Dell's AI Server Margins And PC Market Recovery Signal Earnings Growth, Say Analysts

Dell Technologies Inc. DELL shares are trading higher after the company reported better-than-expected second-quarter financial results yesterday.

Dell reported revenue of $25.03 billion, beating the consensus estimate of $24.14 billion, and adjusted earnings of $1.89 per share, beating analyst estimates of $1.71 per share, according to Benzinga Pro.

In the conference call, the company stated that it expects solid top-line growth in the second half of the year.

Dell expects adjusted EPS of $1.90 – $2.10 (vs. consensus of $2.20) for the third quarter and $7.55 – $8.05 (vs. street view of $7.70) for FY25.

Goldman Sachs analyst Michael Ng reiterated a Buy rating with a target price of $155 (vs. $160 prior) and raised its already above-consensus FY25/26/27 EPS by 3% on average.

The analyst notes that DELL’s improving AI server margins should bolster its valuation multiple and mid-term growth prospects. Early signs of growth in traditional servers and storage are also promising.

The analyst projects Dell’s diverse portfolio to benefit from a PC market recovery, growth in ISG driven by its strong position in enterprise servers and storage, and shareholder-friendly capital returns, including 40-60% of free cash flow.

Also Read: SecureWorks Stock Drops as Dell Weighs Strategic Sale Options

J.P.Morgan analyst Samik Chatterjee reiterated the Overweight rating with a price target of $160.

Chatterjee writes that confidence in the AI-driven compute investment cycle, which should benefit Dell’s branded server companies.

While other business segments face mixed macro challenges, they also see stronger growth in the ISG group, setting up Dell for double-digit earnings growth as it overcomes PC and general-purpose server pressures.

The analyst also expects further gains from a higher valuation multiple tied to AI investments and a potential rebound in PCs, including AI-enhanced models.

Investors can gain exposure to the stock via Innovator Deepwater Frontier Tech ETF LOUP and Return Stacked Bonds & Managed Futures ETF Roundhill Generative AI & Technology ETF CHAT.

Price Action: DELL shares are up 3.2% at $114.24 at the last check Friday.

Photo via Shutterstock

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.