Buy Dell Technologies Stock Before Q2 Earnings as AI Server Demand Soars?

Dell Technologies DELL) is set to report Q2 results after-market hours on Tuesday, September 1, with expectations running high following explosive growth in its AI infrastructure business.

Dell is coming off a record first quarter, and another strong showing from AI-optimized servers could reinforce the bullish case for DELL stock, which has surged over 260% year to date but is trading 10% below a 52-week and all-time high of $514 a share.

Dell's Lofty Q2 Expectations

The Zacks Consensus Estimate calls for Q2 earnings of $4.95 per share, more than doubling from EPS of $2.32 a year ago. Revenue is projected at $45.34 billion, representing 52% year-over-year growth from $29.78 billion in the comparative quarter.

Notably, Wall Street's expectations are now slightly ahead of Dell's own guidance. Management previously projected Q2 revenue of $44-$45 billion and adjusted EPS of $4.80, plus or minus $0.10. Dell also expects roughly $15.5 billion in AI server revenue, with Infrastructure Solutions Group revenue projected to rise about 75%.

That follows a spectacular Q1 in which Dell generated $16.1 billion in AI-optimized server revenue, up 757% year over year, while booking $24.4 billion of AI orders. Dell subsequently raised its current fiscal 2027 AI server revenue outlook to roughly $60 billion.

Rising EPS Estimates Are Another Bullish Signal

Perhaps the strongest indicator heading into Dell's Q2 report is the upward trend in analyst earnings estimates.

As shown below, EPS revisions for Q2, Q3, FY27, and FY28 have continued to trend higher in the last week. In the last 90 days, FY27 EPS revisions have now spiked nearly 11% from $17.40 to $19.29, with FY28 EPS revisions rising almost 10% from $21.42 to $23.51.

After posting adjusted earnings of $10.30 per share last year, Dell is now expected to post 87% EPS growth in its FY27, with another 22% spike projected in FY28.

The Zacks ESP

More intriguing is that the Zacks ESP (Expected Surprise Prediction) paints an even more bullish picture, with the Most Accurate and recent estimate among Wall Street analysts having Dell’s Q2 EPS slated at $5.26 and more than 6% above the underlying Zacks Consensus of $4.95 (Current Qtr below).

Keeping that in mind, Dell most recently crushed Q1 EPS expectations by nearly 60% and has posted a very impressive average earnings surprise of 18.66% in its last four quarterly reports.

Dell's Expanding AI Ecosystem

Dell remains one of the most direct hardware beneficiaries of soaring AI infrastructure spending through its server product line, primarily sold under the PowerEdge (PE) brand, which provides the computing hardware that businesses and data centers use to run applications, databases, cloud workloads, and AI workloads.

The company’s partnership with Nvidia NVDA) continues to expand through the Dell AI Factory, including new PE systems designed around Nvidia's next-generation Vera Rubin architecture.

Dell is also deepening its relationship with Advanced Micro Devices AMD), offering AI platforms powered by AMD Instinct accelerators.

Still, competition remains intense. Hewlett Packard Enterprise HPE), Super Micro Computer SMCI) and Lenovo Group LNVGY) are competing aggressively for AI server and enterprise infrastructure spending, making Dell's ability to maintain strong margins while rapidly scaling AI shipments an important metric to watch.

Bottom Line

Dell enters its Q2 report with tremendous momentum, supported by surging AI server demand, which has led to a very positive trend of rising earnings estimate revisions.

This suggests there could certainly be more upside for Dell stock, with shares still trading at a reasonable 24X forward earnings multiple despite a massive YTD rally.

That said, the biggest risk is that expectations have become exceptionally high, with the current consensus already exceeding the upper end of Dell's original Q2 guidance. Still, the combination of robust AI demand, sharply higher earnings projections, and an expanding Nvidia-and AMD-powered infrastructure portfolio makes the setup compelling ahead of its Q2 results.

At the moment, Dell stock sports a Zacks Rank #1 (Strong Buy), making DELL one of the more attractive AI infrastructure stocks to consider heading into Tuesday's report.

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This article originally published on Zacks Investment Research (zacks.com).

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