Should You Trim Or Add To Your Dell Position Now?

If you own Dell Technologies (DELL), your worry is probably about size. The stock returned 287% over the past twelve months, against 16% for the S&P 500. A position that was modest a year ago may now be one of your largest. Trimming means selling a company whose sales are growing quickly. Adding means buying after that 287% return.

Dell Ended Fiscal Q2 With $95 Billion AI Backlog

Dell ended its latest reported quarter, fiscal Q2 2027, with $95 billion of AI server orders still to ship. Management called that backlog a record. The backlog grew because Dell took orders far faster than it shipped them. Dell booked $60.9 billion of new AI orders in the quarter. It recorded $16.4 billion of AI server revenue over the same three months.

Management has kept raising its forecast as those orders arrived. On its fiscal Q2 call, it raised its revenue guide for fiscal 2027 by $25 billion, to $192 billion at the midpoint. That was the fifth straight quarter in which Dell raised its outlook. Management also guided to $19 billion of AI server revenue for fiscal Q3 2027. Both guides are forecasts, but the orders are already on Dell’s books.

Will Dell Earn More On Each Dollar Of Revenue?

Dell earned more on each dollar of revenue in fiscal Q2 2027, but it has not shown that the gain lasts. In that quarter, operating income rose 160% while revenue rose 58%. Operating income is the profit left after the costs of running the business. Management said the main reason was scale: a larger Dell spreads its running costs over more sales.

Dell is still a low-margin business. Its operating margin over the past twelve months was 9.6%, against 18.6% for the S&P 500. That means Dell keeps less than ten cents of each sales dollar as operating profit. Management said it would not expect every benefit from the quarter to continue at that level. Management added that the quarter also reflects structural improvements in the business. The memory chips that go into servers, DRAM and NAND, also remain in short supply. Management said demand for its traditional servers outstripped supply.

Dell’s profit growth matters because of the price you now pay for each dollar of its earnings. Dell stock trades at 30.7 times its earnings of the past twelve months, against 21.4 for the S&P 500. This price-to-earnings ratio, or P/E, is the share price divided by profit per share. Dell’s P/E stands at that level after the past year’s rise in the share price. If profit keeps growing as fast as it did in fiscal Q2, the same price becomes a smaller multiple of earnings. If profit growth slows, the P/E comes down more slowly and stays above the index for longer.

Dell Stock Fell About 40% In Three Market Shocks

Dell stock lost about 40% of its value in three of the five recent market shocks we track. In the 2025 tariff shock, it fell 41% from its peak to its low. The S&P 500 fell 19% in the same period.

In the mid-2024 shock tied to the Japanese yen, Dell fell 39% and the index fell 7.8%. In the 2022 inflation shock, Dell fell 40% against 24% for the index. Each fall is measured from the highest price to the lowest price inside that period. On a $10,000 position in Dell, the largest of those falls would be a loss of about $4,100.

Dell is taking orders faster than it ships them. Its profit has grown faster than its sales. Memory chips are still short. Management does not expect every benefit from the quarter to continue at the same level. Dell’s next report covers fiscal Q3 2027. AI server revenue at or above the $19 billion guide would show the backlog turning into sales. Operating income that grows more slowly than revenue would show that Dell’s costs are catching up with its sales.

Does This Mean You Should Act On DELL?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.