$DELL: Undervalued AI Infrastructure Play
$DELL has spent three years digesting and now looks ready for its next leg higher, backed by an exceptional and hidden fundamental outlook. The market is figuring out the earnings power Dell has over the next few years. The company is transforming from a traditional hardware vendor into the backbone of artificial intelligence infrastructure. Here is my financial model for fiscal year 2027 and fiscal year 2028.
My fiscal year 2027 estimates project $140 billion in revenue and $15.4 in earnings per share. Management guided for $12.90 in earnings per share. Leadership is sandbagging this target to manage supply chain expectations. My model assumes a strict 4% growth in operating expenses, in line with management's low single digit growth guide. The record $43 billion AI server backlog easily covers these fixed costs. The company will also execute its expanded $10 billion share repurchase program. We have a starting share count of 684.2 million. Aggressive buybacks will rapidly shrink this base by ~10% and boost earnings per share.
The setup becomes even more compelling in fiscal year 2028. I project $159 billion in revenue and $22.0 in earnings per share. This assumes a 12% top line growth rate and I carry forward the 4% operating expense growth. Internal automation initiatives make this expense control highly achievable. The operating leverage at this scale is immense.
Dell differentiates itself through the AI Factory concept. The company provides a complete infrastructure solution. Customers need high speed storage and advanced networking to run massive AI models. Dell pairs lower margin AI servers with high margin proprietary storage and service contracts. This pull-through effect drives massive cash flow.
The stock offers a rare mix of value and rapid growth. Current market multiples price the business against conservative management guidance. The underlying operating leverage tells a completely different story. Dell dominates the enterprise hardware space. The company generates the cash required to aggressively buy back stock while funding expansion. The math points to significant upside over the next two years.