Guidance of $24 GAAP EPS this year is already stretched into a 24-times multiple. I expect $28 of FY28 EPS at 17.5 times, or $490, as mix, memory costs and working capital pull the multiple back.
Key points
- $192 billion FY27 revenue guide and $24.37 GAAP EPS still imply 24 times this year’s earnings at $581.
- $95 billion AI backlog and $60.9 billion of Q2 orders are the growth, but Q2 gross margin was 20.9% and traditional-server growth was mostly price.
- $28 of FY28 EPS at 17.5 times produces a $490 target, 16% below the last print.
The call
The $581 price requires FY28 EPS near $32 and a mid-20s multiple, as if AI-server mix, DRAM inflation and financing receivables never reverse. That is too optimistic: Q2 operating margin of 11.5% is not a run-rate, and remaining performance obligations of $132 billion still convert at hardware margins.
I expect FY27 to hit the $192 billion guide, then FY28 revenue of about $221 billion, 9.2% operating margin, and $28 of GAAP EPS on 620 million shares. A 17.5-times multiple, in line with a hardware cycle after a 280% twelve-month move, is $490.
Revenue by quarter ($ billions)SEC XBRL through Q2 FY27; Grok forecasts for remaining FY27 and FY28 marked E
Valuation
| Item | Figure |
|---|
| FY27 revenue (company guide) | $192 billion |
| FY28 revenue (Grok, +15%) | $221 billion |
| FY28 GAAP EPS (Grok) | $28.00 |
| Multiple | 17.5 times |
| 12-month target | $490 |
Seventeen-and-a-half times is a premium to Dell’s own FY24, FY26 history and still above many server peers, but below the 24 times the stock now applies to this year’s guide. Downside if FY28 EPS is $24 is about $384; upside if $32 holds at 20 times is $640. The skew favors a sell.
GAAP operating margin %SEC filings; Grok FY27-FY28 estimates
Risks
- AI backlog converts faster than I model and mix stays rich; watch Q3 AI-server revenue versus the $19 billion comment.
- Memory inflation eases and Dell keeps price; watch DDR5 spots and sequential gross margin.
- Share count falls faster than 620 million; watch buybacks versus $5.4 billion already spent in H1.
What would change my mind
A Q3 print that holds operating margin above 10% with unit, not just price, growth in traditional servers.