Dell surges 293% as AI server backlog hits $51 billion

Dell Technologies has become the year's defining AI infrastructure trade, up 293% to $490.81 as record server orders — $24.4 billion booked in one quarter — position the hardware maker ahead of chip stocks.

"Demand continues to exceed supply, and customer conversations are multi-year in nature — think three, four, five years," Chief Executive Jeff Clark said on the May 28 earnings call.

Dell's fiscal first-quarter revenue rose 87.5% year over year to $43.84 billion, with non-GAAP earnings of $4.86 a share beating consensus by nearly 64%. AI-optimized server revenue jumped 757% to $16.13 billion, and the company exited the quarter with a $51.3 billion AI backlog. Infrastructure Solutions Group operating margin expanded to 10.5%.

Management raised fiscal 2027 revenue guidance to $165 billion to $169 billion, with non-GAAP earnings of $17.90 a share at the midpoint, up 74% from a year earlier. 24/7 Wall St. rates Dell a buy with a $560.77 price target, implying 14.25% upside, and a 90% confidence level.

The stock has climbed 19.1% in the past month and sits 2% from its 52-week high of $514. Dell's bull scenario points to $585.31, roughly 19% upside, with agentic AI layering in as a fresh tailwind for traditional servers.

Hewlett Packard Enterprise, the closest enterprise server rival, raised fiscal 2026 non-GAAP EPS guidance to $3.35 to $3.45 after posting second-quarter revenue of $10.68 billion, up 40% year over year. But HPE's fiscal 2027 framework calls for 8% to 12% revenue growth, well below Dell's 47% guide. Dell is scaling faster and returning more capital, supporting a premium.

Super Micro Computer, the AI server pure play, guided fiscal 2027 revenue to $65 billion to $72 billion and trades at a price-to-earnings ratio near 12. The cheap multiple reflects margin instability — first-quarter GAAP gross margin was 9.3% — and an ongoing board review tied to export-control matters involving Nvidia chips. Dell's diversified mix of infrastructure and client solutions earns its higher multiple.

The broader AI infrastructure buildout has shifted from chips to the systems that house them. Dell's rack-scale systems and data center solutions let customers deploy AI clusters while managing total cost of ownership, broadening demand across enterprises, sovereign entities and emerging cloud providers. The company now serves more than 4,000 AI customers globally.

The bear case lands at $422.16, a 14% drawdown. First-quarter gross margin compressed to 17.8% from 21.1% a year earlier as low-margin AI servers dominate the mix. Negative stockholders' equity of $1.4 billion and hyperscaler concentration pose real risks. Operating income still grew 213.8% year over year, offsetting the mix shift. A beta of 1.4 means any pause in AI capital spending would hit Dell harder than the market.

Dell trades at a forward price-to-earnings ratio of 27, which looks fair given the 74% earnings growth guidance. The bull thesis rests on hyperscaler AI capital spending holding through 2027, with Dell one server maker inside that buildout. The bear thesis kicks in if memory and GPU supply loosen in a way that cracks pricing power. Nineteen analysts rate Dell a buy or strong buy against zero sells, showing sell-side alignment with the bull view.

Extending the price target model forward, 24/7 Wall St. projects Dell at $625 in 2027, $685 in 2028, $730 in 2029 and $763 in 2030, assuming the company converts its AI backlog to revenue and defends Infrastructure Solutions Group operating margins. Significant upside or downside could result from the trajectory of hyperscaler AI capital spending or a sustained shift in GPU allocation away from Dell's platforms.

This article is for informational purposes only and does not constitute investment advice.