The tech hardware sector is becoming more competitive, and Dell Technologies (DELL) is standing out as a strong rival to Super Micro Computer (SMCI). In 2024, Dell showed its strength, with its stock price rising by 52.9% on the year, compared to the S&P 500's ($SPX) 23.3% increase. This was partly because Dell rejoined the S&P 500 after a decade, which shows how confident the market is in its future.
Dell's big push into artificial intelligence (AI) infrastructure has been a major success. In fiscal year 2025, Dell sold $10 billion worth of AI servers, thanks to key partnerships with AI powerhouses like Elon Musk's xAI. At the same time, Super Micro Computer has faced some major issues, including accounting delays and operational challenges, which have shaken investor confidence and given Dell room to gain more market share.
Dell's recent decision to increase its dividend by 18% highlights its financial stability and commitment to giving back to shareholders. With a strong cash flow of $5.6 billion in fiscal 2025, Dell is well-positioned to capitalize on the growing demand for data center solutions and AI workloads. As analysts see Dell as a strong competitor to Super Micro Computer, is now a good time to invest in Dell's growth story? Let's explore that further.
Dell's Financial Fortitude
Dell Technologies (DELL) has built its business around a simple but effective idea: selling directly to customers without relying on middlemen. By cutting out traditional retail channels, Dell keeps costs low and passes those savings on to its customers, making it a go-to choice for both personal and enterprise tech solutions.
Over the past year, Dell's stock dropped 21.3%, and its 2025 year-to-date performance shows another 19% decline. (By comparison, SMCI is down 67% over the past year, and up 21.5% YTD.) Despite these challenges, Dell’s stock seems to be finding some stability as it weathers market headwinds.
Financially, Dell had a solid fiscal 2025. Revenue grew by 8% to $95.6 billion, driven by a 29% surge in its Infrastructure Solutions Group. Operating income rose by 15% to $6.2 billion, and diluted EPS hit a record $6.38, a 39% jump from the previous year. With $4.5 billion in cash flow from operations, Dell showed strong financial discipline.
From a valuation standpoint, Dell looks appealing compared to its peers. Its forward price/earnings (P/E) ratio of 10.33x is well below the sector average of 22.70x, suggesting it might be undervalued. With a PEG ratio of 0.91 and a beta of 0.83, Dell offers a mix of growth potential and relative stability, qualities that could make it attractive to investors looking for both steady returns and upside potential in the tech space.
Dell's Strategic Growth Engines
Dell is making big moves to stay ahead in the tech game, and its growth strategy is a clear reflection of that. The recently launched Open Telecom Transformation Program is a prime example. It’s designed to help communication service providers (CSPs) modernize their networks by simplifying the shift to cloud-native systems.
By partnering with industry giants like Ericsson (ERIC) and Nokia (NOK), Dell is making it easier for CSPs to adopt advanced telecom solutions, which could open up new revenue streams and strengthen its foothold in the telecom sector.
On top of that, Dell is doubling down on AI-powered PCs. Its latest portfolio features devices with built-in AI capabilities that work directly on the hardware, making them faster and more secure. These machines cater to the growing demand for more innovative, more efficient computing, which could help Dell grab a bigger slice of the AI market.
Financially, Dell is backing up its growth strategy with solid shareholder returns. The company recently raised its annual dividend by 18% to $2.10 per share and approved a $10 billion increase in its share repurchase program. With a forward dividend yield of 2.21% and a payout ratio of just 19.93%, Dell is showing it has both the financial strength and confidence to reward investors while continuing to grow.
Analysts Weigh In on Dell's Potential
Dell Technologies is optimistic about fiscal year 2026. It projects revenue between $101.0 billion and $105.0 billion, which represents an 8% increase at the midpoint of $103.0 billion. The company expects its earnings per share (EPS) to rise significantly, with GAAP EPS reaching $7.85, a 23% jump, and non-GAAP EPS hitting $9.30, up 14%.
Analysts are equally bullish about Dell's prospects. Among the 21 analysts in coverage, the consensus on DELL is a "Strong Buy" rating, reflecting broad confidence in its growth potential. The average price target among these analysts is $141.64, suggesting a potential upside of about 50% from Dell's current price.
The overall outlook remains bullish, even as some analysts have tempered their expectations recently. Goldman Sachs lowered its price target from $165.00 to $145.00, while still recommending a "Buy." Bank of America reduced its target to $150 from $155, citing potential short-term challenges in AI server sales due to supply issues with Nvidia (NVDA) chips. Morgan Stanley also trimmed its target to $128 from $154, noting that Dell's short-term outlook might be a bit rocky despite strong demand for AI servers.
Conclusion
Dell Technologies is making a strong case for itself as a leading tech player, particularly with its recent 18% dividend hike and robust fiscal 2026 guidance. Despite market fluctuations, Dell's strategic focus on AI and telecom infrastructure positions it well for growth. With analysts overwhelmingly bullish on its prospects, Dell offers an attractive blend of income and growth potential, making it a compelling option for investors seeking a trusted legacy player with upside in the evolving AI market.
