenue scale, pricing discipline and improved storage profitability. Infrastructure Solutions Group (ISG) operating income jumped 225% year over year to $4.8 billion, while its operating margin expanded to 15%.
Dell raised its fiscal 2027 revenue guidance by $25 billion to $192 billion (plus or minus $2 billion), representing roughly 70% year-over-year growth, while non-GAAP earnings are projected at $25.5 per share (plus or minus 25 cents), up about 150% year over year.
For the third quarter of fiscal 2027, Dell expects revenues of $49 billion, plus or minus $500 million, and non-GAAP earnings of $6.50 per share, plus or minus 10 cents. DELL expects ISG revenues to grow roughly 145%, supported by about $19 billion in AI server revenues.
The Zacks Consensus Estimate for third-quarter fiscal 2027 earnings is pegged at $6.63 per share, up by 53.4% over the past 60 days and indicating 156% growth from the figure reported in the year-ago quarter.
The consensus mark for fiscal 2027 earnings is pegged at $26.09 per share, up 38.8% over the past 60 days, suggesting 153.3% growth from fiscal 2026’s reported figure.
DELL Stock is Trading at a Premium
Dell shares are trading at a premium, as suggested by a Value Score of D.
In terms of the forward 12-month price/earnings (P/E), DELL is trading at 19.10X, higher than Hewlett Packard Enterprise’s 14.93X, Super Micro Computer’s 9.44X, and HP’s 10.42X.
Valuation: DELL Vs. HPE
Image Source: Zacks Investment Research
Valuation: DELL Vs. SMCI
Image Source: Zacks Investment Research
Valuation: DELL Vs. HPQ
Image Source: Zacks Investment Research
Technically, Dell is trading above the 50 and 200-day moving averages (SMAs), indicating a bullish trend.
DELL Stock Trades Above 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Conclusion
Dell’s premium valuation appears justified by the strength and breadth of its growth outlook. Record AI server demand, a $95 billion backlog, accelerating enterprise AI adoption and a large installed base of aging servers provide strong visibility into continued infrastructure growth. At the same time, improving storage profitability, operating leverage and disciplined pricing are helping earnings grow faster than revenues. The sharp increase in fiscal 2027 guidance and strong upward earnings estimate revisions further reinforce confidence in Dell’s execution. With shares also trading above the 50-day and 200-day moving averages, the stock appears well positioned to sustain its positive momentum.
View the Zacks #1 Rank List
Image: Bigstock
DELL Jumps 32% in 3 Months: Can Strong AI Demand Fuel More Gains?
Key Takeaways
Dell Technologies (DELL - Free Report) shares have jumped 32.4% in the past three months, outperforming the broader Zacks Computer and Technology sector’s rise of 9.2%. The appreciation can be attributed to a combination of accelerating AI infrastructure demand, a broader data-center refresh cycle, improving profitability and a sharply higher fiscal 2027 outlook.
Year to date (YTD), DELL stock has jumped 338.7%, outperforming the broader Zacks Computer and Technology sector’s rise of 25.5%. DELL has also outperformed Super Micro Computer (SMCI - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) and HP (HPQ - Free Report) , shares of which have returned 47.5%, 184.6% and 41.2%, respectively, over the same time frame. So, what should investors do with DELL stock? Let’s find out.
DELL Stock’s YTD Price Performance
Image Source: Zacks Investment Research
DELL Shares Ride on AI Prospects
DELL is benefiting from strong demand for AI-optimized infrastructure. In the second quarter of fiscal 2027, AI server orders reached a record $60.9 billion, while revenues were $16.4 billion and ending backlog climbed to $95 billion. Importantly, demand is becoming more diversified. The AI customer base surpassed 6,500 across neocloud, sovereign and enterprise customers in the second quarter of fiscal 2027. Customers are replacing aging infrastructure to improve processing capacity, power efficiency, security and resiliency. A majority of Dell’s installed base remains on 13th-generation or older servers, providing a sizeable multi-year refresh opportunity.
