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Shares of Dell Technologies (DELL) are down 47% from their high of $179.70. While the stock has lost substantial value, the company’s fundamentals remain solid, with its earnings growing at a compound annual growth rate (CAGR) of 10% since fiscal 2021. Further, Dell is poised to benefit from artificial intelligence (AI)-driven demand for its high-performance computing solutions, as seen in its increasing AI-driven shipments and backlog.
In this context, let’s explore Dell’s future growth prospects and valuation to determine whether its stock is currently undervalued.
AI as a Growth Catalyst
Dell’s prospects in AI are particularly compelling, backed by strong demand, strategic partnerships, and a rapidly expanding backlog. In the fourth quarter of FY25, AI-related orders reached $1.7 billion, with shipments totaling $2.1 billion and a robust backlog of $4.1 billion.
The company’s AI momentum has continued into FY26 as Dell has strengthened its AI footprint by expanding its partnership with xAI and other key clients in February 2025. As a result, its AI backlog surged to nearly $9 billion, which indicates sustained demand and solid revenue growth.
Since the launch of its high-performance XE9680 system, Dell’s AI pipeline has grown consistently each quarter, signaling strong momentum. Further, increasing adoption of AI by enterprise customers remains a key growth catalyst. Dell is seeing steady growth in customer count and order volume, strengthening its competitive position in the AI infrastructure solutions market. Moreover, Dell’s compelling financing options and energy-efficient AI solutions are attracting large cloud service providers and enterprises.
Strength in Servers and Storage Solutions
Beyond AI, Dell continues to perform well in the traditional server and storage markets. The company’s server business is thriving, reflecting strong demand for high-efficiency servers. As enterprises upgrade their data centers with advanced CPU cores, storage, and memory, Dell is well-positioned to benefit from this growth opportunity.
The storage segment is also seeing impressive momentum, with Dell reporting strong profitability. Its midrange PowerStore product remains in high demand, while its PowerScale and PowerFlex solutions are gaining widespread adoption.
Rebound in Client Solutions and AI-Powered PCs
Dell’s Client Solutions Group (CSG), which includes its PC business, is showing signs of recovery. The small and medium-sized business (SMB) segment has rebounded. Additionally, Dell saw an improvement in commercial revenue, marking its second consecutive quarter of growth.
The advent of AI-powered PCs will significantly boost productivity, setting the stage for a potential surge in demand in this segment. This trend could lead to robust sales as businesses look to upgrade their PC infrastructure in the upcoming quarters.
Is Dell Stock Undervalued?
Despite its strong financials and AI-driven growth potential, Dell stock appears significantly undervalued. DELL stock trades at a forward price-earnings (P/E) multiple of 11.68x and a price-sales (P/S) multiple of 0.72x. Considering the company’s double-digit earnings growth forecast for FY26 and expanding AI footprint, the stock appears cheap.
Looking ahead, Dell projects its top line to range between $101 billion and $105 billion for FY26. The midpoint of its guidance reflects 8% year-over-year growth. Dell’s Infrastructure Solutions Group (ISG) is forecast to grow revenue in the high teens, driven by $15 billion in AI server shipments and continued expansion in traditional servers and storage. Meanwhile, adjusted earnings per share (EPS) are expected to reach $9.30 (plus or minus $0.25), representing a 14% increase at the midpoint.
Final Thoughts: A Strong Investment Opportunity?
With the AI market expanding rapidly, Dell is well-positioned to capitalize on this trend. Dell’s strong competitive positioning in the AI infrastructure, servers, and storage solutions market and solid backlog positions it well. Projected growth in its revenue and earnings should enable it to lower its debt, enhance shareholder value through share buybacks, and support its share price.
Given its strong market position, growing demand, and attractive valuation, Wall Street analysts remain optimistic, maintaining a “Strong Buy” consensus on Dell stock.
