Dell’s Growth is Accelerating, But the Valuation Hasn’t Fully Caught Up

AI growth story is accelerating and the valuation still looks modest.

Dell Technologies (DELL) has already had a strong run, with shares climbing nearly 80% over the past year. But even after that move, the valuation still doesn’t fully reflect the company’s growing role in the AI infrastructure buildout. With demand accelerating and visibility improving, this story looks like it still has room to run.

Dell Technologies is no longer just a legacy PC maker. Today, it sits at the center of one of the biggest spending cycles in tech, supplying the servers, networking, and storage infrastructure needed to support the rapid buildout of enterprise AI.

That shift is showing up most clearly in the company’s Infrastructure Solutions Group, which has become Dell’s main growth engine. As enterprises and hyperscalers invest in AI workloads, demand is spreading well beyond compute alone. Customers also need the surrounding infrastructure to support those systems, and Dell’s broad portfolio gives it a chance to capture more of that spending across the stack.

That matters because this is not simply a one-product story. AI server demand can pull through additional sales in networking, storage, and traditional server refreshes, creating a broader infrastructure cycle that plays to Dell’s scale. Just as importantly, adoption is moving beyond the hyperscalers and into the enterprise market, expanding Dell’s customer base and adding durability to the growth story.

Visibility is another differentiator. Dell booked more than $64 billion in AI-optimized server orders in fiscal 2026 and exited the year with a $43 billion backlog. For a hardware company, that is an unusually strong level of forward revenue support - and a key reason the story deserves attention even after the stock’s big run.

Dell’s latest results showed just how quickly that infrastructure story is translating into financial performance.

Fourth-quarter revenue (reported on February 26) rose 39% year over year to a record $33.4 billion, while full-year revenue climbed 19% to a record $113.5 billion. The biggest driver was Infrastructure Solutions Group revenue, which jumped 73% in the quarter to $19.6 billion. Within that segment, AI-optimized server revenue surged 342% to $9.0 billion, highlighting the strength of enterprise and data center demand.

The order book was even more striking. Dell generated $34 billion in AI orders in the fourth quarter alone, bringing the full-year total to $64 billion. That helped drive the company’s year-end AI backlog to $43 billion, giving investors unusual visibility into near-term conversion, revenue, and cash flow.

And the cash generation story is getting stronger too. Full-year operating cash flow reached a record $11 billion, while management raised the dividend by 20% and added another $10 billion to its repurchase authorization. Looking ahead, Dell expects fiscal 2027 revenue of roughly $140 billion at the midpoint, with AI-optimized server revenue projected to reach about $50 billion - up more than 100% year over year. That guidance suggests this is more than a short-term spike. It looks increasingly like a multi-year infrastructure wave.

Even after rising more than 50% over the last year, Dell still does not look expensive relative to the growth it is delivering.

Shares trade at roughly 20x trailing earnings, versus a sector average closer to 31x. On a price-to-sales basis, the gap is also notable, with Dell at about 1.0x sales compared to roughly 3.1x for the sector. For a company posting record revenue, record cash flow, and triple-digit growth in one of the market’s most important spending categories, that still looks like a modest valuation.

Wall Street generally agrees. Of the 23 analysts covering Dell, 17 rate the stock a buy, alongside five holds and one sell. The average price target sits around $170 per share, versus a current share price near $175. However, the upper end of the range reaches closer to $220/share.

That gap between the average and the high-end targets is telling: although the consensus suggests the stock is already trading near fair value, the more optimistic projections point to meaningful upside if Dell continues to outperform. And if broader market or war-related volatility triggers another round of indiscriminate selling, that could give investors a chance to step in at a more attractive price.

Source: Barchart

There are still risks to consider. Dell’s margin structure remains relatively lean, which leaves less room to absorb higher input costs. Rising memory prices could pressure profitability, especially in lower-margin parts of the business, and the broader thesis still depends on continued enterprise and hyperscaler capital spending. But even with those caveats, the setup remains compelling.

Dell is delivering strong top-line growth, generating substantial cash, and building real momentum in AI infrastructure - yet the stock is still priced more like a conventional hardware name than a company with this kind of exposure and earnings visibility. That disconnect is what makes the story so compelling. For investors looking for a growth story, Dell still appears to offer more upside than the current valuation fully reflects.