Dell Stock Soars on Server Demand, But Margin Lags

Dell Technologies has seen its stock return 341% over the past twelve months, outperforming its peers. However, its operating margin ranks only fourth among six companies in its peer group.

Behind the growth is demand for Dell's servers, which has outrun supply. The company's revenue grew 49% over the last twelve months, the fastest in the group, while Cisco Systems' revenue grew 9.2%.

The market is paying for growth instead of margin, with Dell trading at a lower price-to-earnings ratio than both Cisco and Apple. To justify its stock performance, Dell needs to widen its operating margin while sales continue to come in.

Management cites two key levers: scale, with operating expenses guided to around 8% of revenue for fiscal 2027, the lowest in the company's 42-year history; and storage, where Dell is shifting sales from partner products to its own lines, which earn a higher margin.