What Are Dell Stock Investors Overlooking?
The number Dell Technologies (DELL) holders should watch most closely is its AI server revenue. Dell expects $74 billion from these servers in fiscal 2027, three times the year before. The stock returned 320% in the last twelve months, against 17.7% for the S&P 500. News reports tie Dell’s rally in 2026 to its rise as one of the top sellers of Nvidia-based servers. So what might Dell stock investors be overlooking?
Investors May Miss How Recently Dell’s AI Sales Grew
Investors may be missing how recently Dell’s AI server business reached its current size. Dell expects AI server revenue to triple in fiscal 2027 alone. The growth came from a surge in orders. Dell booked a record $60.9 billion of AI server orders in fiscal Q2 2027. Management said on the fiscal Q2 2027 earnings call that Dell now has more than 6,500 AI customers.
Customers are also ordering further ahead to secure supply, management said. The AI server business is now large compared with the rest of Dell. Its expected revenue is close to 40% of the $192 billion Dell has guided for fiscal 2027.
Five years ago, the whole company had $88.8 billion of revenue over twelve months. Dell expects one product line to bring in more than four-fifths of that in fiscal 2027. Because the growth is so recent, Dell has little history to show how AI server sales behave when orders slow.
What AI Servers Mean For Dell’s Margins And Stock
Dell’s profits have grown along with its server sales. Dell reports AI servers inside its infrastructure business, which also sells traditional servers and storage. That business earned a record $4.8 billion of operating income in fiscal Q2 2027. Its operating margin was 15%, up 6.2 points from a year earlier.
Management does not expect all of that to last. On the fiscal Q2 2027 call, it said not every benefit would continue at that level. It also pointed to structural improvements in the business. For fiscal Q3 2027, Dell expects AI server revenue to more than triple from a year earlier. It expects the infrastructure margin to be just over 1 point higher than a year earlier.
Dell’s stock trades at 30.8 times its past year’s earnings. The S&P 500 trades at a P/E, or price-to-earnings ratio, of 22.1. Dell stock has also fallen harder than the market in most recent sell-offs. In the 2025 US tariff shock, it dropped 41% from peak to trough, against 19% for the S&P 500.
Management has not given a growth forecast beyond fiscal 2027. Asked about later growth on the fiscal Q2 2027 call, management gave no growth rate. It pointed to a strong second half of fiscal 2027 and a market opportunity of more than $1 trillion. The price likely assumes AI server sales keep growing after fiscal 2027. Dell has not said they will.
Does Dell Have Enough AI Orders To Keep Growing?
Dell has a large pile of unfilled AI orders. It ended fiscal Q2 2027 with a record $95 billion of AI server backlog, meaning orders not yet delivered. Management said its pipeline of possible deals remains multiples of that backlog. Dell has guided AI server revenue of $19 billion for fiscal Q3 2027.
A holder has reason for measured worry, not alarm. Dell has a record AI server backlog, but Dell has given no growth forecast past fiscal 2027. The fiscal Q3 2027 results will show whether AI server revenue reaches the $19 billion guide. A result at or above that level would ease the worry. If AI server revenue falls short, or orders slow, the worry about Dell’s reliance on one product line would grow.
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