DELL has stated that AI bookings totaled roughly $132 billion over the trailing 12 months and highlighted that enterprise AI adoption is growing the fastest on a percentage basis. Dell believes enterprises remain early in the adoption cycle, with only around 10-15% having undertaken meaningful AI or agentic modernization. This leaves substantial room for additional infrastructure deployment. Dell expects fiscal 2027 AI server revenues of $74 billion, roughly three times the prior-year level.
Dell’s ability to deploy complex AI clusters quickly is becoming an additional competitive differentiator. Dell can deliver “time-to-token” four to six weeks faster in some large deployments, an economically meaningful advantage for customers seeking to monetize expensive GPU infrastructure quickly. Dell also provides engineering, installation, ongoing support and financing around these projects.
Meanwhile, the company’s competitive position is expected to strengthen from industrywide component shortages. Demand for both traditional and AI servers continues to exceed available supply, and the company expects the supply-demand imbalance to become tighter next year. Dell’s scale, longstanding supplier relationships and ability to redirect components across its broad portfolio provide an advantage in obtaining and allocating scarce components.
DELL Rides on Improved Profitability & Raised FY27 Guidance
Dell is benefiting from improved profitability. In the second quarter of fiscal 2026, non-GAAP operating income jumped 160% year over year to $5.93 billion. The operating margin expanded to 12.6% from 7.7%, aided by higher revenue scale, pricing discipline and improved storage profitability. Infrastructure Solutions Group (ISG) operating income jumped 225% year over year to $4.8 billion, while its operating margin expanded to 15%.
Dell raised its fiscal 2027 revenue guidance by $25 billion to $192 billion (plus or minus $2 billion), representing roughly 70% year-over-year growth, while non-GAAP earnings are projected at $25.5 per share (plus or minus 25 cents), up about 150% year over year.
For the third quarter of fiscal 2027, Dell expects revenues of $49 billion, plus or minus $500 million, and non-GAAP earnings of $6.50 per share, plus or minus 10 cents. DELL expects ISG revenues to grow roughly 145%, supported by about $19 billion in AI server revenues.
DELL’s Earnings Estimate Revision Shows Rising Trend
The Zacks Consensus Estimate for third-quarter fiscal 2027 earnings is pegged at $6.63 per share, up by 53.4% over the past 60 days and indicating 156% growth from the figure reported in the year-ago quarter.
Dell Technologies Inc. Price and Consensus
Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. Quote
The consensus mark for fiscal 2027 earnings is pegged at $26.09 per share, up 38.8% over the past 60 days, suggesting 153.3% growth from fiscal 2026’s reported figure.
DELL Stock is Trading at a Premium
Dell shares are trading at a premium, as suggested by a Value Score of D.
In terms of the forward 12-month price/earnings (P/E), DELL is trading at 19.10X, higher than Hewlett Packard Enterprise’s 14.93X, Super Micro Computer’s 9.44X, and HP’s 10.42X.
Valuation: DELL Vs. HPE
Image Source: Zacks Investment Research
Valuation: DELL Vs. SMCI
Image Source: Zacks Investment Research
Valuation: DELL Vs. HPQ
Image Source: Zacks Investment Research
Technically, Dell is trading above the 50 and 200-day moving averages (SMAs), indicating a bullish trend.
DELL Stock Trades Above 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Conclusion
Dell’s premium valuation appears justified by the strength and breadth of its growth outlook. Record AI server demand, a $95 billion backlog, accelerating enterprise AI adoption and a large installed base of aging servers provide strong visibility into continued infrastructure growth. At the same time, improving storage profitability, operating leverage and disciplined pricing are helping earnings grow faster than revenues. The sharp increase in fiscal 2027 guidance and strong upward earnings estimate revisions further reinforce confidence in Dell’s execution. With shares also trading above the 50-day and 200-day moving averages, the stock appears well positioned to sustain its positive momentum.
DELL currently sports a Zacks Rank #1 (Strong Buy), which implies investors should start accumulating stock right now. You can see the complete list of today’s Zacks #1 Rank stocks here.