Dell Technologies shares are showing an impressive gain of more than 10% in after-hours trading following the release of a strong quarterly report. Adjusted earnings per share came in at $7.04, significantly beating the analyst consensus forecast of around $4.90.
The company's revenue grew 58% year-over-year, reaching $46.97 billion. Immediately after the report was released, shares traded around $469.66, while the closing price in the regular session was $424.20, down 6.98%.
Reasons for the decline ahead of the report
Sellers dominated throughout the trading day before the earnings release. Traders were bracing for a sharp market reaction in either direction. Options expiring on Friday priced in a move of 11%, which almost exactly matched the actual after-hours movement (+10.59%).
Notably, Dell itself had previously lowered the bar for expectations. In May, management forecast revenue of $44–45 billion and adjusted earnings of $4.80 per share. The caution was attributed not to weak demand but to margins: memory prices rose in 2024, and AI servers generate less profit per unit than storage devices or corporate PCs.
Record AI order backlog
Sales volume of AI-optimized servers doubled over the year, reaching $16.4 billion. However, the main news is orders. During the quarter, Dell received AI server orders worth $60.9 billion, and the total backlog of unfilled orders reached a record $95 billion. Three months ago, this figure stood at $51.3 billion.
Demand continues to significantly outpace Dell's physical equipment shipments. Management has raised its full-year guidance for the second consecutive quarter. The company now expects revenue of around $192 billion and adjusted earnings of $25.50 per share. The previous forecast was $167 billion and $17.90, respectively.
The revenue forecast for AI servers is now nearly $74 billion — in May, the expectation was $60 billion. In the third quarter, Dell expects approximately $49 billion in revenue and adjusted earnings of $6.50 per share.
The market has not yet fully priced in these expectations. The stock is trading at $469.66 — just 3% above Monday's close of $456.01. Most of the gain simply offset Tuesday's decline.
Management will need to answer questions about memory supplies and the pace at which the backlog converts into actual shipments. Dell's stock rally in 2026 has already lifted shares from around $110 to a high of $514, and the market now views the company as one of the biggest beneficiaries of the AI boom.
My comment: Dell is becoming a key player in AI infrastructure, but investors should closely monitor the conversion of the backlog into actual revenue and margins. The current valuation already largely reflects an optimistic scenario, so any slowdown in shipment pace could trigger a correction.