While Dell Technologies has navigated a tricky balancing act between explosive AI server growth and margin pressures, the company’s recent financial performance reveals a compelling story that Wall Street may be underestimating.
The numbers tell an interesting tale. Dell posted revenue of $29.8 billion in Q2 FY26, growing 19% year-over-year. The company expects to reach $138-$142 billion in revenue for FY27, representing 23% growth at the midpoint. More importantly, AI server shipments are forecasted to hit $50 billion, doubling from the previous year’s $25 billion target. That’s not just growth—that’s a business transformation happening in real time.
Here’s where things get interesting. Critics point to gross margins dropping from 22% to 18.7%, missing the 19.6% consensus. They worry about margin compression from AI server mix and supply costs. But this view misses the forest for the trees. Operating margins are actually holding near 9%, supported by the infrastructure business mix. Net profit margins improved to 5% from 4.6%, showing the company is getting more efficient even as it scales rapidly.
The real kicker is Dell’s order book. The company sits on $64 billion in AI-optimized server orders with a $43 billion backlog. Think of it like a restaurant with reservations booked solid for months—that’s predictable revenue growth with visibility most companies dream about.
Non-GAAP earnings per share reached $10.30 for FY26, up 27% year-over-year, with another 25% growth expected in FY27. The company generated $11.2 billion in cash flow from operations while returning $5.3 billion to shareholders year-to-date. These aren’t the metrics of a struggling business.
The margin narrative focuses on temporary pressure while ignoring structural improvements. Dell’s servers and networking revenue jumped 37% to $10.1 billion in Q3, driven by enterprise AI demand that carries better economics than traditional hardware. With operating margins expanding and AI revenue accelerating, the math suggests significant upside potential that current valuations don’t fully capture.
Fixed income markets total over $200 trillion globally, which underscores how capital allocation trends can influence corporate funding and investor expectations for companies like Dell. global market size
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