Dell Stock Skyrockets After Q2 EPS Surges 200%, AI Server Business Secures $60.9B in Orders

Dell Technologies stock rose 15.8% on Wednesday after the company's Q2 adjusted earnings rose 203% to $7.04 per diluted share from $2.32 from a year earlier, driven by a record $16.4 billion revenue from its AI-optimised server business. The stock is up by over 291% year-to-date.

'There's an old Texas saying I may have just made up... If you keep growing EPS 200%+ y/y something good will happen,' CEO Michael Dell said in an X post.

Dell's AI server business booked a record $60.9 billion in orders and exited the quarter with a $95 billion backlog. While this business segment played a vital role in buoying overall company revenue to a record $47 billion in Q2, revenue from the traditional servers and networking segment also grew 122% year-over-year to $10.5 billion. Dell executives attributed the traditional server segment growth to widespread data centre modernisation.

'We are seeing a growing trend of customers that require meaningful CPU compute capacity to support AI and agentic workflows,' said Dell COO Jeff Clarke during the earnings call. 'These workloads are creating incremental demand for traditional servers.'

Revenue from the company's client solutions group also witnessed a 20% YoY growth to $15 billion, primarily driven by commercial client sales.

Dell believes that its storage segment revenue growth of 26% to $4.9 billion indicates that this business unit is becoming a more meaningful contributor to overall profitability, driven by growth in Dell-IP mix, share gain, and accelerating product development.

Meanwhile, Dell's chief financial officer David Kennedy stated in the earnings release that the company raised its fiscal 2027 guidance by $25 billion to $192 billion due to accelerating AI momentum and its leading market position to benefit from the market dynamic. Note that Dell also ramped up its fiscal 2027 adjusted EPS guidance to $25.50 from $17.90 earlier.

Clarke had also indicated during the conference call that price hikes due to rising input costs factor into the higher revenue guidance.

Meanwhile, Kennedy highlighted that the company now has over 6,500 clients buying Dell AI Factory solutions, and the acceleration is primarily driven by enterprise clients.

'We now have more than 6,500 customers buying Dell AI factory. 3,300 of them have happened in the last three quarters. It took us eight quarters to get to the first 3,200,' he said, adding that repeat customers are also increasing markedly.

Shareholder Value Creation Remains a Top Priority

In terms of shareholder value creation, Dell returned a record $4.3 billion to stockholders via share buybacks and dividend payouts. The company maintained its quarterly dividend at $0.63 per share, payable 30th October.

Dell stock was the top performer in the S&P 500 index on Wednesday, and the price surge was also likely supported by the company's long-term adjusted EPS compound annual growth rate target of over 16% and revenue growth of 7% to 9%.

Note that the company also plans to return over 80% of adjusted free cash flow to shareholders and boost its dividend payouts by 10% annually from fiscal 2026 through 2030.

However, there could be another driver that has been supporting the overall positive market sentiment around the Dell stock this year. US President Donald Trump reportedly purchased Dell shares earlier this year and then recommended buying Dell Computers months later in July.

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