DELL: Riding the AI Server Wave? AI Options Outlook

Dell Technologies provides a broad range of technology solutions, from client devices and peripherals to infrastructure solutions like servers, networking, and storage. Its two main business units are the Infrastructure Solutions Group ('ISG') and the Client Solutions Group ('CSG'). 'ISG' focuses on solutions for AI, machine learning, data analytics, and multicloud environments, offering servers, networking, and storage products. 'CSG' provides branded PCs, peripherals, and related services, targeting both commercial and consumer markets. Dell serves a diverse customer base across various segments including large enterprises, public institutions, small and medium-sized businesses, and consumers, operating in over 170 countries. Dell differentiates itself through a comprehensive portfolio, a direct sales force, a global network of channel partners, and a global services footprint, offering customers flexible acquisition options including traditional purchasing and as-a-Service models.

DELL's technical outlook appears mildly bearish. The stock has experienced a significant pullback from a recent high of $167.94 on 2025-10-29 to close recently at $154.60, breaking below its 21-day EMA, which currently sits at $154.23. The MACD, while still positive at 5.79, shows a declining histogram, suggesting weakening bullish momentum. The RSI of 60.25 indicates that the stock is no longer overbought and has room to decline further. The price is also trading well above both its 50-day SMA of $140.96 and 200-day SMA of $117.40, which could act as support levels during any further downward movement. The stochastic oscillator, with %K at 69.68 and %D at 74.98, is trending downward, reinforcing the bearish sentiment. The ADX is elevated at 35.81, suggesting a strong trend, but the recent price action indicates a shift in that trend. The recent price action suggests a potential for further consolidation or a continued decline, especially if it breaks below its 50-day SMA.

Dell Technologies' MD&A paints a moderately bullish picture, driven by strong performance in specific areas. Total `net revenue` increased by 19% for the three months ended August 1, 2025. This surge was primarily fueled by a 44% increase in Infrastructure Solutions Group (ISG) net revenue, particularly in servers and networking offerings, which grew by 69%. Conversely, services `net revenue` decreased by 4% due to a decline in Corporate and other services. The `gross margin` decreased by 310 basis points to 18.3%, attributed to a 'shift in mix towards our AI-optimized server offerings'. Regarding liquidity, `cash provided by operating activities` was $5.3 billion for the first six months of Fiscal 2026, a significant increase from $2.4 billion in the prior year. This improvement was 'driven by net revenue growth, profitability, and working capital dynamics'. The company expects 'net revenue growth for the full fiscal year driven by ISG and CSG net revenue, most notably within ISG'. However, management anticipates 'demand moderation to persist into the second half of the year within our traditional servers and networking offerings and storage offerings as customers within our domestic market continue to reevaluate IT spending behavior due to uncertainty in the macroeconomic environment'. Despite margin rate pressure from AI-optimized servers, the company expects 'margin growth for the full fiscal year'.

Dell Technologies' Q2 2026 earnings call projects a moderately bullish outlook, primarily fueled by strong AI server demand. The company reported record revenue of $29.8 billion, up 19%, and EPS of $2.32, also up 19%. Management raised their full year revenue guidance to $105-$109 billion and increased AI server shipment guidance by $5 billion to $20 billion, stating they are 'raising our AI server shipment guidance $5 billion to $20 billion'. Despite storage revenue declining 3%, PowerStore saw double-digit growth for the sixth consecutive quarter. Management anticipates improved profitability in the second half of the year, particularly in AI servers and storage, with Yvonne McGill noting that 'storage is expected to perform better sequentially in the second half, with more Dell IP as well as normal seasonal acceleration in the fourth quarter'. While gross margin was impacted by the mix shift to AI servers, the company expects margins to improve in the second half through value engineering, scaling, and enterprise customer expansion. The company's focus on modernization efforts and shareholder returns further contributes to a positive sentiment, with $1.3 billion returned to shareholders in Q2.

DELL's financial performance presents a mixed picture. Revenue has generally increased, starting from $22.25B in Q3 2023 and reaching $29.78B in Q2 2025, indicating growth in sales. However, the gross profit ratio has fluctuated, beginning at 0.231 in Q3 2023 and settling at 0.183 in the latest quarter, suggesting some pressure on profitability. Operating cash flow has been positive throughout the observed period, with the most recent quarter showing $2.54B, demonstrating the company's ability to generate cash from its operations. Total debt has decreased from $27.45B in Q3 2023 to $28.69B in Q2 2025, representing a slight increase in leverage. While DELL demonstrates solid cash generation and revenue growth, the fluctuating profitability and increasing debt levels warrant careful monitoring. The negative total stockholders' equity also remains a concern, signaling potential balance sheet weakness.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.