Dell Rises Over 4% Premarket, Pentagon’s Nearly $10 Billion Contract and Earnings Expectations May Push Shares to $400

TradingKey - On May 28, EST, Dell Technologies ( DELL) saw its pre-market share price rise more than 4% following reports that the U.S. Pentagon awarded Dell Technologies a five-year software contract worth approximately $9.7 billion. This positive news comes just as Dell is set to release its fiscal 2027 first-quarter earnings report, further heightening market focus on the growth prospects of its AI servers, enterprise IT demand, and government business.

For Dell, while this contract focuses more on software license integration and government channel services, its symbolic significance cannot be ignored. On one hand, Dell further consolidates its position in U.S. federal government and defense IT procurement; on the other hand, against the backdrop of rising demand for enterprise AI infrastructure, large government contracts help boost market confidence in the company's long-term order stability and customer stickiness.

Importantly, Dell will announce its fiscal 2027 first-quarter results after the market closes on May 28, EST. The company provided quite positive guidance in the previous fiscal quarter, projecting first-quarter revenue between $34.7 billion and $35.7 billion, representing a year-over-year increase of approximately 51% at the midpoint; non-GAAP diluted earnings per share (EPS) are expected at a midpoint of $2.90, a significant year-over-year increase of about 87%. For the full year, Dell previously estimated fiscal 2027 revenue to reach a midpoint of $140 billion, with AI-optimized server revenue projected at approximately $50 billion.

For investors, three key focus areas in this earnings report are: first, whether AI server orders and backlog can sustain high growth; second, the margin performance of the Infrastructure Solutions Group (ISG) under rapid expansion; and third, whether demand for traditional PCs and commercial clients continues to recover. Dell previously disclosed that AI-optimized server orders exceeded $64 billion in fiscal 2026, with full-year shipments surpassing $25 billion, entering the new fiscal year with a record backlog of $43 billion.

Analysts believe that the $9.7 billion Pentagon contract has provided clear support for sentiment ahead of Dell's earnings report. However, whether the stock price can sustain its upward momentum still depends on the company's updates regarding AI server deliveries, gross margins, cash flow, and full-year guidance. If management continues to signal strong AI demand and robust government and enterprise orders, it could support further gains in Dell's stock price.

Dell Technologies stock price monthly chart, Source: TradingView

Looking at the monthly chart of Dell Technologies, the share price has currently broken through the Fibonacci 1.618 extension resistance level of $297 and the psychological $300 mark. However, it is important to watch whether the closing price this month can hold above $300. If the monthly closing price is below $300, the stock will enter a correction phase in the short term, potentially testing the $264 support level. Conversely, if the monthly closing price stays above $300, the upside potential toward the $400 psychological level or even the Fibonacci 2.618 extension at $441 will be opened.

Trading Recommendations

Buy and hold if this month's closing price is above $300; if it is below $300, wait for a correction to around $264 before considering a purchase.