Dell Technologies' Q2 Earnings and AI-Driven Growth Momentum: A Compelling Long-Term Buy?

Dell Technologies’ Q2 2024 earnings report paints a nuanced picture of a company navigating a post-pandemic market while capitalizing on the explosive growth of AI infrastructure. Total revenue for the quarter fell 13% year-over-year to $22.9 billion but rose 10% sequentially, reflecting a stabilization in demand after a prolonged slump [1]. The Infrastructure Solutions Group (ISG), which includes servers and storage, delivered $8.5 billion in revenue—a 11% sequential increase, driven by sustained demand for AI-optimized servers and PowerStore/PowerFlex storage solutions [1]. Meanwhile, the Client Solutions Group (CSG) reported $12.9 billion in revenue, down 16% year-over-year but up 8% sequentially, as enterprises increasingly adopt AI-ready workstations for complex workloads [1].

The company’s forward-looking guidance, however, tells a more bullish story. By Q2 2026, Dell’s AI server revenue is projected to surge 69% year-over-year to $12.9 billion, with a $14.4 billion backlog signaling robust future demand [2]. The firm raised its AI server shipment guidance to $20 billion for fiscal 2026, capitalizing on a global AI server market growing at a 55% compound annual growth rate (CAGR) and projected to reach $252 billion in 2025 [2]. Strategic partnerships, such as the integration of NVIDIA’s cutting-edge GPU technology, have secured Dell a 20% share of the AI server market in 2025, outpacing peers like HPE and IBM [3].

Dell’s financial resilience further strengthens its case as a long-term investment. The company generated $3.2 billion in operating cash flow for Q2 2024 and returned $525 million to shareholders through buybacks and dividends [1]. Its Infrastructure Solutions Group maintained a 12.4% operating margin, a testament to supply chain efficiency and economies of scale [1]. Analysts project 16.09% earnings per share (EPS) growth for 2026, driven by AI infrastructure and cloud demand, while its forward P/E ratio of 14.85x suggests an undervalued stock relative to peers [3].

Yet, the path is not without risks. Supply chain constraints, geopolitical export restrictions, and the rapid pace of technological obsolescence in AI hardware could temper growth [4]. Additionally, while Dell’s AI server backlog is impressive, converting these orders into sustained revenue will depend on maintaining its competitive edge in a market where rivals like Lenovo and HPE are aggressively scaling their offerings [2].

For investors, the question is whether Dell’s AI-driven momentum can offset its near-term challenges. The company’s strategic investments in AI PCs, data center solutions, and ecosystem partnerships with AMD, Intel, and Qualcomm position it as a leader in the Forrester Wave™: AI Infrastructure Solutions [5]. With a $39 billion remaining performance obligation and $30.3 billion in deferred revenue, Dell has the financial runway to reinvest in innovation while rewarding shareholders [1].

In conclusion, Dell Technologies appears to be a compelling long-term buy for those willing to navigate short-term volatility. Its AI infrastructure business is not just a growth engine but a structural shift in enterprise computing, underpinned by strong margins, a robust backlog, and a clear vision for the future. However, investors must remain vigilant about macroeconomic headwinds and the pace of technological disruption.

Source:
[1] Dell Technologies Delivers Second Quarter Fiscal 2024 Financial Results [https://investors.delltechnologies.com/news-releases/news-release-details/dell-technologies-delivers-second-quarter-fiscal-2024-financial]
[2] Dell Q2 FY26 slides: Record revenue driven by AI server boom, raises guidance [https://www.investing.com/news/company-news/dell-q2-fy26-slides-record-revenue-driven-by-ai-server-boom-raises-guidance-93CH-4215461]
[3] Dell's AI Infrastructure Dominance and Margin Resilience [https://www.ainvest.com/news/dell-ai-infrastructure-dominance-margin-resilience-strategic-play-hardware-boom-2508/]
[4] Has Nvidia's AI Boom Hit a Wall? [https://www.ainvest.com/news/nvidia-ai-boom-hit-wall-2508/]
[5] Dell's AI Infrastructure Makes Waves in Forrester Report [https://www.dell.com/en-us/blog/dells-ai-infrastructure-makes-waves-in-forrester-report/]