Dell Stock Jumps 4% on $9.7B Pentagon Software Deal

TLDR

• Dell stock jumped more than 4% in pre-market trading Thursday after securing a $9.7 billion Pentagon contract
• Dell Federal Systems will supply Microsoft 365, cloud subscriptions, and on-premises licensing to the U.S. military over five years
• The deal is expected to save the Pentagon around $422 million per year by consolidating IT spending
• The contract win comes the same day as Dell’s Q1 FY27 earnings, due after the close on May 28
• Wall Street expects Dell Q1 EPS of $2.96, up 91% year-over-year, with revenue forecast at $35.74 billion

Dell Technologies (DELL) stock jumped more than 4% in pre-market trading Thursday after the Department of Defense announced Dell Federal Systems had won a five-year, $9.7 billion software contract to serve the U.S. military.

Dell Technologies Inc., DELL

The contract, formally called the Microsoft Department of War Enterprise Software Agreement II Core Enterprise Technology Agreement, covers Microsoft 365, advanced cloud subscriptions, and on-premises licensing across the Pentagon, the intelligence community, and the U.S. Coast Guard.

Defense Department CIO Kirsten Davies said the deal “will streamline and consolidate critical Microsoft software and services” into a single purchasing vehicle. She added it is expected to save the Pentagon roughly $422 million per year.

Dell Federal Systems is the company’s government-focused unit. Dell has a long-standing partnership with Microsoft and is one of the largest buyers of Windows PC licenses globally.

Political Backdrop

Michael Dell also joined Trump’s Council of Advisors on Science and Technology and congratulated Trump on his 2024 election win, saying he looked forward to “continued progress and opportunity under his leadership.”

The Pentagon confirmed the contract was awarded through a competitive process, and officials did not reference any political considerations in their briefing.

The contract also comes as the Pentagon faces heavy pressure from Capitol Hill to deliver a clean audit, particularly as it pushes for a $1.5 trillion budget for fiscal year 2027. Consolidating IT licensing under one agreement is part of that efficiency push.

Earnings On Deck

The timing matters. Dell reports Q1 FY27 earnings after the market close on May 28 — the same day the contract was announced.

Wall Street is forecasting EPS of $2.96 for the quarter, a 91% jump year-over-year. Revenue is expected to come in at $35.74 billion, up roughly 53% from the same period last year.

DELL stock has already rallied more than 140% year-to-date, driven largely by demand for AI infrastructure and server hardware.

Heading into earnings, Wall Street holds a Moderate Buy consensus on the stock, based on 10 Buy ratings, three Holds, and one Sell. The average price target sits at $264.83, which implies about 13.3% downside from current levels.

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