Dell Technologies Q2 Earnings Preview: AI Growth Fuels Stock Momentum
Explore Dell Technologies’ Q2 fiscal 2026 outlook, driven by AI-optimized servers and expanding partnerships, revealing key growth catalysts and valuation insights for savvy investors.
Key Takeaways
- Dell expects Q2 fiscal 2026 revenues between $28.5B and $29.5B, marking 16% year-over-year growth at midpoint.
- AI-optimized servers and partnerships with NVIDIA, AMD, and others drive Dell’s Infrastructure Solutions Group growth.
- Dell shares have outperformed the tech sector with a 13.7% year-to-date gain, trading at a steep discount.
- Margins face short-term pressure due to competitive pricing and AI investments, with recovery expected later in the year.
- Analysts hold a Moderate Buy consensus, with price targets implying roughly 10% upside from current levels.
Dell Technologies is gearing up to report its Q2 fiscal 2026 earnings on August 28, 2025, amid growing excitement fueled by its leadership in AI-optimized servers. The company’s revenue guidance of $28.5 billion to $29.5 billion signals a robust 16% growth compared to last year, spotlighting AI infrastructure as a key growth engine. Investors are watching closely as Dell’s shares have outpaced the broader tech sector, trading at a notable discount despite strong momentum.
Behind the scenes, Dell’s Infrastructure Solutions Group (ISG) is the star player, with AI server demand surging and partnerships with giants like NVIDIA and AMD expanding. Yet, this growth story isn’t without its challenges—margin pressures and execution risks linger in a fiercely competitive tech landscape. This article unpacks Dell’s financial outlook, growth drivers, risks, and what it means for investors eyeing the stock.
Whether you’re a seasoned investor or just curious about how AI is reshaping tech giants, this deep dive into Dell’s Q2 earnings preview offers actionable insights and a fresh perspective on a company at the crossroads of innovation and market realities.
Anticipating Dell’s Q2 Growth
Dell Technologies is on the cusp of unveiling its Q2 fiscal 2026 results, with expectations riding high. The company forecasts revenues between $28.5 billion and $29.5 billion, a midpoint growth of 16% year-over-year. That’s no small feat in a tech world where growth often feels like a rollercoaster. Analysts are slightly more optimistic, nudging revenue estimates to around $29.3 billion and earnings per share to $2.29, signaling a 22% jump from last year.
This growth isn’t just numbers on a page; it’s fueled by real demand for AI-optimized servers. Dell’s Infrastructure Solutions Group (ISG) is expected to bring in $11.3 billion, with a hefty $7 billion coming from AI servers alone. Imagine the buzz in data centers worldwide as these machines crunch AI workloads faster than ever. Yet, the story isn’t all sunshine—margins are expected to tighten, with ISG’s gross margin dipping to 26.2% and operating margin to 9.8%. It’s a reminder that scaling AI infrastructure is a costly, competitive game.
Still, Dell’s track record of beating earnings estimates in recent quarters adds a layer of confidence. Investors are watching to see if this trend continues, especially as the company balances rapid growth with margin pressures. The stage is set for a quarter that could either cement Dell’s AI leadership or expose the challenges lurking beneath the surface.
Driving Growth with AI Servers
The heart of Dell’s recent surge is its AI-optimized servers, a product category that’s capturing enterprise attention like never before. In the first quarter of fiscal 2026, Dell shipped $1.8 billion worth of AI servers and saw a backlog of $14.4 billion—think of it as a pipeline brimming with future revenue. This momentum continued with $12.1 billion in AI server orders, underscoring the accelerating adoption of AI workloads.
Partnerships play a starring role here. Collaborations with NVIDIA, AMD, and others have turbocharged Dell’s AI infrastructure offerings. For instance, the PowerEdge 9680 server, optimized for AI tasks, is a flagship product driving this growth. These alliances don’t just add tech muscle—they open doors to new markets and customers, from cloud providers to retail giants like Lowe’s.
