Dell Technologies (NYSE: DELL) has re-emerged as one of the most compelling large-cap technology stories following its Q3 2026 earnings report. Once known primarily as a PC manufacturer, Dell has transformed into a diversified enterprise technology company with strong exposure to data centers, AI infrastructure, servers, storage, and enterprise services. The company’s latest financial results highlight accelerating earnings growth, improving free cash flow, and a valuation that remains attractive compared to peers and the broader market. In this article we will dive into Dell Technologies recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.
About Dell Technologies
Dell Technologies, founded in
1984 by Michael Dell and headquartered in Round Rock, Texas, began as a
direct-to-consumer PC company and has since grown into a global technology
leader serving enterprises, governments, and consumers. The company operates through
Infrastructure Solutions Group, which provides servers, storage, networking,
and data center solutions, and Client Solutions Group, focused on PCs and
peripherals. Its diversified portfolio, including software and lifecycle
services, supports enterprise digital transformation while reducing reliance on
any single product category.
Dell Financial Performance
Dell Technologies delivered
strong financial performance in Q3 2026, which ended in October 2025, with
quarterly revenue of $27 billion, up from $24.36 billion in Q3 2025,
representing a 10.83% year-over-year increase, while quarterly EPS rose to
$2.28 from $1.58, marking a robust 44.3% growth. On a trailing twelve-month
basis, revenue reached $104.09 billion, compared to $93.95 billion in Q3 2025,
reflecting a 10.79% increase, and EPS (TTM) climbed to $7.50 from $6.01, up 24.77%
year over year. Free cash flow generation improved significantly, with free
cash flow per share (TTM) increasing to $6.40 from $3.90, a 64.1% growth,
supported by a Gross profit margin of 20.95%, Net profit margin of 5.01%, and Free
cash flow margin of 4.27%, while return on assets stood at 5.84% and return on
equity was not applicable as Dell has negative equity value.
Over the past five years, Dell’s
financial performance has fluctuated, but it has shown improvement in net
income since 2024 and is projected to continue improving in the future.
Dell Fiscal 2026 Financial
Forecast
Looking ahead, analysts forecast 2026
revenue of $111.42 billion, representing a 16.59% increase from 2025 revenue of
$95.57 billion, and expect Non-GAAP EPS to reach $9.92, up 21.85% from $8.14 in
2025. Wall Street analysts currently rate the stock a Buy, with an average
price target of $163.30, implying 25.63% upside, and a highest price target of $200,
offering 53.87% potential upside.
DELL Stock Price Performance
and Valuation
At the time this article was written Dell’s stock was trading at $129.98 per share, Dell Technologies has gained 9% over the past year, slightly underperforming the S&P 500, which rose 12.8% during the same period; however, the longer-term performance remains compelling, with the stock up 251.8% over the past five years, significantly outperforming the S&P 500’s 84.6% gain.
Dell also offers a 1.62% dividend
yield, providing additional income for investors. From a valuation perspective,
the stock appears attractive, trading at a Price to sales P/S TTM ratio of 0.86
and a forward P/S of 0.77, alongside a Non-GAAP Price to earnings P/E TTM of 14.22 and a forward Non-GAAP P/E of
13.1, all of which are modest relative to its earnings growth outlook.
Additionally, the Price to free cash flow P/FCF TTM ratio is 19.36.
Based on Fiscal.ai data, over the
past five years the forward P/S and forward P/E ratios have been slightly above
average, while P/FCF has been significantly above average. Although valuations
are higher than the historical average, improving margins and growth potential
from the AI industry make Dell a compelling stock at these valuation levels.
Dell Growth Potential
Dell growth potential remains solid
driven by several factors.
- Explosive AI Server Demand and
Backlog
Dell's Infrastructure Solutions Group (ISG) drives growth through surging AI server demand. In Q3 fiscal 2026, record AI server orders hit $12.3 billion, lifting year-to-date totals to $30 billion, with shipments at $5.6 billion. The AI server backlog reached a record $18.4 billion, ensuring multi-quarter visibility and durable demand. Full-year shipment guidance rose to $25 billion, signaling 150% year-over-year growth.
