A year ago, Dell Technologies (NYSE:DELL) was not a stock that many investors were excited about. Today, it is one of the hottest stocks in the market.

The company has now attracted as much investor interest as some of the largest players in the AI field, including Nvidia and Alphabet. The price of Dell’s shares has increased by almost 260% in the past year.

Dell Has Become a Major AI Player

Most people know Dell as a company that makes computers and laptops. It has been doing that since 1984. While its PC business is still important, Dell has found a new growth engine in artificial intelligence.

The company now sells servers that help businesses build and run AI systems. These servers are in huge demand as companies around the world rush to invest in AI technology.

Dell’s latest results show just how fast this business is growing.

In the quarter that ended in early May, Dell reported revenue of $43.8 billion. That was an 88% increase from the same period last year and much higher than what analysts expected.

The biggest surprise came from Dell’s AI server business. Revenue from AI-optimized servers jumped 757% year over year to $16.1 billion.

That is a massive increase and shows just how strong demand has become.

Dell also received $24.4 billion worth of AI orders during the quarter. Even more impressive, the company finished the quarter with an AI server backlog of $51.3 billion. This means customers have ordered billions of dollars’ worth of products that Dell still needs to deliver.

Demand is coming from several directions.  Cloud computing firms, big corporations, and AI engineers all require heavy infrastructure in order to train and deploy AI models. This means that Dell’s Infrastructure Solutions Group has become one of the most critical units within the firm.

Segment revenue surged 81% year over year, reaching a record-breaking $29 billion.

The figure that perhaps offers investors the most optimism is Dell’s AI backlog. Dell reported its total outstanding order volume for AI servers at $51.3 billion by the end of the quarter.

In other words, customer demand is outpacing Dell’s production capacity.

Investors Loved Dell’s Earnings Report

When Dell released its earnings report, Wall Street responded immediately. The stock jumped 33% in a single day, its biggest one-day gain since returning to the stock market in 2018.

Investors were impressed by both the company’s recent performance and its future outlook.

Dell now expects to generate about $167 billion in revenue during its fiscal year ending in January 2027. That is much higher than its earlier forecast of around $140 billion. The company also expects AI server sales to reach $60 billion this year.

These numbers suggest that demand for AI remains very strong. Profit also came in far above expectations. Dell earned $4.86 per share during the quarter, easily beating Wall Street estimates.

The company is also generating significant cash. Free cash flow rose 40% year over year to $3.1 billion. Strong cash flow gives Dell more flexibility to invest in growth, buy back shares, and reward investors.

Another positive development came from the U.S. government. Dell recently won a $9.7 billion contract to help manage Microsoft software licenses for military and government agencies. This deal gives Dell another source of growth outside of AI.

Meanwhile, the company continues to compete in the PC market. Dell recently introduced a new XPS 13 laptop starting at $699, with a discounted student price of $599. The company hopes this will help it attract students and young professionals looking for affordable laptops.

Is Dell Stock Still Worth Buying?

This is where things get a little more complicated. There is no doubt that Dell’s business is performing very well. Revenue is growing quickly, AI demand remains strong, and the company has a large backlog of orders.

However, the stock has already risen a lot. After gaining more than 260% in just one year, some investors believe the stock may be due for a pullback. It is common for stocks to cool off after such a strong rally as some investors decide to take profits.

Still, many analysts remain positive on Dell. Based on the company’s earnings forecast of $17.90 per share for the year, the stock trades at around 23 times forward earnings. Some investors believe that is reasonable given how fast the business is growing.

Analysts currently have an average price target of about $440, which is slightly above where the stock recently traded. This suggests that Wall Street still sees some upside, even after the huge rally.

My Final Thoughts on This

Dell has become one of the biggest winners of the AI boom.

The company is now a major supplier of the servers that power artificial intelligence. With AI server revenue up 757%, AI orders reaching $24.4 billion, and a backlog of $51.3 billion, Dell is benefiting from one of the strongest trends in technology.

At the same time, investors should remember that the stock has already had a huge run. While Dell’s future looks bright, the share price may not continue rising at the same pace forever.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.