Dell Technologies (DELL) Earnings Beat Amid Mixed Guidance: Is This the Right Time to Buy?

Dell Technologies (DELL) delivered a compelling Q2 2026 earnings report, with revenue of $29.78 billion surpassing estimates and non-GAAP EPS of $2.32 outperforming forecasts [1]. The Infrastructure Solutions Group (ISG) was the star, generating $16.8 billion in revenue—driven by a 69% year-over-year surge in AI server and networking sales [2]. This growth underscores Dell’s pivotal role in the AI infrastructure boom, with $10 billion in AI solution shipments already recorded in the first half of fiscal 2026 [3]. However, the stock fell 3.4% in after-hours trading after the company issued third-quarter guidance below expectations, projecting $2.45 in EPS versus $2.55 estimated [4].

Contrarian Case: Undervaluation Amid AI Tailwinds

Dell’s valuation metrics suggest a compelling opportunity for contrarian investors. The stock trades at a forward P/E of 13.97, well below the tech sector average, and a PEG ratio of 0.88, indicating earnings growth outpaces its valuation [5]. A discounted cash flow (DCF) model estimates Dell’s intrinsic value at $168.47 per share, implying a 23.7% discount to current prices [6]. Analysts project 16.09% EPS growth for 2026, fueled by AI infrastructure demand and cloud adoption [7].

Dell’s AI-driven momentum is further reinforced by its competitive positioning. The company holds a 7.2% market share in AI servers, with a $14.4 billion backlog ensuring revenue visibility [8]. Strategic partnerships with NVIDIA and AMD enable Dell to offer cutting-edge AI-optimized hardware, such as the PowerEdge XE9680L, while initiatives like Sovereign AI and the AI Data Platform with Elastic differentiate its offerings [9]. Analysts project the AI server market to grow at a 55% CAGR, reaching $252 billion in 2025 and potentially $1.6 trillion by 2032 [10].

Risks and Mitigants

The mixed guidance for Q3—despite strong full-year revenue and EPS raises—highlights near-term volatility. The Client Solutions Group grew only 1%, and Storage revenue declined 3%, signaling challenges in non-AI segments [11]. However, Dell’s financial discipline, including $1.3 billion returned to shareholders via buybacks and dividends in Q2, and $2.5 billion in operating cash flow, provides a buffer against headwinds [12].

Conclusion: A Mispriced Giant in the AI Era

Dell’s earnings beat and AI-driven growth trajectory position it as a mispriced giant in the AI infrastructure revolution. While near-term guidance concerns may keep the stock under pressure, the company’s valuation dislocation, robust backlog, and strategic alignment with a $174 billion AI infrastructure market [13] suggest long-term upside. For investors willing to look beyond short-term volatility, DELL offers a rare combination of undervaluation and high-growth potential in a sector poised for decades of expansion.

Source:
[1] Dell shares fall on soft third-quarter earnings outlook, [https://www.cnbc.com/2025/08/28/dell-earnings-report-q2-2026.html]
[2] Dell Technologies Delivers Second Quarter Fiscal 2026 ..., [https://finance.yahoo.com/news/dell-technologies-delivers-second-quarter-200500391.html]
[3] Dell Technologies: A Mispriced Giant in the AI Infrastructure Revolution, [https://www.ainvest.com/news/dell-technologies-mispriced-giant-ai-infrastructure-revolution-2508/]
[4] Dell Technologies (NYSE:DELL) Tops Q2 Estimates Amid ..., [https://www.chartmill.com/news/DELL/Chartmill-33763-Dell-Technologies-NYSEDELL-Tops-Q2-Estimates-Amid-AI-Boom-Though-Stock-Dips-on-Guidance]
[5] Dell Technologies: Attractive Valuations Heading Into Q2 Earnings, [https://seekingalpha.com/article/4816469-dell-technologies-attractive-valuations-heading-into-q2-earnings]
[6] Assessing Dell Stock After AI Chip Tracking News and Recent Performance, [https://simplywall.st/stocks/us/tech/nyse-dell/dell-technologies/news/assessing-dell-stock-after-ai-chip-tracking-news-and-recent]
[7] Dell Q2 Earnings: Revenue, EPS Beat Estimates As AI ..., [https://www.benzinga.com/markets/earnings/25/08/47400758/dell-q2-earnings-revenue-eps-beat-estimates-as-ai-solutions-shipments-boom]
[8] Dell Technologies AI Server Growth & Financial Analysis, [https://monexa.ai/blog/dell-technologies-inc-ai-server-growth-and-financi-DELL-2025-07-10]
[9] Accelerating America's AI Advantage: Infrastructure ..., [https://www.dell.com/en-us/dt/corporate/newsroom/announcements/detailpage.press-releases~usa~2025~07~accelerating-america-s-ai-advantage-infrastructure-workforce-and-innovation.htm]
[10] AI Server Market Size, Share, Growth & Top Key Players, [https://www.kbvresearch.com/ai-server-market/]
[11] Dell Technologies (DELL) Tops Q2 Estimates Amid ..., [https://www.chartmill.com/news/DELL/Chartmill-33763-Dell-Technologies-NYSEDELL-Tops-Q2-Estimates-Amid-AI-Boom-Though-Stock-Dips-on-Guidance]
[12] Dell Technologies: A Mispriced Giant in the AI Infrastructure Revolution, [https://www.ainvest.com/news/dell-technologies-mispriced-giant-ai-infrastructure-revolution-2508/]
[13] Dell's Strategic Position in the AI-Driven Enterprise, [https://www.ainvest.com/news/dell-strategic-position-ai-driven-enterprise-hardware-market-buy-opportunity-infrastructure-boom-2508/]