SMCI vs. DELL: Which Server Stock is the Better Buy Now?
Super Micro Computer SMCI and Dell Technologies DELL are key players in the server space, offering organizations server-based technologies and supporting them with high computing power.
Per a report by Grand View Research, the Global Server market is anticipated to witness a CAGR of 9.8% from 2024 to 2030. Rapid adoption of servers across industries like healthcare, retail, BFSI, manufacturing, education and others will drive the server space.
With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let's break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
Super Micro Computer is experiencing strong adoption of its high-performance and energy-efficient servers among AI data centers and hyperscalers. Notably, server and storage system segmental revenues grew 19% year over year in the third quarter of fiscal 2025, crossing the $4.5 billion milestone and now account for 97% of its total revenues.
SMCI's server and storage revenues are being driven by its direct liquid cooling products for data-center applications, which reached a production volume of more than 2000 DLC racks per month. Super Micro Computer's recent launches, like Data Center Building Block Solutions, petascale storage systems for AI workloads, and its integration of NVIDIA Blackwell GPUs in its solutions to achieve high compute power, will keep it at the forefront of the server and storage space.
Irrespective of the massive potential of SMCI's server offerings, the company is facing some near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms.
SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell. In the last reported quarter, SMCI also incurred a one-time inventory write-down on older-generation GPUs and related components, further affecting its margins.
Based on all the above factors, SMCI revised the revenue guidance for fiscal 2025 from $23.5-$25.0 billion to a range of $21.8 billion to $22.6 billion. The Zacks Consensus Estimate for SMCI's 2025 revenues is pegged at $22.12 billion, indicating growth of 48% year over year. The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $2.07 per share, indicating a year-over-year decline of 6.3%.
Image Source: Zacks Investment Research
Dell Technologies is experiencing a massive traction in its AI-optimized servers, which has enabled it to achieve a record servers and networking revenues of $6.3 billion in the first quarter of 2026, which grew 16% year over year. In the first quarter of 2026, DELL announced that it received orders worth $12.1 billion for its AI servers, which has surmounted to become $14.4 billion in AI backlogs.
The adoption of DELL's AI servers is propelled by rapid enterprise adoption by organizations across web technology, financial services, manufacturing, media and entertainment, and education, with DELL witnessing growth in repeat enterprise customers and AI Factory deployments.
Dell has designed its AI server solutions to be custom and modular, adding air and liquid cooling features with 24-hour rack deployment turnaround and end-to-end deployment services. These key differentiators make its server easy to deploy, hence encouraging smoother adoption.
The company has partnered with leading technology providers, including NVIDIA, AMD, Meta, Hugging Face, Cohere, Mistral, and Google. These partnerships have aided DELL in implementing technological enhancements like integrated PowerCool, Project Lightning and on-prem Gemini support, making its AI servers even more promising.
Based on all the above factors, DELL expects its fiscal 2026 revenues to be between $101 billion and $105 billion, with the mid-point of $103 billion, indicating 8% year-over-year growth. The Zacks Consensus Estimate for DELL's fiscal 2026 revenues is pegged at $103.53 billion, indicating growth of 8.33% year over year. The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $9.43 per share, indicating year-over-year growth of 15.85%.
Image Source: Zacks Investment Research
Shares of SMCI and DELL have gained 45.4% and 1.1%, respectively, in the year-to-date period.
Image Source: Zacks Investment Research
SMCI is trading at a forward 12-month Price to Sales ratio of 1.28X, which is higher than its median of 1.25X. DELL is trading at a forward sales multiple of 0.85X, much below its median of 0.87X. The lower valuation of DELL stock compared to SMCI makes it more attractive at present.
Image Source: Zacks Investment Research
DELL is comparatively cheaper and has brighter prospects in the server market as it is strongly driven by its AI servers, which are rapidly adopted by enterprise customers, as reflected in its massive backlog value. In the meantime, SMCI is facing near-term challenges stemming from delayed purchasing decisions from customers and margin contraction from pricing pressure.
Furthermore, DELL sports a Zacks Rank #1 (Strong Buy) at present, making the stock a stronger pick compared with SMCI, which has a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank stocks here.
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