Dell Earnings: AI Flywheel Spreading Across Portfolio

Key Morningstar Metrics for Dell Technologies

• Fair Value Estimate
  : $490.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of Dell Technologies’ Earnings

Dell Technologies DELL reported extraordinary fiscal 2027 second-quarter results, exceeding even the greatly increased expectations established after its first quarter. Revenue grew 58% year over year to $47 billion, while non-GAAP earnings per share increased 203% to $7.04.

Why it matters: Despite massively raised expectations after last quarter’s results, adjusted earnings were roughly 47% above management’s prior midpoint, and the full-year guidance increase was over 3 times higher than the beat amount in the quarter, implying accelerating growth in the second half.

• Artificial intelligence demand continues to exceed supply and accelerate, even with previously high growth rates. The AI customer base continued to expand, as did the backlog, and the pipeline remains multiples of the backlog.
• We were also pleased to see this demand spreading to multiple product categories. Last quarter, general-purpose server demand caught the AI wave, and now growth is expected to be over 100% for the year. This quarter, the storage story started to really play out, with revenue up 26%.

The bottom line: We are raising our fair value estimate for no-moat Dell to $490 per share from $460, now implying an exit forward P/E multiple of 15 times in 2030 versus 16 times previously (on a rolling fair value basis). We would not be surprised if some more upside remains within storage specifically.

• We view the result as strongly supportive of Dell and of continued AI infrastructure investment, with shares looking close to fairly valued after the current rally. Current results strengthen the case that Dell is evolving from a narrow AI server beneficiary into a broader infrastructure platform.
• The strongest item in the quarter may have been ISG profitability, which expanded to 15% from 10.5%. Investors will recall this was a key debate several quarters ago. While near-term pricing power may subside slightly, we broadly expect momentum to carry on into next year.