A five-quarter pipeline exceeds backlog multiples, featuring diverse clients like neocloud providers, sovereign entities, and enterprises shifting to production AI deployments. Dell excels in custom high-performance solutions and rapid large-scale AI cluster rollouts edges rivals can't match. This positions Dell for outsized enterprise AI infrastructure capture, with backlog conversion yielding strong revenue and earnings visibility into fiscal 2027 and beyond. - Infrastructure Solutions Group
Profitability and Margin Expansion
Dell's ISG shows accelerating profitability amid aggressive AI infrastructure expansion. In Q3 fiscal 2026, ISG revenue hit $14.1 billion, up 24% year-over-year, with operating income rising 16% to $1.7 billion at 12.4% margins. Six straight quarters of double-digit ISG operating income growth highlight margin discipline despite heavy AI investments. Servers and networking revenue reached record $10.2 billion, growing 37% year-over-year, boosted by higher-margin Dell IP storage.
Management targets 10-12% ISG margins alongside 11-14% revenue growth. Economies of scale in AI production, recurring services leverage, and shifts to PowerStore, PowerMax, ObjectScale, and PowerFlex drive expansion. This revenue-margin dynamic creates strong operating leverage, converting incremental sales into outsized earnings growth and shareholder value. - Traditional Server Refresh
Cycle and Installed Base Modernization
Dell's installed base advantage features 70% of enterprise customers on legacy 14th-generation servers or older, creating massive refresh opportunities for AI modernization. Latest 17th-generation PowerEdge servers deliver seven-to-one consolidation ratios, slashing datacenter footprints while boosting performance and efficiency. Traditional x86 server demand surged with double-digit year-over-year growth across regions, driven by denser compute with expanded memory and storage for next-gen workloads.
Commercial PC revenue grew 5% to $10.6 billion in Q3 fiscal 2026, five straight quarters of gains fueled by Windows 11 cycles and Windows 10 end-of-support. With 500 million PCs upgrade-eligible globally, a multiyear runway persists into fiscal 2027, plus $500 million+ in refresh potential. This infrastructure cycle, plus AI PC demand with neural units, fuels sustained growth alongside AI servers.
Risks to Consider
While Dell’s stock looks
compelling, we should be mindful of potential risks.
- Intense Competition in the AI
Server Market
Dell is seeing robust demand for AI-optimized servers, but it operates in a highly competitive landscape. Rivals such as Hewlett Packard Enterprise (HPE), Super Micro Computer (SMCI), and major cloud providers like AWS and Microsoft are rapidly expanding their AI infrastructure. Intensifying competition may trigger aggressive pricing, constrain Dell’s market share, and place sustained pressure on margins and overall profitability over time. - Margin Pressure from High AI
Server Costs
Production costs for AI servers are increasing sharply, driven by high-priced components such as Nvidia GPUs, advanced cooling systems, ongoing supply chain disruptions, and inflation in memory and semiconductor inputs. Although order volumes and backlogs remain strong, these cost pressures have weighed on gross margins. As a result, investors are increasingly concerned about whether profitability can be sustained even as revenue continues to expand. - High Debt Levels and Financial
Leverage
Dell faces elevated financial risk due to significant leverage, with long-term debt of approximately $21–25 billion and periods of negative shareholder equity. This high indebtedness increases vulnerability to interest rate fluctuations, economic downturns, and potential cash flow pressures. As a result, Dell’s financial flexibility may be constrained, limiting its capacity to fund strategic investments, pursue growth initiatives, or return capital to shareholders.
Conclusion
Dell Technologies demonstrates a compelling combination of solid financial growth, improving cash flow, and attractive valuation following its Q3 2026 earnings. The company’s diversified business model, strong exposure to enterprise infrastructure and data center demand, and favorable analyst outlook support continued earnings expansion. While short-term market performance has lagged, Dell’s long-term returns and discounted valuation suggest meaningful upside, making the stock an appealing choice for investors seeking growth with value characteristics.
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