DELL Set to Report Q2 Earnings: Buy, Sell or Hold the Stock?

Dell Technologies anticipates strong fiscal Q2 2026 results, projecting revenues between $28.5 billion and $29.5 billion and non-GAAP EPS around $2.25, aligning closely with analyst consensus for significant year-over-year growth. This positive outlook is primarily driven by robust demand for AI-optimized servers, reflected in a substantial $14.4 billion AI server backlog and strong Infrastructure Solutions Group (ISG) growth expectations, further supported by strategic partnerships with key players like NVIDIA. Despite macroeconomic headwinds and fierce competition, DELL shares have outperformed the broader tech sector and peers year-to-date, and the stock is considered undervalued with a forward P/S of 0.82x, highlighting its potential amidst market challenges.

Analysis

Dell Technologies is positioned for a strong fiscal second quarter in 2026, primarily fueled by robust demand for its AI-optimized servers. The company's guidance projects significant year-over-year growth, with revenues expected at a midpoint of $29 billion (+16%) and non-GAAP EPS at $2.25 (+15%), figures which are closely aligned with, yet slightly more conservative than, Zacks Consensus Estimates that project 17.15% revenue growth and 22.22% earnings growth. This momentum is heavily concentrated in the Infrastructure Solutions Group (ISG), where consensus forecasts 27% YoY revenue growth, underpinned by a substantial $14.4 billion AI server backlog and strategic partnerships with industry leaders like NVIDIA. In contrast, the Client Solutions Group (CSG) is expected to post modest growth of 3.86%. Despite this positive outlook, the company faces headwinds from a challenging macroeconomic environment and fierce competition. Nevertheless, DELL's stock has outperformed its sector and key peer Hewlett-Packard year-to-date, rallying 13.7%, while trading at a significant valuation discount with a forward 12-month P/S ratio of 0.82X compared to the sector average of 6.67X.

Key Decisions for Investors

• Given the strong AI-driven growth trajectory, substantial order backlog, and a discounted valuation relative to the sector, investors may consider accumulating or adding to positions.
• Investors should focus on the upcoming earnings report for confirmation of the Infrastructure Solutions Group's (ISG) revenue growth and any updates to the AI server backlog, as these are the primary drivers of the current bullish thesis.
• It is crucial to monitor management's commentary on the impact of macroeconomic headwinds and tariff uncertainties, as these represent the key risks to the otherwise positive outlook.
• Consider Dell's relative strength, as its 13.7% year-to-date share performance has significantly outpaced both its direct industry, which declined 8.5%, and peer HPE, which returned 5.7%.