Holding 95 billion in AI backlog orders! Profit margins are soaring against the trend, and Dell Technologies, Inc. Class C (DELL.US) welcomes the era of "profits and orders rising together."

Notably, Dell Technologies, Inc. Class C (DELL.US) recently raised its fiscal year 2027 guidance by a substantial $25 billion, while its backlog of orders increased by $43.7 billion quarter-on-quarter, becoming the absolute focus of market attention. Previously, the market was generally in a neutral wait-and-see stance, mainly because although there was a possibility of upward revisions to the fiscal year 2027 guidance, the companys overall operating profit margin was expected to be diluted by the rapid growth of AI servers, leading to ongoing concerns over its profit structure. However, the latest financial report shows significant outperformance: Guidance markedly exceeds expectations: The sales guidance for the full fiscal year 2027 has been raised by $25 billion, and the non-GAAP earnings per share (EPS) has risen by an additional $7.6, reflecting a 42% increase compared to prior guidance. Significant improvement in profit margins: The operating profit margin for ISG (Infrastructure Solutions Group) reached 15.0%, substantially higher than the 8.8% from the same period last year; the overall non-GAAP gross margin for the company rose to 21.1% (compared to 18.7% in the same period last year). Typically, AI servers dilute overall profit margins, but Dell Technologies, Inc. Class C saw an upward trend in profit margins in the second quarter. Analysis of the fiscal year 2027 guidance After Dell Technologies, Inc. Class C released its earnings report, Wall Street's profit forecasting models showed significant upward revisions for EPS estimates across the four quarters following the second quarter of fiscal year 2027. Technically, the stock price exhibited a strong breakout at the $500 mark. Even against the backdrop of the overall market being impacted by hawkish macro reports, Dell Technologies, Inc. Class C's stock price still managed to rise against the trend. There was a clear structural differentiation in market funds: the supply chain targets benefiting from AI mega-company capital expenditures continued to rise, while traditional non-AI sectors and some mega-companies experiencing pressure on free cash flow and buybacks from high capital expenditures faced downward pressure. From a business outlook perspective, the management of Dell Technologies, Inc. Class C noted during the earnings call that: By 2028, enterprise-level AI is expected to become the largest single workload. By 2030, AI will account for 75% of total demand in data centers, with an additional 200 gigawatts of power demand. About half of this demand will align with Dell Technologies, Inc. Class C's core target customer base (including next-generation cloud providers like Neoclouds, sovereign entities, and enterprise clients). It is expected that by 2030, the total market opportunities in this field will exceed $1 trillion. As of the second quarter of fiscal year 2027, the backlog of orders for Dell Technologies, Inc. Class C's AI segment surged by $43.7 billion, reaching a total of $95 billion. Drivers of revenue outperformance: Expansion of non-AI business According to S&P Global data, the market expectation for AI server revenue prior to the release of the fiscal year 2027 second quarter report was approximately $16 billion, while the actual AI server revenue reported was $16.401 billion, exceeding expectations by $401 million. In contrast, Dell Technologies, Inc. Class C's total quarterly revenue reached $46.97 billion, surpassing market expectations of $45.1 billion, with an overall outperformance of $1.87 billion. This means that the $401 million excess in AI servers constituted only about 21.4% of the overall revenue outperformance, indicating that Dell Technologies, Inc. Class C's growth momentum is expanding into the non-AI server domain. Data comparisons show: Traditional server sales increased by 23% quarter-on-quarter; storage business sales increased by 12%; AI server revenue slightly increased by 2%. The growth in the non-AI segment of ISG primarily benefited from three supporting factors: Device replacement cycle: Approximately 1.2 million existing devices are in need of upgrades. Preference for hybrid cloud deployment: Enterprise clients continue to favor hybrid cloud architectures in AI infrastructure development. Increased share of high-margin IP portfolio: The share of Dell Technologies, Inc. Class C's proprietary intellectual property (IP) in the storage business has increased, effectively supporting gross margins and overall profitability in ISG. It is noteworthy that management mentioned during the first quarter of fiscal year 2027 that "the profitability of AI servers is maintained at a mid-single-digit operating profit margin target," but this metric was not updated in the second quarter. However, given the significant year-on-year and quarter-on-quarter growth in ISG's operating profit margin, the market infers that AI server profit margins currently remain at the expected mid-single-digit level. Summary Given the $25 billion upward revision to the sales guidance for fiscal year 2027 and the AI backlog increasing to $95 billion, both the fundamentals and technical aspects (breaking through $500) of Dell Technologies, Inc. Class C exhibit strong bullish signals, justifying an upgrade of the investment rating to "buy." However, the macro environment still presents short-term risks. The upcoming CPI report is expected to indicate a month-on-month rise in inflation (as per market consensus of 0.4%), along with the political pressures from GEO Group Inc. on long-term treasury yields, which may overall suppress risk assets. Despite being pressured by the hawkish employment report, Dell Technologies, Inc. Class C's stock price has still demonstrated strong resilience, indicating that the selling pressure on the stock is becoming more tempered.