Can Dell’s Margins Catch Up With Its Stock?
Dell Technologies (DELL) stock has returned 341% over the past twelve months, the best record among the six companies in its peer group. Its revenue growth also ranks first. Its operating margin ranks only fourth, and that gap is what a buyer today has to judge. Behind the growth is demand for its servers that has outrun its own supply.
How Did Dell Win The Year Without Winning On Margin?
Cisco Systems shows the gap clearly. Cisco runs an operating margin of 23.7%, against 9.6% at Dell, yet its stock returned 65.6% over the same twelve months.
| DELL | HPQ | HPE | IBM | CSCO | AAPL | |
|---|---|---|---|---|---|---|
| Market Cap ($ Bil) | 371.1 | 30.3 | 82.5 | 218.3 | 436.7 | 4,765.1 |
| PE Ratio | 32.6 | 12.4 | 29.6 | 20.4 | 36.5 | 37.0 |
| LTM Revenue Growth | 49.0% | 8.1% | 26.6% | 7.9% | 9.2% | 14.2% |
| LTM Operating Margin | 9.6% | 6.6% | 7.8% | 18.4% | 23.7% | 33.2% |
| 12M Stock Return | 341.0% | 22.6% | 149.0% | -10.2% | 65.6% | 43.0% |
The market is paying for growth instead. Dell grew revenue 49.0% over the last twelve months, the fastest in the group, while Cisco grew 9.2%. Nor is Dell the priciest name on earnings. At 32.6 times trailing earnings, it trades below both Cisco and Apple.
That puts the weight on the margin. A stock that has more than quadrupled on a middling margin needs that margin to widen while the sales keep coming.
What Is Dell Selling To Earn That Growth?
Start with AI servers. Dell ended fiscal Q2 2027 with a record $95 billion of AI backlog.
The growth is broader than AI. Dell says it gained more than 10 points of traditional server share over the past two quarters. Most of its installed base still runs on 14th generation or older servers, which management sees as a durable refresh ahead.
The margin case rests on two levers. Management names scale as the biggest, with operating expenses guided to about 8% of revenue for fiscal 2027, the lowest in the company’s 42-year history. The next is storage, where Dell is shifting sales from partner products to its own Dell IP lines, which earn a higher margin.
Is Dell’s Server Demand Durable Or Borrowed?
Management has put a number on it. It raised its fiscal 2027 revenue guide to $192 billion at the midpoint, from $167 billion. Hitting it would show the backlog turning into sales. Missing it would suggest the growth is peaking.
The risk is that some of the demand is borrowed. An analyst asked whether pricing and pre-buys were driving the traditional server surge instead of real demand. Management says customers are placing orders further in advance to secure supply, and that many would prefer to have the product sooner. It names DRAM and NAND as the tightest parts.
Orders placed early to beat a shortage can fade when the shortage ends. The CFO also says Dell should not expect every margin benefit from fiscal Q2 to continue at that level, though he adds that the quarter also reflects meaningful structural improvements in the business. On a margin well below Cisco’s, Dell has less room if growth cools. The test to follow is whether Dell stays among the companies raising guidance.
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