DELL is Overvalued at 21.92X P/E: Should You Still Buy the Stock?

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Technically, Dell Technologies is trading above the 50 and 200-day moving averages (SMAs), indicating a bullish trend.

DELL Stock Trades Above 50 & 200-Day SMAs

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Is DELL worth buying at current prices? Let’s dig deep to find out.

DELL Shares Ride on AI Prospects

Year to date (YTD), DELL shares have outperformed the broader Zacks Computer and Technology sector, as well as Super Micro Computer, Hewlett Packard Enterprise and HP. Dell returned a whopping 263.7% YTD while the broader sector, Super Micro Computer, Hewlett Packard Enterprise and HP have returned 17.7%, 7.4%, 127.6% and 33.7%, respectively.

DELL Stock’s Price Performance

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The company is benefiting from a combination of exceptional AI infrastructure demand, a broader server refresh, exponential storage and data growth, and improving scale economics. Dell’s AI server business is scaling rapidly with AI-optimized server revenue reaching $16.1 billion, up 757% year over year in the first quarter of fiscal 2027. Orders were $24.4 billion, and ending backlog was $51.3 billion. Importantly, the opportunity pipeline continued to grow sequentially and remained multiples of backlog, even after the strong order conversion. Dell consequently raised fiscal 2027 AI server revenue guidance to $60 billion, nearly 2.4 times last year’s reported level.

Dell’s expanding customer base, which now exceeds 5,000 across hyperscalers, neocloud providers, sovereign AI projects and enterprises, provides strong visibility into growth. The company’s management expects fiscal 2027 revenues between $165 billion and $169 billion (up 47% year over year at the midpoint), and non-GAAP earnings of $17.90 per share (plus or minus 25 cents). 

Dell believes agentic AI is creating incremental demand for both accelerated and general-purpose compute. Agentic workloads involve sequential tool calls that are better suited to CPUs, meaning AI adoption can stimulate traditional server demand alongside GPU infrastructure. The on-premise AI opportunity is another important tailwind. Dell noted that roughly 83% of enterprise data remains on-premise, while performance, cost and security considerations encourage enterprises to deploy AI closer to their data. That creates opportunities not only for servers but also for Dell’s AI Data Platform and broader data-management portfolio.

DELL’s Expanding Portfolio Aids Prospects

Dell is increasingly selling an integrated architecture rather than individual hardware components. The company is offering accelerated and general-purpose compute, networking, storage, data management, software, deployment and services. Dell Management argues that enterprises prefer validated systems rather than having to integrate complex AI infrastructure themselves.

Dell also points to engineering, large-scale deployment capabilities, services/support, financing and its supply chain as competitive advantages. The company has highlighted its ability to bring successive NVIDIA platforms to market quickly and deploy racks into production at customer sites in under 6.5 hours.

A substantial traditional server refresh cycle bodes well for Dell’s prospects. Large enterprises are refreshing compute infrastructure, expanding capacity and seeking greater density and efficiency. The majority of Dell’s installed server base remains on 14th-generation or older systems, suggesting the refresh cycle still has runway. AI inference is also generating incremental demand for general-purpose compute. Accordingly, Dell expects traditional server revenue to grow just more than 60% in fiscal 2027, making growth considerably broader than AI servers alone.

DELL’s Earnings Estimate Revision Shows Rising Trend

The Zacks Consensus Estimate for second-quarter fiscal 2027 earnings is pegged at $4.89 per share, up by a penny over the past 30 days and indicating 110.78% growth from the figure reported in the year-ago quarter. 

The consensus mark for fiscal 2027 earnings is pegged at $18.80 per share, up 3 cents over the past 30 days, suggesting 8.52% growth from fiscal 2026’s reported figure.

Conclusion

Dell Technologies is well positioned to benefit from the rapid expansion of AI infrastructure spending, growing enterprise adoption of agentic AI and ongoing server refresh activity. The company’s record AI backlog, expanding customer base and broad portfolio spanning compute, storage, networking and data management provide solid revenue visibility. Moreover, continued strength in traditional servers and storage should help diversify growth beyond AI-optimized systems.

DELL currently has a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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