Core Insights - Dell Technologies (DELL) is experiencing a decline in gross margin, which contracted 140 basis points year over year to 21.1% in Q3 FY26, primarily due to competitive pricing and an unfavorable geographical mix in traditional servers [1][9] Financial Performance - The Infrastructure Solutions Group (ISG) segment significantly supported overall gross margin performance, with revenues increasing 24% year over year to $14.10 billion in Q3 FY26, driven by a 37% growth in servers and networking revenues to $10.12 billion due to rising AI server demand [2][9] - DELL booked $12.3 billion in AI server orders in Q3 FY26, bringing year-to-date orders to $30 billion, and ended the quarter with a record backlog of $18.4 billion in AI server orders, indicating strong demand for AI solutions [3][9] - The company expects to ship $9.4 billion in AI servers in Q4 FY26, projecting full-year shipments to reach $25 billion, representing over 150% year-over-year growth [3] Competitive Landscape - DELL faces significant competition in the AI infrastructure market from Hewlett-Packard Enterprise (HPE) and Super Micro Computer (SMCI), with HPE benefiting from a favorable mix shift to networking and stable gross margins, achieving a non-GAAP gross margin of 36.4% in Q4 FY25, up 550 basis points year over year [5] - Super Micro Computer is transitioning to a full IT solutions provider, with its Data Center Building Block Solutions (DCBBS) expected to carry over 20% margins, enhancing revenue per deal and improving overall margins [6] Stock Performance and Valuation - DELL's shares have increased by 4.8% over the past six months, underperforming the broader Zacks Computer & Technology sector, which returned 19.2%, and the Zacks Computer - Micro Computers industry, which rose by 23.5% [7] - DELL's stock is considered undervalued, with a forward 12-month Price/Sales ratio of 0.64X compared to the sector's 7.49X, and the company holds a Value Score of A [10] - The Zacks Consensus Estimate for fiscal 2026 earnings is $9.89 per share, indicating a 21.50% year-over-year growth, with DELL currently holding a Zacks Rank 3 (Hold) [12]

Core Insights - Dell Technologies is experiencing a decline in gross margin, which contracted 80 basis points year over year to 21.6% in Q1 FY26, primarily due to competitive pricing and an unfavorable geographical mix in traditional servers [2][11] - The Infrastructure Solutions Group (ISG) segment is a key driver for Dell's overall gross margin performance, with ISG revenues growing 12% year over year to $10.3 billion, and record server and networking revenue of $6.3 billion, up 16% year over year [3][11] - Dell's AI-optimized server orders increased significantly, with $12.1 billion in orders and a healthy backlog of $14.4 billion, indicating strong demand in the AI sector [4] Financial Performance - Dell expects gross margin dollars to increase by 10% quarter over quarter in Q2 FY26, driven by strong ISG performance and anticipated shipments of $7 billion worth of AI servers [5][11] - The Zacks Consensus Estimate for Q2 FY26 earnings is $2.28 per share, reflecting a year-over-year increase of 20.63%, while the estimate for 2025 earnings is $9.44 per share, suggesting 15.97% year-over-year growth [15] Competitive Landscape - Dell faces stiff competition from Hewlett Packard (HPE) and Super Micro Computers (SMCI), both of which are benefiting from robust demand for AI-optimized servers and evolving their business models to enhance margins [6][7][8] - HPE's multi-billion-dollar investment plan aims to diversify its business beyond servers, while Super Micro is transitioning to a full IT solutions provider, bundling various services to improve revenue per deal and customer retention [7][8] Stock Performance and Valuation - Dell's shares have gained 7.3% year to date, underperforming the broader Zacks Computer & Technology sector's return of 8.4% [9] - Dell is trading at a significant discount with a forward 12-month Price/Sales ratio of 12.36X compared to the sector's 27.64X, indicating a favorable valuation [13]