Dell: AI Server Growth Backs Value (Rating Upgrade)

Dell delivered a standout Q2, driven by surging AI server orders and record AI-driven revenue backlog. Q2 saw record revenues of ~$47B, operating income of $5.4B, and free cash flow of $986M, down heavily due to higher CapEx spending. I upgraded shares of Dell from 'Sell' to 'Buy,' citing robust AI infrastructure demand, record AI server orders, and potential for increased stock buybacks. Key risks include potential overbuilding of data center capacity amid aggressive CapEx, but current momentum remains strong.

Dell Technologies (DELL) had a massive second fiscal quarter this week, with AI server orders driving significant top-line and profitability growth. As a result, the AI infrastructure platform posted better-than-expected revenues and earnings for Q2 '27, and Dell posted