Is This One Number Reason Enough To Sell Dell Stock?
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Dell Technologies (DELL) is selling far more than it did a year ago, but over the past twelve months the company kept less of that revenue after paying for the cost of goods. Dell posted a twelve-month gross margin of 19.8% in the year to July 2026, down from 21.1% in the prior year. The decline matters to investors holding a stock that fell 42.7% in the month to November 6, while the S&P 500 lost 4.9%. So why is Dell keeping less of each sale?
Why Dell Keeps Less Of Each Sale
Management points to AI servers. During its September 1, 2026 call, management said gross margin rates for the full fiscal year are up year over year when excluding the effect of the growing share of those servers. The systems have become a large piece of the business, with Dell recognizing $16.4 billion of AI server revenue in fiscal Q2 2027 to account for about 35% of its sales that quarter.
The slide has been steady rather than sharp. In the twelve months to August 2024, Dell retained 22.7% of sales after the cost of goods, compared with 23.4% the year before. The figure has fallen in each of the two years since. That is a drop of under three points in two years.
Can Dell Keep Profit Growing On A Thinner Margin?
So far it has. Dell’s operating income was $14.5 billion over the twelve months to July 2026, roughly double the $7.16 billion reported a year earlier. Its twelve-month operating margin of 9.6% is the highest at any quarter end in the past ten years. Management called scale the single biggest lever behind that performance, and said that operating costs fell to 8.5% of revenue in fiscal Q2 2027.
The latest quarter also looks better than the trailing twelve-month period. Dell recorded a quarterly gross margin of 20.9% in fiscal Q2 2027, an increase from 18.3% in the same quarter a year earlier. Management also said the company’s gross margin outlook for the second half of the fiscal year has improved.
Dell’s costs remain the unsettled part of the business. Management named DRAM and NAND as the main supply constraints, and said that part of its server growth came from price increases as its input costs keep rising. Dell also expects the operating income rate of its PC business to moderate to roughly 6% in fiscal Q3 2027.
How Far Has Dell Stock Fallen In Past Shocks?
Dell trades at 18.6 times its trailing earnings, sitting below 21.8 times for the S&P 500. When markets have turned, Dell has usually fallen much further than the index. The stock lost 41% during the 2025 tariff shock, compared with 19% for the S&P 500 ETF. It shed 40% in the 2022 inflation shock, against 24% for the ETF. During the 2024 yen unwind, Dell fell 39%, whereas the ETF lost 7.8%. The 42.7% drop in the month to November 6 is already deeper than all three previous shocks.
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For a shareholder, the slipping margin presents a real but slow-moving risk, balanced against a business that has grown its profit. The worry would grow if the gross margin kept slipping after operating costs stopped falling as a share of sales. Dell’s gross margin is the number to watch when the company reports its fiscal third quarter of 2027, expected in November 2026.
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