Dell's AI Server Boom Shocked Goldman—And The Stock Could Rocket From Here

Shares of Dell Technologies Inc. (NASDAQ:DELL) soared in premarket trading on Wednesday, up about 6%, after the company posted third-quarter earnings that beat expectations and raised its full-year forecast on the back of surging demand for AI servers and improved profitability in its infrastructure division.

Dell’s strong results prompted Goldman Sachs to raise its 12-month price target from $175 to $185, implying a 47% surge from Tuesday’s close.

Dell Beats Estimates And Hikes Forecasts On Explosive AI Server Growth

Dell’s third-quarter earnings for fiscal 2026 delivered a beat-and-raise, driven by one clear catalyst: explosive demand for AI servers, particularly from second-tier cloud service providers and high-margin enterprise customers.

AI server orders soared to $12.3 billion, more than doubling from the $5.6 billion recorded in the previous quarter.

The headline figure was an earnings per share of $2.59, ahead of consensus estimates at $2.47. Revenue came in at $27 billion, roughly in line with expectations.

Dell also saw a clear jump in profitability. Dell's Infrastructure Solutions Group (ISG) EBIT margins improved to 12.4%, up from 8.8%.

Goldman Sachs analyst Michael Ng attributed the gains to "improved mix of higher margin customers," reduced one-time costs related to earlier rack deployments, and a shift toward more engineering-intensive GB300 rack designs.

For the full year, Dell upgraded its AI server shipment outlook to $25 billion, from a previous estimate of $20 billion. The ISG revenue outlook was also lifted to mid-to-high 30% year-over-year growth, up from mid-to-high 20%.

Consumer PCs Still A Drag, But Commercial Holds Up

While ISG delivered a strong beat, the Client Solutions Group (CSG) lagged. "CSG revenue and margins missed as consumer revenue weakness (-7% YoY) weighed on accelerating commercial revenue growth (+5% yoy)," Ng said.

Despite the weakness, Dell reaffirmed its full-year CSG margin framework of 5%-7% and maintained expectations for a flat PC market in 2026, helped by "continued refresh of aging devices and Windows-11 driven upgrades."

CSG revenue for the quarter was $12.5 billion, slightly below expectations. Margins came in at 6%, missing Goldman's estimate of 7.0%. Ng noted the drag came from "competitive pricing in consumer and education markets."

Storage and Traditional Servers Quietly Outperform

Dell also saw strength outside of AI, particularly in traditional servers and its proprietary storage solutions. "Traditional server demand grew double-digits year-over-year driven by continued data center modernization," Ng said.

Storage revenue of $4.0 billion exceeded expectations, and profitability improved sequentially due to a favorable product mix. Ng highlighted "double-digit demand growth across PowerStore, PowerMax, ObjectScale, and PowerFlex offerings."

Outlook Raised Across the Board

Looking ahead, Dell now expects fourth-quarter revenue of $31 billion to $32 billion, well above consensus estimates.

For the full fiscal year 2026, it raised revenue guidance to $111.2 billion to $112.2 billion and lifted its non-GAAP EPS range to $9.82–$10.02, from $9.30–$9.80.

Goldman Sachs expects Dell's AI-driven momentum to continue in 2026, supported by a "continued traditional server refresh" and a growing mix of Dell-IP storage offerings — all contributing to sustained margin expansion.

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