Dell Technologies Earnings Preview: Tariffs, AI Servers, and a Rebound Story in the Making

Dell Technologies is set to report earnings Thursday after the market close, with Wall Street eyeing $1.69 in EPS on $23.10 billion in revenue for the quarter. The unofficial “whisper number” is slightly higher, signaling cautious optimism around potential upside. After a volatile year that saw the stock surge near $180 last May before plummeting below $60 in April, Dell has staged a sharp rebound and now trades near $113. Investors will be closely watching whether this quarter’s results — and more importantly, the forward outlook — can justify the recovery, especially as AI demand builds and tariff risks linger.

At the heart of investor focus is Dell’s role as a growing AI infrastructure player. Demand for AI-optimized servers is expected to drive topline momentum in its Infrastructure Solutions Group (ISG), bolstered by high-profile customers like xAI and CoreWeave. Dell’s AI partnerships — including its work supporting the Colossus 2 supercluster, which could scale to 1 million GPUs — have fueled speculation that the company is poised for a multi-year growth runway. Analysts estimate Dell could book $15 billion in AI server sales this fiscal year, or roughly 43% of its server and networking segment revenue.

Still, the AI boom comes with trade-offs. While AI servers offer volume growth, they are margin-dilutive relative to traditional servers, which are still in a digestion phase after a period of heavy purchasing. As a result, management has flagged the potential for compressed ISG margins throughout FY26, though expectations are that profitability could rebound into FY27 as the traditional server market stabilizes and AI volumes scale.

The Client Solutions Group (CSG), meanwhile, presents a more complex picture. Consumer PC demand has remained weak, hit by inflation and ongoing tariff exposure. In Q4 FY25, consumer sales dropped 12% year-over-year despite the rollout of next-generation AI PCs. Economic uncertainty and import tariffs — especially those impacting goods manufactured in China and Vietnam — have weighed on discretionary spending. Dell’s broad international manufacturing footprint adds a layer of exposure, though recent rollbacks in proposed U.S. tariff hikes may offer some near-term relief.

Commercial sales, in contrast, have shown signs of life as enterprise customers refresh hardware to meet evolving workplace and AI integration needs. This segment helped offset broader weakness in Q4 and is expected to continue providing support, though overall CSG growth is expected to remain flattish for the quarter.

From a valuation standpoint, Dell appears attractively priced relative to its infrastructure peers and the broader market. At around 10–11x forward earnings, the stock trades at roughly 0.6x the S&P 500’s P/E ratio. With consensus EPS estimates of $10.35 for FY26 — and some analysts forecasting as much as $11–$12 in a bullish scenario — the stock offers substantial upside if Dell can deliver on growth and margins. A forward P/E re-rating to 15x would imply a share price target of $165, nearly 45% above current levels.

In terms of segment details, investors should watch closely for ISG revenue and margin trends. The segment grew 54% year-over-year in servers and networking in FY25 and is positioned to benefit from accelerating AI infrastructure demand. Storage, which had been sluggish earlier last year, saw a rebound in the back half of FY25, and sustained momentum would be a sign of strengthening enterprise IT budgets.

CSG, for its part, may hinge on Dell’s ability to navigate the shifting PC landscape. Intel-based configurations may remain soft, while AMD-powered devices could see better performance given AMD’s recent strength in EPYC and AI-focused chips. Tariff commentary will be particularly important on this front — not just from a margin perspective, but also in terms of consumer pricing behavior, which has remained tepid.

On the macro side, Dell’s working capital build-up in FY25 suggests potential for improved free cash flow as inventories are normalized, though the risk of overhang looms if AI PC demand continues to disappoint. Management’s guidance for Q2 — expected to be in the range of $25.3 billion in revenue and $2.11 in EPS — will be a key swing factor in determining whether Dell can continue to command investor confidence.

Recent analyst commentary has been mixed. Susquehanna’s Mehdi Hosseini reaffirmed a Neutral rating and $105 target, expecting Dell to hit Q1 guidance but guide cautiously for Q2. That said, bulls argue Dell’s positioning in AI infrastructure and its hybrid value/growth profile make it one of the most compelling plays in the space.

In sum, this quarter’s earnings report will serve as a litmus test for Dell’s AI-driven thesis. With a relatively low valuation, improving operating leverage, and a clear growth narrative, Dell doesn’t need to be perfect — just good enough to keep momentum alive. If it delivers even a modest beat with a confident AI outlook, the recovery rally may just be getting started.