Dell’s AI Server Boom: Nvidia and SpaceX Tailwinds
Dell Technologies (DELL) is set to report its fiscal second-quarter earnings on Tuesday, September 1, 2026, and analysts expect a sharp year-over-year revenue jump, driven by robust demand for AI-optimized servers. The company’s stock has been a standout performer in 2026, and recent developments at Nvidia (NVDA) and SpaceX could provide additional catalysts that extend Dell’s growth into 2027.
Nvidia’s next-generation Rubin architecture, which began shipping in volume during Q2 2026, has become a key growth driver for Dell’s Infrastructure Solutions Group (ISG). Dell’s AI server backlog, which stood at $4.1 billion as of its last quarterly report in May 2026, is being filled with Rubin-based systems that command premium pricing and higher margins than previous generations.
Nvidia’s Rubin Cycle Fuels Dell’s Server Backlog
The Rubin platform, which Nvidia launched in March 2026, has seen adoption among hyperscale cloud providers and enterprise customers. Dell’s ISG revenue grew 22% year-over-year in the last quarter, with AI server sales contributing nearly half of that segment’s total. Analysts at Morgan Stanley project that Dell’s AI server revenue will reach $15 billion in fiscal year 2027, up from an estimated $10 billion in the current fiscal year.
Dell’s strategic partnership with Nvidia, which includes co-engineered reference architectures and joint go-to-market programs, positions it to capture a disproportionate share of the Rubin upgrade cycle. The company’s ability to offer end-to-end solutions—from servers to storage to networking—has been a key differentiator against competitors like Super Micro Computer and HPE.
SpaceX Starlink Deal Adds Recurring Revenue Stream
In a separate development, Dell announced a multi-year agreement with SpaceX in July 2026 to provide edge computing infrastructure for Starlink’s ground stations. The deal, valued at approximately $2.5 billion, involves Dell supplying ruggedized servers and storage systems that process data locally at Starlink’s distributed network, reducing latency and bandwidth costs.
This partnership is part of Dell’s broader push into edge computing, a market that Gartner projects will grow from $12 billion in 2025 to $35 billion by 2028. The Starlink contract provides Dell with a predictable recurring revenue stream and validates its enterprise-grade edge solutions, which are becoming increasingly important as AI workloads move beyond centralized data centers.
Valuation and Margin Expansion Drive Earnings Upside
Dell’s stock currently trades at 18 times forward earnings, a premium to its five-year average of 14 times, reflecting investor optimism about its AI growth trajectory. The company’s gross margins have improved by 150 basis points year-over-year, reaching 22.5% in the last quarter, thanks to a richer mix of AI servers and higher-margin services.
Operating income for the ISG segment grew 35% year-over-year in the last quarter, and analysts expect that pace to continue as Rubin-based systems ship in higher volumes. Dell’s free cash flow conversion has also improved, with the company generating $3.2 billion in operating cash flow in the first half of fiscal 2026, up from $2.6 billion in the prior year period.
Risks From Supply Chain and Enterprise Spending
Despite the positive outlook, Dell faces risks from continued component shortages, particularly for high-bandwidth memory (HBM) used in AI accelerators. Nvidia has allocated a significant portion of HBM supply to its own direct customers, which could limit Dell’s ability to meet demand for Rubin-based systems.
Enterprise IT spending has shown signs of caution in recent months, with some CIOs delaying non-AI infrastructure upgrades. However, Dell’s management noted on its last earnings call that AI-related deals have a 95% win rate, indicating that demand remains robust even as overall tech spending softens.
What to Watch in Tuesday’s Earnings Report
Investors should focus on Dell’s AI server backlog, which is expected to reach $5.5 billion by the end of the quarter, and any updates on the Starlink partnership’s revenue contribution. The company’s guidance for fiscal Q3 will be particularly important, as it will indicate whether Dell can sustain its growth momentum amid potential supply constraints.
A key metric to watch is Dell’s ISG operating margin, which analysts expect to expand to 18% in the current quarter, up from 16.5% last year. If Dell delivers on these expectations and raises its full-year guidance, the stock could see further upside. Conversely, any commentary about HBM shortages or order cancellations would likely weigh on shares.
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