Dell’s AI Data Platform updates, powered by NVIDIA acceleration, streamline complex AI workloads, making the company a go-to for enterprises navigating the AI revolution. This isn’t just about selling hardware; it’s about delivering integrated solutions that meet the evolving needs of AI-driven businesses. The result? A growth engine that’s firing on all cylinders, even amid a challenging macroeconomic backdrop.
Navigating Margin Pressures
Growth often comes with a catch, and for Dell, it’s margin pressure. The company expects its Infrastructure Solutions Group’s gross margin to slip to 26.2% in Q2, down from previous quarters. Operating margins are also forecast to decline to 9.8%, reflecting the costs of competitive pricing and heavy investments in AI technologies.
Why does this matter? Margins are the financial heartbeat of profitability. When they shrink, it signals that while sales are growing, the profit per sale is under strain. Dell’s management acknowledges this dip but projects a rebound in the second half of the fiscal year as scale and product mix improvements kick in.
This margin squeeze isn’t unique to Dell; it’s a common theme in tech sectors racing to capture AI market share. The challenge lies in balancing aggressive growth with sustainable profitability. Investors should watch closely how Dell manages this tightrope, as margin recovery will be a key indicator of the company’s operational health and long-term viability.
Valuation and Stock Performance
Dell’s stock has been quietly outperforming its peers and the broader tech sector, rallying 13.7% year-to-date. That’s a notable feat compared to the Computer & Technology sector’s 12.5% gain and the Micro Computers industry’s 8.5% decline. Even Hewlett-Packard, a competitor also riding AI server demand, trails with a 5.7% gain.
What’s intriguing is Dell’s valuation. The stock trades at a forward 12-month price-to-sales ratio of 0.82X, a steep discount compared to the sector’s 6.67X. This suggests the market hasn’t fully priced in Dell’s growth potential, offering a value opportunity for investors.
Dell’s expanding partner network—including NVIDIA, Lowe’s, Microsoft, and Meta Platforms—adds to its growth narrative and investor appeal. These collaborations not only boost sales but also enhance Dell’s competitive moat. For investors, this combination of solid growth, undervalued stock, and strategic partnerships makes Dell a compelling story in the AI-driven tech landscape.
Balancing Risks and Opportunities
No growth story is without its shadows. Dell faces execution risks as it scales complex AI server deployments, which demand precise delivery, integration, and ongoing support. The tech sector’s inherent volatility and macroeconomic uncertainties add layers of complexity.
Tariff-related uncertainties and fierce competition in a rapidly evolving market further challenge Dell’s prospects. These factors could pressure margins and slow growth if not managed carefully. Yet, Dell’s track record of earnings beats in recent quarters shows resilience and operational strength.
Analysts maintain a Moderate Buy consensus, with an average price target implying roughly 10% upside. This reflects cautious optimism—acknowledging both the promise of AI-driven growth and the hurdles ahead. For investors, the key lies in weighing these risks against the tangible momentum Dell has built in AI infrastructure and enterprise solutions.
Long Story Short
Dell Technologies stands at an intriguing crossroads, where soaring AI demand meets the realities of margin pressures and execution challenges. The company’s Q2 fiscal 2026 guidance paints a picture of solid revenue growth, driven by AI-optimized servers and an expanding partner ecosystem that includes NVIDIA and Lowe’s. This momentum has propelled Dell’s shares to outperform peers and the broader sector, even as the stock trades at a steep discount. Investors should appreciate the nuanced story here: growth is real and backed by tangible orders and partnerships, but short-term margin dips remind us that innovation often comes with a price. The market’s Moderate Buy consensus and attractive valuation suggest confidence in Dell’s long-term trajectory, yet caution remains prudent given the competitive and macroeconomic headwinds. Ultimately, Dell’s upcoming earnings report will either reinforce its pivot to AI-driven enterprise solutions or highlight the hurdles ahead. For investors, the key lies in balancing enthusiasm for AI’s promise with a clear-eyed view of execution risks and margin dynamics. The relief of a funded emergency account feels similar—comforting but earned through discipline and vigilance.