Key Points
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Dell Technologies is growing at a terrific pace due to the fast-growing demand for AI servers.
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The company’s robust backlog will ensure that its solid growth continues.
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Dell can outperform Wall Street’s earnings growth expectations, paving the way for a big jump in the stock price.
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The recent sell-off in technology stocks has made some top names in this sector extremely attractive right now. For example, industry bellwethers Nvidia and Micron Technology are trading at extremely cheap multiples.
Nvidia stock has a forward price-to-earnings (P/E) ratio of just 11, well below its five-year average forward earnings multiple of 33. It could get cheaper owing to the negative press the company is getting right now.
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Micron, on the other hand, trades at just 5 times forward earnings, which is again significantly lower than its five-year average forward P/E multiple of 10.6. The good part is that both companies are on track to deliver solid growth in 2027.
While Nvidia expects a 70% increase in revenue next year, analysts expect Micron’s earnings per share (EPS) to more than double in the current fiscal year. As such, I won’t be surprised to see shares of Micron and Nvidia recovering nicely in 2027 following their recent declines. However, there is another artificial intelligence (AI) stock trading at an attractive valuation following its recent slide, and I won’t be surprised if it outperforms Nvidia and Micron next year.
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Phenomenal AI server demand has been a massive tailwind for Dell Technologies
Dell Technologies (NYSE:DELL) stock has soared by an incredible 192% in 2026, as of this writing. However, the AI infrastructure specialist hasn’t been immune to the sell-off in the technology sector. It has lost 36% of its value over the past month. As a result, it can now be bought at an incredibly cheap 12 times forward earnings.
That’s quite attractive for a company whose non-GAAP earnings per share (EPS) tripled on a year-over-year basis in the last reported quarter to $7.04. Dell is capitalizing on the terrific demand for AI-optimized servers and storage systems. Dell manufactures liquid-cooling systems, server racks, and modular servers, which are used to mount chips designed and manufactured by Nvidia and Micron.
Notably, the demand for the company’s server solutions is outstripping supply, which explains the big jump in its EPS. This is evident from the fact that Dell is receiving more AI server orders than it is fulfilling. For instance, the company received $60.9 billion in AI server orders in the second quarter of fiscal 2027 (which ended on Oct. 31).
For comparison, Dell recognized $16.4 billion in AI server revenue during the quarter. The stunning inflow of AI server orders sent Dell’s AI server backlog to a whopping $95 billion at the end of the quarter. What’s more, Dell is experiencing strong demand for its traditional servers and networking products. The company’s revenue from these products increased by 122% year over year to $10.5 billion, and demand exceeded supply in this segment as well.
Dell management noted on the previous earnings call that it has booked $131.7 billion in AI server orders over the past 12 months. So, the $60.9 billion in orders it booked last quarter clearly shows a significant acceleration in demand for Dell’s AI server solutions. In fact, Dell has added nearly half of its 6,500 AI-specific customers over the past three quarters, and I won’t be surprised to see this number getting bigger.
That’s because the global server market’s revenue could increase at a compound annual growth rate (CAGR) of 28% through 2030, reaching $1.58 trillion by the end of the decade, according to IDC. So, Dell can attract more customers in the future, and the supply-constrained nature of the server market should ensure strong earnings growth for the company over the long run.
So, it is easy to see why there has been a significant bump in Dell’s long-term EPS growth expectations.
DELL EPS LT Growth Estimates data by YCharts
Dell stock is poised for a big jump next year
Dell’s fiscal 2027 adjusted EPS guidance of $25.50 points to a 148% jump over the prior year. However, analysts are projecting a significantly slower increase of 17% in Dell’s bottom line in fiscal 2028 (which will end in January 2028 and coincide with the majority of calendar 2027).
DELL EPS Estimates for Current Fiscal Year data by YCharts
However, we saw in the previous section that analysts have become bullish on Dell’s long-term growth prospects, believing the company could clock nearly 40% annual EPS growth over the long run. Assuming its bottom line increases by 40% in fiscal 2028, the company’s EPS will reach $33.15 by the end of fiscal 2028 (using this fiscal year’s projected earnings as the base).
If Dell trades at 19 times earnings at that time, in line with the S&P 500 index’s forward earnings multiple, its stock price will reach $630 by the end of fiscal 2028. That implies potential gains of 72% in just over a year. However, Dell could command a premium valuation owing to its impressive growth potential, which is why I won’t be surprised to see bigger gains in this AI stock.
So, investors can consider using the recent pullback in Dell stock to buy more shares before it skyrockets in 2027.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.
