These Analysts Revise Their Forecasts On Dell Following Q1 Results

Dell Technologies reported mixed Q1 results, with revenue beating estimates at $23.38 billion but adjusted EPS missing at $1.55. Despite the EPS miss, server and networking revenue hit a record $6.3 billion, driven by strong AI server demand, with AI orders reaching $12.1 billion in the quarter and a backlog of $14.4 billion. The company projects Q2 revenue between $28.5 billion and $29.5 billion and adjusted EPS of $2.25, while analysts adjusted price targets, resulting in a 3.4% stock decline to $109.74.

Analysis

Dell Technologies Inc. (DELL) presented a mixed financial picture for its first quarter, with reported revenue of $23.38 billion exceeding the consensus estimate of $23.14 billion, while adjusted earnings per share of $1.55 missed analyst expectations of $1.69. A significant highlight was the record $6.3 billion in revenue from its servers and networking segment, driven by what the company described as 'unprecedented demand' for AI-optimized servers. This demand translated into $12.1 billion in AI-related orders during the quarter, a figure that surpasses the total AI server shipments for the entire previous fiscal year (FY25), contributing to a substantial backlog of $14.4 billion. Dell issued strong forward guidance, projecting second-quarter revenue between $28.5 billion and $29.5 billion with adjusted EPS of $2.25, and fiscal 2026 revenue of $101 billion to $105 billion with full-year adjusted EPS anticipated at $9.40. Despite the robust AI momentum and positive outlook, the Q1 EPS miss appeared to weigh on investor sentiment, as Dell shares declined 3.4% to $109.74 following the announcement. Analyst reactions were varied, with firms like UBS lowering their price target to $145 (maintaining a Buy) and JP Morgan raising its target to $125 (maintaining an Overweight), reflecting an ongoing assessment of the balance between current performance and future AI-driven growth potential.

Key Decisions for Investors

• Investors should carefully evaluate the short-term impact of the first-quarter earnings miss against the significant long-term growth potential indicated by Dell's robust AI server order intake, substantial backlog, and optimistic forward guidance.
• Closely monitor Dell's execution in converting its large AI order backlog into revenue and profitable growth in the upcoming quarters, as this will be critical in validating the company's AI-centric narrative and justifying its growth projections.
• Consider the recent share price decline as a potential opportunity for those with a bullish outlook on AI infrastructure, while remaining cognizant of the execution risks involved in scaling AI operations and the mixed, albeit generally constructive, analyst price target revisions.