Dell's AI Server Boom Is Real — But the Stock Is Consolidating After Its 13% Pop

TradingKey - Dell Technologies (DELL) announced their Q1 FY 2027 results, dated May 28th. And while celebrating their success has become almost routine, it is worth more than casual observance this time. $43.8 billion in revenue, an 88% increase. In the last fiscal year, revenue was $43.8 billion. During the last fiscal year, revenue was $43.8 billion. AI-optimized servers surged an astounding 757% to $16.1 billion. With this news, the company raised the revenue targets of their full year guides to $167 billion, up from previous estimates, and increased EPS estimates to $17.90, up from previous estimates. Accordingly, the stock rocketed to new heights, pulled back to the $475 mark, and began consolidating to $437, while testing a bullish trend support line. With that in mind, has the stock reached its peak, or is it strong enough to continue?

The Quarter Was Exceptional

By all appropriate accounts, the first quarter was truly remarkable. Revenue reached, and surpassed market expectations by as much as $8 billion. Revenue was $43.8, a year over year growth of 88%. The annual growth in revenue, and adjusted EPS of the company, which came in at $4.86, also improved by, and EPS estimates improved by $1.90. $29 billion in revenue was generated by the Infrastructure Solutions Group, the group that includes servers and data-center equipment, which improved by 181% and which includes AI-optimized servers that increased by 757% to $16.1 billion. To illustrate how strong that number is, the revenue of AI-optimized servers that Dell sold is more than the revenue that most Fortune 500 companies sold in the same time period. Additionally, Dell set an all time record with 4.1 billion USD of cash flow and returned $2.1 billion to shareholders.

The Backlog Is Massive

As the most substantial indicator of credibility for the quarter, the backlog is impressive. Dell entered the quarter with an unprecedented $51.3 billion AI server backlog. Management stated they are still receiving more orders than they can fulfill. During Q1 alone, the company reported $24.4 billion in AI server sales, resulting in a backlog nearly extending multiple quarters. Management also reported that the backlog is a fraction of the total pipeline of orders yet to be placed. Stated differently, if demand were to drop to zero today, Dell would still have many years of work to complete.

Guidance Was Raised Significantly

Management increased guidance based on backlog visibility. For Dell's full fiscal year 2027, the updated guidance suggests revenue of $165 billion to $169 billion, with $167 billion as the midpoint reflecting a year-over-year increase of nearly 47%, and improvements from previous guidance, and also the Street's revenue estimate of $142.5 billion. Increased guidance for adjusted EPS is now $17.90, an improvement from previous guidance of $13.09. For the Infrastructure Solutions Group, Dell guidance of revenue is expected to be nearly $60 billion for the fiscal year, more than a 100% increase from $16.1 billion in Q1 revenue.

Why the Stock Pulled Back

The stock gave back some gains despite the positive earnings results. The stock increased rapidly on May 28. Afterward, the stock declined from $475 to $437. This decline was likely due to profit taking by traders, and will likely continue. There is usually volatility in stock prices after earnings reports, and new buyers want to wait and see if the company will sustain its growth in the long run. This price decline is a normal part of price appreciation, and healthy pullbacks usually don't mean a decline in the company's fundamentals. The price is maintaining the upward trend from July and the stock continues to stay above the 50-day and 100-day moving averages.

Dell Technical Analysis; the Valuation Question

At approximately $437, Dell is trading at about 24 times the company's fiscal 2027 EPS guidance of $17.90. This is reasonable, as Dell's earnings are expected to grow by about 50% on an annual basis, and as Dell continues to grow its addressable market due to the commitment of hyperscalers and enterprises to large-scale AI infrastructure.

dell Price Chart - Source: Tradingview

The consensus target for Dell is about $502, indicating about a 15% upside. Dell's results are actually supply constrained, and not demand constrained. Dell's results are limited by the availability of memory components and the ability to manufacture systems, not by the demand for Dell products. If supply constraints ease sooner than expected, Dell's results will improve. If supply constraints continue, results will improve at a slower pace.

Key Levels

• Resistance: $461.81, $484.95, $500.00 (psychological)
• Support: $426.59, $395.50, $364.76
• Rising trendline: Currently around $427-$430
• 50 EMA: $438.20 (just above the current price)

Why did Dell stock pull back from $475 if the earnings were so good?

The earnings of Dell were very good, and the stock was up substantially on May 28. The pullback from $475 to the $437 level was normal for profit taking and the stock consolidating from the advance. Dell's fundamentals have not changed and are very strong. The question is whether the stock is able to break back above $475 and move toward $500.

Is Dell stock a buy at $437?

Investors should consider whether Dell can sustain the current growth. Due to the backlog, and considering the current guidance, Dell should be able to sustain the growth at least through FY2027. The stock is currently selling around 24x the projected earnings making it fairly valued. The biggest concerns are the constrained supply (this will only extend the backlog while limiting Dell's ability to meet customer demands in the short term) and the stock price relative to earnings (if Dell's earnings don't grow at the expected rate, then the stock price will decrease). Currently the stock is on a rising trend with support from the moving averages, and the RSI (Relative Strength Index) nearly at 43 indicates Dell is fairly valued and is likely to have some positive price movement in the near future.

Bottom Line

Dell Technologies is in the midst of an AI boom which has led to massive growth in earnings and revenue, a backlog, and guidance which has levelled up significantly. The $437 price per share is a drop from the peak price per share, and although the price is dropping, there have been no negative changes in the fundamentals. Dell must now maintain this positive price movement.

Dell's rising support trend suggests a rising price, and a move back over $475 with $500 as the resistance, will likely indicate positive movement to that price level. For investors who expect that Dell will be an AI Infrastructure spend winner FY2027, Dell's backlog and guidance provide good support to that sentiment. The next meaningful catalyst for the stock should be Dell's Q2 FY2027 earnings in early September.