Dell Earnings Preview: Stock Up Nearly 140% This Year, Can AI Servers Continue to Support Stock Gains?

TradingKey - Dell Technologies ( DELL) will release its first-quarter results for fiscal year 2027 after the U.S. market close on May 28. Investors should focus on whether Dell's AI server demand can continue to exceed expectations and whether profit margins for AI servers can improve.

Market sentiment has warmed up significantly ahead of this earnings report. Dell's stock price has strengthened substantially of late; trading data shows that Dell's shares surged over 16% on May 22 to hit a record high, with a year-to-date gain of nearly 140%. The core logic driving the share price higher is that investors remain optimistic about Dell's potential to benefit in the AI server and infrastructure markets amid the ongoing AI data center construction cycle.

Can AI server demand continue to exceed expectations?

The primary focus of Dell's upcoming earnings report is whether its AI server business can continue to scale up production.

Over the past year, Dell has evolved from a traditional PC and enterprise IT equipment firm into a market-repriced AI infrastructure play. Ongoing GPU server procurement from hyperscalers, enterprise clients, sovereign AI projects, and emerging cloud providers has turned Dell’s Infrastructure Solutions Group (ISG) into the company's primary growth engine.

According to previous guidance, AI servers have become a critical source of Dell’s earnings growth potential. In the last earnings call, management projected first-quarter revenue for fiscal year 2027 to be between $34.7 billion and $35.7 billion—a midpoint of roughly $35.2 billion, up 51% year-over-year—with ISG growth expected to exceed 100%, fueled by approximately $13 billion in AI server revenue.

Driven by recent performance, Dell Technologies shares have surged 41% since May, including a 16.77% jump last Friday, indicating that investors have already priced a potential earnings beat into the stock ahead of the announcement.

As a result, simply meeting expectations may not be enough to sustain the rally. With Dell reporting a record $43 billion AI server backlog for fiscal year 2026, market expectations for the current year are likely elevated, and any failure to maintain momentum could trigger a pullback.

Can AI server profit margins improve?

Dell's AI server business is large in scale and growing rapidly, but it also faces margin pressure. Due to the high cost of core components such as GPUs, memory, high-speed networking, and liquid cooling systems, supply chain bargaining power is limited; meanwhile, although orders from hyperscale customers are substantial in volume, price competition is also more intense.

For this earnings report, the market will look beyond just whether AI server revenue is growing, focusing instead on changes in the Infrastructure Solutions Group's operating and gross margins, as well as management's assessment of costs for the second half of the year.

Dell previously indicated that operating margins for ISG and CSG in fiscal 2027 are expected to be at the lower end of their long-term frameworks, due to factors including product mix shifts from rapid AI expansion and short-term margin dynamics in the Client Solutions Group. This suggests that while AI servers can significantly drive revenue, they may not necessarily enhance margins concurrently in the short term.

If the current earnings report shows continued strength in AI server revenue with better-than-expected margins, Dell's AI valuation logic will be further reinforced; conversely, if revenue is strong but margins are under pressure, the market may re-evaluate the quality of its AI business, potentially placing pressure on the stock's continued rally.

How will the stock price react post-earnings?

Data shows that Dell's FY2026 revenue reached $113.5 billion, up 19% year-over-year; non-GAAP diluted EPS was $10.30, up 27% year-over-year; and adjusted free cash flow reached $11.5 billion. This data provides a fundamental basis for the market's bullish outlook on Dell, but it also raises expectations for the company's upcoming earnings report.

Therefore, the stock price reaction following this earnings report will likely depend on three questions: first, whether Q1 AI server revenue is significantly higher than the company's $13 billion guidance; second, whether full-year revenue and EPS guidance are revised upward; and third, whether management signals that AI server orders will persist through the second half of the year or even into FY2028.

If Dell only slightly beats expectations without a significant upward revision to its full-year outlook, the stock could see a profit-taking pullback after its strong rally. Conversely, if Dell delivers strong AI server revenue, robust margins, and higher full-year guidance, it will support a continued rise in the stock price.

Technical Analysis: If the stock price stabilizes above $300, it is expected to rise toward the $441 level.

Dell Technologies monthly stock chart. Source: TradingView

Based on Dell Technologies' monthly chart, the stock price has risen to just below the Fibonacci 1.618 extension level of $297.71 and the $300 psychological barrier. However, given the recent strong bullish sentiment, a breakout above this resistance level is highly likely.

If the stock can break out and sustain its position above the $300 level, it will open the door for a rally toward the Fibonacci 2.618 extension at $441.