Dell (DELL) AI Strong Buy
If you've been following the tech market, you know that Artificial Intelligence (AI) isn't just a buzzword – it's a monumental shift reshaping industries. And at the heart of this revolution, powering the digital economy from the ground up, is Dell Technologies (DELL). Once synonymous with personal computers, Dell has strategically pivoted and is now soaring to unprecedented heights, driven by the insatiable demand for AI servers and robust data infrastructure.
Analysts are taking note, bestowing a coveted "Strong Buy" rating on Dell. This isn't just hype; it's a testament to the company's solid fundamentals, explosive growth potential, and a financial outlook that promises to outperform the broader market and its competitors for the foreseeable future. Just look at the numbers: Dell stock has already surged an impressive 33.8% year-to-date, handily eclipsing the S&P 500 Index ($SPX) gain of 14.6%. So, is Dell a smart buy right now? Let's dive in!
Dell Technologies, a company valued at a staggering $100.9 billion, has masterfully evolved beyond its traditional personal computing roots. While still a player in the PC market, its true strength now lies in providing the high-performance servers that fuel AI, cloud computing, and enterprise data centers. They're also a critical provider of data storage hardware and software, helping enterprises securely manage and recover their vast amounts of data.
This strategic foresight has been a game-changer. Dell identified the burgeoning need for powerful infrastructure to support AI workloads early on and aggressively shifted its focus. This pivot is precisely why we're seeing its stock performance outshine market averages. It's not just about selling boxes anymore; it's about building the intelligent backbone of tomorrow's economy.
Dell's recent fiscal 2026 second-quarter results are a clear indicator of its successful strategy. The company reported a phenomenal $29.8 billion in revenue, marking a 19% year-over-year increase. This impressive growth was primarily propelled by the surging demand for AI servers and widespread enterprise adoption.
Let's break down the key drivers:
- Infrastructure Solutions Group (ISG) Takes Center Stage: This segment, which encompasses Dell’s AI and data center business, saw an incredible 44% increase, reaching a record $16.8 billion. Within ISG, server and networking revenue alone skyrocketed by 69% to $12.9 billion, directly supporting enterprise data centers and critical AI workloads.
- Next-Gen Servers & Upgrade Opportunities: Dell's introduction of its 17th-generation servers this quarter highlights its commitment to innovation, offering increased performance and efficiency crucial for AI integration. With over 70% of the installed base still on older server generations, Dell foresees massive upgrade opportunities ahead – a significant future revenue stream!
- Client Solutions Group (CSG) Holds Steady: While the AI story dominated, the Client Solutions Group (PCs and notebooks) also saw revenue increase by 1% to $12.5 billion. Business PCs rose by 2%, offsetting a 7% dip in consumer PCs. Crucially, profitability improved due to favorable market conditions and stronger product positioning.
Dell's commitment to AI is not just talk; it's backed by concrete numbers and strategic partnerships.
- Explosive AI Server Momentum: The company secured $5.6 billion in AI server orders, sold $8.2 billion worth, and ended the quarter with a massive $11.7 billion backlog. This backlog alone is a strong indicator of robust future revenue. To put its rapid execution into perspective, Dell shipped more AI servers in the first half of 2025 than in the entire year of 2024!
- Leadership Comments: COO Jeffrey Clarke aptly described AI as a "significant tailwind" for the business, emphasizing Dell's "unprecedented pace of innovation" in engineering scalable solutions.
- Cutting-Edge Partnerships: Dell was among the first to ship Nvidia’s (NVDA) GB200 NVL72 and GB300 NVL72 systems, which are state-of-the-art AI hardware designed for next-generation computing clusters. They even delivered the first GB300 NVL72 devices to CoreWeave (CRWV) in July, showcasing their agility in adapting to evolving AI architectures.
- Financial Discipline & Shareholder Returns: Despite heavy investments in R&D and modernization, operating expenses fell by 4%. This discipline contributed to a 19% increase in adjusted diluted earnings to $2.32 per share in Q2. CFO Yvonne McGill highlighted the company's efficient execution, generating $2.5 billion in operating cash flow and holding $9.8 billion in cash and investments. Dell also returned $1.3 billion to shareholders through buybacks and dividends in Q2, bringing total returns to $14.5 billion since fiscal 2023.
- Upgraded Full-Year Guidance: Given its stellar first half, Dell raised its fiscal 2026 full-year guidance, now projecting revenue between $105 billion and $109 billion (a 12% YoY increase at the midpoint). AI server shipments alone could hit around $20 billion. Adjusted earnings are expected to be around $9.55 per share (a 17% increase at the midpoint).
The global demand for AI hardware and services is projected to nearly double from $184 billion in 2024 to an astonishing $356 billion by 2028. Dell's ability to scale manufacturing, deploy turnkey AI systems, and maintain financial discipline truly sets it apart and positions it perfectly to dominate this growth wave.
Q1. What is the primary reason Dell Technologies has earned a "Strong Buy" rating from analysts?
A. Dell has garnered a "Strong Buy" rating due to its robust fundamentals, significant growth potential, and strong financial outlook, particularly driven by its successful strategic shift into high-demand AI servers and data infrastructure. Its stock performance has also consistently outperformed the broader market.
Q2. How has Dell's focus on AI servers impacted its financial performance in recent quarters?
A. Dell's strategic focus on AI servers has led to stellar financial results. In its most recent quarter (Q2 fiscal 2026), the company reported a 19% year-over-year revenue increase, with its Infrastructure Solutions Group (ISG), which includes AI and data center business, growing by an impressive 44% to a record $16.8 billion.
Q3. What is Dell's projected outlook for AI server shipments and the broader AI hardware market?
A. Dell forecasts approximately $20 billion in AI server shipments for fiscal year 2026. Management also notes that the global demand for AI hardware and services is expected to double from $184 billion in 2024 to $356 billion by 2028, positioning Dell to capitalize significantly on this market expansion.
With six consecutive quarters of double-digit ISG growth, record revenue and EPS, and undeniable momentum in the AI sector, it's no surprise that Dell Technologies is a "Strong Buy." Trading at a reasonable 15 times forward earnings, Dell offers investors a compelling opportunity to participate in the burgeoning AI revolution. Its ability to innovate, execute, and maintain financial discipline makes it a standout choice in the tech space.
Don't miss out on the AI server boom – Dell is definitely a stock to watch, and potentially, to buy right now!