Dell Technologies on Thursday delivered record results for its fiscal first quarter. This is mainly due to unexpectedly strong traction in the server business related to artificial intelligence. The blockbuster hit has 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 year ended May 1, beating the $35.43 billion expected by analysts surveyed by LSEG. Sales rose nearly 88% year-over-year, marking the company’s largest quarterly sales increase since returning to the public markets in late 2018. Dell, which is headquartered in the Texas Hill Country north of Austin, also posted adjusted earnings of $4.86 per share, beating TheStreet’s consensus estimate of $2.94. In response, Dell soared as much as 35% on Friday and is up about 29% in recent days, putting the stock on track for its best day ever. DELL 1D Mountain Dell’s stock price soared on Friday. Dell on Thursday said its server division has seen strong growth due to expanded AI adoption, challenging analysts’ assessment that business demand is already reflected in the stock price. AI server revenue increased 757% year-over-year to a total of $16.1 billion, outpacing Dell’s PC sales. Dell executives also said revenue from AI-optimized servers could reach $60 billion for the full year through January 2027, up from previous expectations of $50 billion. Morgan Stanley analyst Eric Woodring said Friday: “Despite significant component cost increases, DELL is seeing unprecedented demand strength across all segments and is seeing higher margins… (E) as AI use cases converge. “We are seeing an increase in (infrastructure solutions group) demand beyond (graphics processing units) and traditional servers and storage as AI agents require more extensive computing and data storage,” he told customers. “This was a mistake. Our model/PT is under consideration.” Dell has soared 225% since the beginning of the year, gaining momentum in the spring as investors took heat for the company’s efforts to capitalize on growing demand for AI infrastructure. Dell’s announcement Wednesday of a roughly $9.7 billion contract to provide a suite of software to the U.S. military also boosted the stock. Analysts say this about Dell: Bank of America: Buy, $500 Analyst Wamsi Mohan’s new price target is up from $280 and is 58% above Thursday’s closing price. “We expect further growth in (intelligent security systems) for AI servers, agent-based enterprise and (cloud solution provider) workloads, and an increase in least-trusted storage connectivity to PC growth next year…Managers noted that demand strength in both AI and traditional compute and pipelines exceeds historical norms, with strong execution, early stages of enterprise AI adoption, and higher connectivity repeat buys for Dell IP in storage.” JPMorgan: Overweight, $500 Samik Chatterjee’s revised price target has been raised from $280, 58% above where Dell ended Thursday. “Despite persistent demand front-loading concerns, our overall strong pipeline/backlog gives us increased confidence that the potential for a demand pullback this year is limited, and we believe Dell’s installed base of equipment capable of supporting traditional server and PC upgrades has further room for continued momentum.Apart from demand, Dell’s execution on pricing to offset rising memory costs will increase our confidence in other IT Continuing to outperform its hardware peers, the latest outlook now incorporates Dell’s year-over-year gross margin improvement, with Dell’s non-AI business exceeding prior expectations… However, we do not assume that Dell’s latest guidance of up to 50% year-over-year revenue growth is sustainable due to device and infrastructure upgrades and refreshes, as well as additional capacity requirements directly or indirectly tied to AI. We predict a higher sustainable growth rate over the medium term, compared to guidance for mid-range growth, warranting an upward revision to earnings as well as a significant increase in valuation multiples.”Citigroup: Buy, $475 Analyst Ashiya Merchant raised her price target to $475 from $290, implying a 50% upside from Thursday’s closing price. “AI momentum accelerated significantly, with AI server revenue of $16.1 billion, AI orders of $24.4 billion, and we ended the quarter with an all-time high AI backlog of $51.3 billion. Customer count is over 5,000 (+50% increase in the past six months) and the pipeline for the next five quarters remains a multiple of backlog across neocloud, sovereign and enterprise customers.” Barclays: Overweight, $550. Barclays analyst Tim Long expects Dell to rise 73% from Thursday’s closing price. He raised his price target from $168. “Despite supply chain constraints, DELL outperformed across all business lines. We are more positive on DELL given its strong AI server orders, stable AI operating margins, growing opportunities in enterprise servers and storage, and DELL’s consistent and disciplined (operating spend) management.” Bernstein: Outperform, $500 Analyst Mark Newman’s target for the stock is up from $280, suggesting a 58% upside from Thursday’s closing price. “AI servers are moving beyond neo-cloud and becoming the enterprise growth engine. In AI servers, Dell posted $16.1 billion in revenue in the first quarter, $24.4 billion in new orders, and a record 513 We ended the quarter with a $1 billion backlog, which confirms that demand remains very strong and still outpaces supply. More importantly, we believe the customer mix is still growing. Neocloud is still the largest contributor, but the pipeline is growing across the board. In other words, traditional servers are now more enterprise-driven and need to expand externally, while traditional servers and AI grow. We expect a significant jump in both servers.
