The Zhitong Finance App notes that Dell Technology (DELL.US)'s latest financial guidance for the 2027 fiscal year increased sharply by 25 billion US dollars, while the backlog of orders increased by 43.7 billion US dollars over the previous month, becoming the absolute focus of market attention.
Previously, the market was generally in a neutral wait-and-see state, mainly because although the market estimates that the 2027 fiscal year guidelines may be raised, the company's overall operating profit margin was diluted by the rapid growth of AI servers, and there are still hidden concerns about the profit structure.
However, the latest financial data showed significant performance that exceeded expectations:
Performance guidance significantly exceeded expectations: FY2027 full-year sales guidance increased by $25 billion, and full-year non-GAAP earnings per share (EPS) increased by an additional $7.6, up 42% from previous guidance.
Margin improved significantly: ISG (Information Infrastructure Solutions Group) operating margin reached 15.0%, up from 8.8% in the same period last year; the company's overall non-GAAP gross margin rose to 21.1% (18.7% in the same period last year). AI servers usually dilute the overall profit margin, but Dell's profit margin in the second quarter bucked the trend.
FY2027 Guidance Analysis
After Dell announced its earnings report, Wall Street's profit forecasting model showed a marked increase in EPS forecasts for four consecutive quarters after the second quarter of fiscal year 2027.
Technically, the stock price showed a strong pattern of breaking through the $500 mark. Even against the backdrop of the overall market being impacted by hawkish macro reports, Dell's stock price bucked the trend. Market capital shows clear structural differentiation: the capital expenditure of AI hyperscale enterprises continues to rise, while the traditional non-AI sector and hyperscale enterprises, which are partly squeezing free cash flow and repurchases due to high capital expenditure, are under downward pressure.
Looking at the business outlook, Dell management stated during the performance call:
Enterprise-grade agents are expected to be the single largest workload by 2028.
By 2030, AI will account for 75% of total data center demand, adding 200 gigawatts of electricity demand.
About half of this demand fits Dell's core target customer base (including Neoclouds next-generation cloud vendors, sovereign agencies, and enterprise customers).
The total market opportunities in this sector are expected to exceed $1 trillion by 2030.
As of the second quarter of fiscal year 2027, Dell's AI backlog had surged by $43.7 billion, to a total of $95 billion.
Drivers for Revenue Exceeding Expectations: Expansion of Non-AI Businesses
According to data from S&P Global, the market expected AI server revenue of about US$16 billion before the financial report for the second quarter of fiscal year 2027 was released, while the actual announced AI server revenue was US$16.401 million, exceeding expectations of US$401 million.
In contrast, Dell's overall quarterly revenue reached 46.97 billion US dollars, exceeding market expectations of 45.1 billion US dollars, and overall exceeding expectations of 1.87 billion US dollars. This means that the surplus of $401 million in AI servers only accounts for about 21.4% of the share of overall revenue exceeding expectations, indicating that Dell's growth momentum is expanding into the non-AI server sector.
The data comparison shows:
Traditional server sales increased 23% month-on-month; storage business sales increased 12% month-on-month; AI server revenue: slightly increased 2% month-on-month.
The growth of ISG's non-AI component has mainly benefited from the following three points of support:
Equipment renewal cycle: The existing equipment asset pool of approximately 1.2 million units faces the need for upgrading.
Hybrid cloud deployment trends: Enterprise customers continue to prefer hybrid cloud architectures in AI infrastructure construction.
Increased share of high-margin IP portfolios: The structural share of Dell's proprietary intellectual property (IP) in the storage business has increased, effectively supporting gross margin and ISG's overall profitability.
Notably, in the first quarter of fiscal year 2027, management mentioned that “AI server profitability remains in the middle single digit operating margin target”, but this indicator was not updated in the second quarter. However, given the significant year-on-year and month-on-month increase in the ISG division's operating profit margin, the market infers that AI server profit margins are still at the expected mid-single-digit level.
summed
Given the increase in sales guidance for FY2027 by $25 billion and the increase in AI backlog orders to $95 billion, Dell's fundamentals and technology (surpassing $500) both showed strong bullish signals, and it is reasonable to raise the investment rating to “buy.”
However, there are still short-term risks in macromarkets. The upcoming CPI report is expected to show a month-on-month rise in inflation (such as 0.4% as agreed by the market). Coupled with the pressure of the geopolitical situation on long-term treasury bond yields, this may put an overall strain on risk assets.
Although the market is under pressure due to hawkish employment reports, Dell's stock price still showed strong resistance to falling, indicating that the sell-off pressure on individual stocks is slowing down.