Why Dell Stock Rocketed Higher Wednesday Morning
Key Points
Dell's Q2 results were well ahead of expectations.
The company's growth was broad-based and continues to accelerate.
The stock is still relatively inexpensive.
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Shares of Dell Technologies (NYSE: DELL) charged sharply higher Wednesday morning, gaining as much as 11.9% in early trading. However, by 10:27 a.m. ET, the stock had given back some of its gains, though it was still up 5%.
The catalyst that sent the computer and artificial intelligence (AI) specialist higher was its financial results, which were robust by any measure.
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The AI boon
For its fiscal 2027 second quarter (ended July 31), Dell delivered record revenue of $47 billion, up 58% year over year. Operating leverage helped expand the company's margins, resulting in record adjusted diluted earnings per share (EPS) of $7.04, which surged 203%.
For context, analysts' consensus estimates called for revenue of $44.5 billion and adjusted EPS of $4.92, so Dell surpassed expectations by a wide margin.
While gains came across the breadth of the company's offerings, the AI server business captured the spotlight. Chief operating officer Jeff Clarke detailed the results, saying, "We booked a record $60.9 billion in orders, recognized a record $16.4 billion in revenue, and exited the quarter with a record $95 billion backlog." Despite the focus on AI, he went on to say that Dell experienced broad-based revenue growth.
Both of the company's main operating segments delivered robust gains. The Infrastructure Solutions Group (ISG) generated record revenue of $31.8 billion, up 89% year over year, driven by AI-optimized server sales, which rose 100%, and by traditional servers and networking revenue, which jumped 122%. The Client Solutions Group (CSG) delivered revenue of $15 billion, up a respectable 20%, driven by record commercial client revenue of $13.2 billion, up 22%.
Management raised the company's already robust full-year guidance, increasing its revenue forecast to $192 billion, up 69%, while guiding for adjusted diluted EPS to $25.50, up 148%.
After initially rocketing higher, Dell stock gave back most of its gains. However, given that the stock has risen 250% thus far in 2026, there's likely some profit-taking going on.
Yet even in the wake of Dell's impressive growth spurt, the stock is remarkably cheap, selling for 26 times earnings, a bargain considering the company's accelerating growth.
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Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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