TLDR
- Dell reports Q2 earnings after market close Tuesday, with analysts expecting EPS of $4.92-$4.95 and revenue of ~$45 billion
- AI server and networking revenue is projected at $25.2 billion, up 95% year over year
- Dell stock has surged 268% this year and trades at 21.5x forward earnings
- Dell booked $24.4 billion in AI orders in Q1 and raised its FY2027 AI server revenue outlook to $60 billion
- Key debate on Wall Street is not if Dell beats, but whether it raises its AI server revenue target again
Dell Technologies reports Q2 earnings after the bell Tuesday, and the bar is high. Analysts surveyed by FactSet expect adjusted earnings of $4.92 per share on revenue of $44.9 billion, compared to $2.32 per share and $29.8 billion in the same period last year.
The Zacks Consensus Estimate is slightly higher, calling for EPS of $4.95 and revenue of $45.34 billion, which represents 52% year-over-year growth. That puts Wall Street expectations just above Dell’s own Q2 guidance of $44-$45 billion in revenue and adjusted EPS of $4.80, plus or minus $0.10.
Dell stock is up 268% year to date and currently trades at 21.5 times forward earnings. That is well above its five-year average of 10.9 times forward earnings. The stock is also around 10% below its 52-week high of $514.
The key number to watch is AI server revenue. Analysts estimate server and networking storage revenue of $25.2 billion for the quarter, a 95% jump from $12.9 billion a year ago.
In Q1, Dell generated $16.1 billion in AI-optimized server revenue, up 757% year over year. The company also booked $24.4 billion in AI orders that quarter and subsequently raised its FY2027 AI server revenue outlook to $60 billion.
What Analysts Are Saying
Evercore ISI analyst Amit Daryanani rates Dell Outperform with a $550 price target. He wrote on August 28 that the bar is “high but achievable,” and that the debate is less about whether Dell beats and more about whether it raises its AI server target again, and by how much.
KeyBanc analyst Brandon Nispel is more cautious. He noted on August 23 that after several quarters of massive growth, “deceleration is inevitable,” and that Dell is trading at a meaningful premium to historical valuations. He rates Dell Sector Weight with no price target.
FY2027 EPS estimates have risen nearly 11% over the past 90 days, from $17.40 to $19.29. FY2028 estimates are up almost 10%, from $21.42 to $23.51. Dell is now expected to post 87% EPS growth in FY2027.
Dell’s AI Infrastructure Build-Out
Dell’s PowerEdge server line sits at the center of its AI growth story. The company has expanded its partnership with Nvidia through the Dell AI Factory, with new systems built around Nvidia’s Vera Rubin architecture.
Dell is also deepening its work with AMD, offering platforms powered by AMD Instinct accelerators.
Competition is not going away. Hewlett Packard Enterprise, Super Micro Computer, and Lenovo are all pushing hard for AI server contracts.
Super Micro posted better-than-expected fiscal Q4 earnings on August 11 and gave a positive full-year outlook. Cisco also reported solid results boosted by AI hardware demand.
Zacks currently gives Dell a Rank 1 (Strong Buy) heading into Tuesday’s report.
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