Dell Technologies (DELL) shares slipped more than 4% on Tuesday, ahead of the company's quarterly earnings report, as rising bond yields and broader market weakness weighed on technology stocks. Inflation concerns and elevated oil prices have pushed yields higher, raising questions about whether the Federal Reserve could tighten policy later this month.
Despite the market headwinds, Dell enters its July-quarter report with a stronger fundamental backdrop. Analysts expect sharp growth, driven by surging demand for AI infrastructure. The company is scheduled to report results after the market closes on Tuesday.
Dell's stock has already gained about 250% this year, setting a high bar for the earnings report. The company's AI server backlog reached a record $51.3 billion, according to Evercore ISI analyst Amit Daryanani. That backlog has shifted the debate from whether AI demand is real to whether Dell can fulfill it.
AI servers to dominate results
AI-optimized servers are expected to generate about $16 billion of the $29.8 billion in Infrastructure Solutions Group (ISG) revenue, which itself accounts for more than half of the roughly $45.1 billion in total revenue expected for the quarter. Visible Alpha Research projects diluted non-GAAP EPS of $4.91, representing 112% growth year-over-year.
The figures illustrate how quickly AI infrastructure has become a central driver of Dell's financial performance. However, supply constraints are limiting near-term upside. Daryanani noted that across the AI infrastructure industry, "constraints are broadening rather than easing," and he expects the situation to worsen in 2027.
That could provide Dell with considerable revenue visibility, even if some orders take longer to convert into reported sales. The analyst also pointed to "material capex raises" from neocloud company CoreWeave and SpaceX, which he identified as Dell's two largest customers.
Nvidia financing could boost demand
One potential catalyst is Nvidia's recent announcement of a $500 billion financing platform involving third-party capital to support frontier AI labs and other major AI customers. Mizuho analyst Vijay Rakesh believes the initiative could drive meaningful demand for AI infrastructure, even if only a portion of the financing translates into spending.
Dell supplies data-center servers with CPUs for agentic AI and inference workloads, as well as AI-optimized systems supporting Nvidia's GPUs. Industry forecasts now call for AI server growth of more than 80% in 2026, up from an earlier estimate of 64%.
SpaceX as a long-term opportunity
SpaceX represents a significant potential long-term opportunity. Rakesh views SpaceX's plan to deploy up to 10 gigawatts of computing capacity by the end of next year as "potentially optimistic," but even a seven-gigawatt deployment could generate meaningful upside for Dell in 2027. He estimates that could represent a more than $200 billion opportunity for Nvidia, which SpaceX has said it will exclusively purchase chips from.
Rakesh also expects SpaceX's data-center capex could eventually surpass spending by Amazon and Google, potentially making it another major customer for Dell.
JP Morgan sees room for outlook upgrade
Analysts are also watching for Dell to raise its fiscal 2027 outlook. JP Morgan expects the company to build on its existing forecast for 47% revenue growth, maintaining an Overweight rating with a $565 price target. The bank cites continued demand for AI servers as well as traditional infrastructure.
Dell's high valuation leaves little room for error. As bearish signals ahead of Q2 earnings suggest, the market's expectations are elevated. Investors will be looking for Dell to show that demand is translating into sustained growth, especially after Nvidia's strong results raised the bar across the sector.
With AI trade facing a pivotal week, Dell's report will be closely scrutinized. The company's ability to navigate supply constraints and capitalize on AI demand will be key to sustaining its rally.
This article is for informational purposes only and does not constitute financial advice.
