Dell shocks Wall Street with booming AI server sales. Where analysts see it headed next
Dell Technologies delivered record results for its fiscal first quarter on Thursday, largely due to unexpectedly strong traction in its artificial intelligence-linked server business. The blockbuster beat led several Wall Street analysts to become more bullish on the AI infrastructure name. The server maker reported revenue of $43.84 billion for the period ended May 1, above the $35.43 billion expected by analysts polled by LSEG. Its top-line grew nearly 88% on a year-over-year basis, marking the company’s biggest quarterly revenue increase since its return to the public market in late 2018. Dell, headquartered in the Texas Hill Country north of Austin, also posted adjusted earnings of $4.86 per share, topping the Street’s consensus estimate of $2.94. In response, Dell soared as much as 35% at one point Friday and was recently higher by about 29%, putting the stock on track for its best day ever. DELL 1D mountain Shares of Dell skyrocketed on Friday. Dell said Thursday that its server unit had gotten a massive boost from widening AI adoption, challenging analysts’ assessment that demand for the business was already reflected in the stock price. AI server revenue soared 757% from the same period a year ago, totaling $16.1 billion, eclipsing the proceeds from Dell’s PC unit sales. Executives at Dell also said that AI-optimized server revenue could reach $60 billion for the full year through January 2027, up from its earlier forecast of $50 billion. “DELL is seeing unprecedented demand strength across all segments, and at higher margin rates, despite broad component cost inflation … [E]merging AI use cases are driving [Infrastructure Solutions Group] demand beyond [graphics processing units], lifting traditional servers and storage as AI agents require broader compute and data storage,” Morgan Stanley analyst Erik Woodring told clients Friday. “We got this one wrong, and our model/PT are under review.” Dell has surged 225% since the beginning of this year, gaining steam in the spring as investors warmed to the company’s push to capitalize on growing AI infrastructure demand. Shares also got a boost after Dell unveiled on Wednesday a roughly $9.7 billion deal to provide a suite of software to the U.S. military. Here’s what analysts are saying about Dell. Bank of America: buy, $500 Analyst Wamsi Mohan’s new price target, up from $280, is 58% above Thursday’s closing price. “We expect further growth in AI servers, [intelligent security systems] for agentic enterprise and [cloud solution provider] workloads, and increased storage attach with the least confidence in PC growth next year … Mgmt. noted demand strength across both AI and traditional compute and pipelines building above historical norms. Reiterate Buy on strong execution, early innings of enterprise AI adoption and higher attach of Dell IP in Storage.” JPMorgan: overweight, $500 Samik Chatterjee’s revised target, up from $280, is 58% above where Dell closed Thursday. “Despite lingering concerns around demand pull-forward, we believe the robust pipeline/backlog across the board increases confidence into limited likelihood of pull-backs this year, and the installed base of Dell equipment ready for upgrades across Traditional Servers and PCs leaves further room for continued momentum. Separate from demand, Dell’s execution on pricing to offset higher memory costs continues to surpass that of other IT Hardware peers, with the updated outlook now embedding y/y gross margin improvement for the non-AI business above prior expectations … We do not assume that Dell’s updated outlook for ~50% y/y revenue growth is sustainable; however, the upgrades and refreshes of devices and infrastructure, along with additional capacity requirements directly or indirectly tied to AI, are driving visibility into a higher sustainable run-rate of growth over the medium term relative to the last issued guide for mid-teens growth over a longer time horizon, warranting a material raise to the valuation multiple in addition to upward revisions in earnings forecasts.” Citigroup: buy, $475 Analyst Asiya Merchant raised her price target to $475 from $290, implying 50% upside from Thursday’s close. “AI momentum accelerated meaningfully with $16.1B of AI server revenue, $24.4B of AI orders, and exiting the quarter with a record $51.3B AI backlog. The AI opportunity remains durable and broad based, with customer count surpassing 5,000 (up over 50% in the last six months), and pipeline over the next five quarters remaining multiples of backlog across neoclouds, sovereigns, and enterprise customers.” Barclays: overweight, $550 Barclays analyst Tim Long sees 73% upside for Dell from Thursday’s close. He raised his price target from $168. “Despite tight supply chain, DELL outperformed across all business lines…We are more positive on DELL given the strength in AI server orders, stability of AI op margins, expanding opportunities in enterprise server and storage, and DELL’s consistent disciplined [operating expenditures] management.” Bernstein: outperform, $500 Analyst Mark Newman’s target, up from $280, implies 58% upside from the Thursday close. “AI servers are moving beyond neoclouds, with enterprise becoming a growth engine. On AI servers, Dell posted $16.1bn of Q1 revenue, booked $24.4bn of new orders, and exited the quarter with a record $51.3bn backlog, reinforcing that demand remains exceptionally strong and still ahead of supply. More importantly, we think the customer mix is still broadening: neoclouds remain the largest contributor today, but the pipeline is expanding across sovereign and enterprise customers as well, with enterprise emerging as the fastest-growing cohort. In other words, while traditional servers are currently more enterprise-led and should expand outward … We continue to see substantial runway ahead in both traditional and AI servers as the customer base broadens and new AI workloads expand the opportunity set.”
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