Tech Corner: DELL's Legacy Tech Evolution in AI Age

0:00All right, thanks and welcome back to the tech corner. I'm George Tillis, senior markets contributor with the Schwab Network. Today we're going to be revisiting Dell technologies. Now Dell Technologies is a legacy leading global technology firm. It operates through two primary segments. The first segment is its Infrastructure Solutions Group or ISG, as well as its other segment called client solutions group CSG. The Infrastructure Solutions Group, which represents about 38% of sales, focuses on enabling digital transformations with solutions, addressing artificial intelligence, machine learning, data analytics, and multi-cloud environments. This segment offers AI optimized servers, traditional store solutions, networking products, and other related services. The client solutions group is larger business, around 62% of sales. And this business offers branded PCs, including notebooks and desktops, workstations, and peripherals, catering to both commercial as well as consumer and markets, with a focus

1:01on high-end consumer and gaming offerings as well. Dell Technologies has positioned itself at the forefront of artificial intelligence and cloud-native infrastructure solutions. The companies committed to research and development and enhancing strategic partnerships ranging from enterprises from small and medium-sized businesses, government agencies, as well as consumers. Now when it comes to competition, Dell faces competition from major several players in the technology industry. Noble competitors and multiple segments include Hewlett Packard Enterprises, IBM and Oracle in the Infrastructure Solutions space, Hewlett Packard Incorporated, this is in client computing, Lenovo out of China, as well as Supermicro Incorporated, which is in the business of high-performance servers. Now Dell's unique value proposition lies in its comprehensive portfolio of integrated solutions that span artificial intelligence storage as well as networking. The company is well recognized for its AI-optimized servers that caters to the growing demand for artificial intelligence and data center infrastructure. The company's ability to offer secure, integrated solutions and maintain strong partnerships

2:05with leading technology firms like Nvidia, AMD, and Google positions the company advantageously in the market. Now let's look at some more recent news for Dell. Going back to late February of 2026, the company recently reported its Q4 2026 sales and earnings numbers. Revenues were higher by 39% to $33.4 billion, beating the estimates by about $2 billion which came in around $31.4 billion. On a non-gap basis, the company printed adjusted earnings of $3.89 cents. This is higher by 45% year-to-year, beating the $3.52 cent estimate. They also demonstrated a really significant AI momentum. They shipped $9.5 billion in AI-optimized servers in Q4 alone. The company also exited a year with a record $45 billion dollar AI server-back-long. The infrastructure solutions group revenue grew 73% year-to-year, which was quite meaningful. They updated their full year 2026 revenue guidance as well. To a record revenue of $113.5 billion up 19% year-to-year, surpassing the previous guidance,

3:07which was between $101 and $105 billion. And lastly, on a non-gap basis, they also updated their guidance for EPS numbers as well. To a record $10.30 per share of 27% year-to-year. Now, despite the most recent revenue and earnings news for Dell, let's also look at some additional positive notes from the company. The company is still positioned to generate robust AI server growth, benefiting from super-micro-computers regulatory setbacks with that $45 billion AI server-back-log in Q4, with expectations of fiscal year 2027 revenue to exceed $140 billion. Dell also booked $64.1 billion in AI orders for fiscal year 2026, with AI revenue potentially doubling to $50 billion in fiscal year 2027, supported by that backlog and strong enterprise AI adoption. Now, we have to remember that Dell reported a 39% year-to-year blowout quarter for Q4 of last year, and a 10X surge year-to-year in adjusted free cash flow. This was driven again by AI Optimized Server Demand and a compelling growth proposition going forward. Demand is no longer

4:10just coming from Tier 1 cloud providers like the big hyper-skiller names. It is also including now sovereign AI firms, international governments, as well as infrastructure from large enterprises overseas. The Dell AI factory strategic partnership with NVIDIA has moved beyond simple hardware sales into a fully integrated ecosystem. Now, as we look at the revenue and earnings growth numbers, the four-quarter sales and earning growth estimates are meaningfully higher relative to their five-year averages, which suggests a strong compelling AI server growth model. Just to give you some context, the forward revenue growth for Dell is approximately 16.5%, which is meaningfully higher than their five-year average, which is barely 3%, as well as earnings growth estimates around 13%, relative to only 2% on a five-year basis. Now, despite many positives for Dell, we always have to address concerns with every company. First off, Dell faces margin pressure as surge in DRAM prices and constraints supply in fleet production costs, both for both servers and consumer segments, with consolidated gross margins declining over the last month. For example,

5:12if you look at over the last four quarters, gross margins were posted around 20.3% of sales versus the five-year average of 23.74, so that demonstrates that decline I mentioned just a moment ago. From a valuation standpoint, Dell is nearly trading at 14.3 times four earnings, which is tempered by cyclical challenges and pressures in the PC markets, which is trying to be balanced by growth in the AI segments. This forward multiple, again, is around 14.3 times earnings. It's above its historical average, which is 11 times. Now, growth in the client services group also is lagging behind the infrastructure solutions group, which is experiencing that slowdown in consumer PC demand, which may impact the company's overall projected growth. Other risks include a greater impact from additional tariffs on Chinese imports, with China representing also about 33% of sales and moderation in that PC refresh cycle that I mentioned just a moment ago. Now, let's look at the technical picture for Dell. The current technical picture is very strong, having recently hit new five-year and 52-week highs, and the chart pattern suggests that

6:15upward momentum may continue. Dell has performed the market in the last 180 days compared to the S&P 500. In context, Dell is up over 39% in the last six months versus a decline of about 2% for the broader market. The stock is also trading above a rising 50-day moving average, and above its 200-day moving average, which is pointing up, indicating that intermediate-term trend is still bullish. Also, the price is both above the short-term 10 and 20-day moving averages, which suggests that near-term price action is still positive, even after the most recent earnings report, as well as price movement to the upside. And lastly, the price has moved quite aggressively in the last several weeks. Upside momentum is still positive as measured by the RSI indicator, which is above 80, but it also suggests there's a potential short-term overbought condition manifest. Therefore, a consolidation pullback towards that rising 10-day moving average may allow for a better entry point. Now, in summary, the primary growth drivers for Dell are accelerating enterprise AI adoption, data center modernization, focus on efficiency, and the end of the Windows 10 life cycle,

7:17as well as the PC refresh going forward. Dell has captured significant market share since early 2026, following governance and supply chain crisis at a pivotal rival, super-micro-incorporated. Large enterprise and government clients have increasingly viewed Dell as a safe and stable alternative for a multi-billion-dollar infrastructure project. And lastly, Dell's portfolio across infrastructure, client devices, and services positions the company uniquely in the ever-expanding AI hardware and services infrastructure markets to come. Alright, that's it for this week's edition of the Tech Corner. Please don't forget to like, subscribe to the Schwab Network. I'm George Silas. We'll see you next week.