Nucor earnings beat by $0.08, revenue fell short of estimates
On Friday, Barclays (LON:BARC) analyst Tim Long updated his outlook on Dell Technologies Inc. (NYSE:DELL), increasing the price target to $123.00 from the previous $116.00. Despite this change, the firm decided to maintain an Equalweight rating on the company’s shares. With a current market capitalization of $77.66 billion and trading at a P/E ratio of 17.37, InvestingPro analysis suggests the stock is currently fairly valued, though technical indicators point to overbought conditions.
Long noted that Dell continues to show strong performance in the AI server market. However, the conversion of orders into revenues has been inconsistent. The analyst attributed this to the transition to Blackwell (BW) and delays in rack scale deployments. According to Long, the company has not yet seen a significant rise in gross margins or an increase in storage or services accompanying the AI business. InvestingPro data confirms this challenge, showing current gross profit margins at 22.4%, which remains a concern for investors seeking deeper insights into Dell’s financial health.
The Barclays analyst expressed concerns about the potential impact of Blackwell rack scale systems on Dell’s gross margin (GM) percentage. He suggested that these systems might exert additional pressure on the company’s profitability.
Looking ahead, Long anticipates that the AI server market will become more competitive. He pointed out the possibility that some of Dell’s larger customers might shift towards Original Design Manufacturer (ODM) or Electronics Manufacturing Services (EMS) solutions over time. This potential shift poses a competitive risk for Dell.
In addition to the AI server market dynamics, Long highlighted that traditional servers and storage are expected to be weaker in the next quarter. He also mentioned a weak PC market, which adds to the uncertainty for Dell’s financial performance in the second half of the fiscal year.
In other recent news, Dell Technologies has reported its first-quarter earnings for 2025, revealing a strong financial performance driven by its AI server business. Although Dell’s earnings per share (EPS) of $1.55 fell short of the forecasted $1.69, the company exceeded revenue expectations with $23.38 billion against a $23.14 billion forecast. This growth was largely attributed to a significant increase in AI server orders and shipments. Dell also raised its full-year EPS guidance to $9.40, reflecting a 15% increase, and expects full-year revenue between $101 billion and $105 billion.
Additionally, Morgan Stanley (NYSE:MS) has raised its price target for Dell to $135 while maintaining an Overweight rating, citing strength in AI server sales as a balancing factor for minor concerns in the enterprise sector. The firm anticipates that demand for AI servers could surpass guidance, contributing to potential upward revisions in EPS. The company’s recent earnings call highlighted Dell’s strong position in the AI market, with over $12 billion in AI server orders for the quarter, showcasing robust market demand.
Dell’s strategic partnerships with companies like NVIDIA (NASDAQ:NVDA) and Google (NASDAQ:GOOGL) are further supporting its growth in the AI sector. The company also returned $2.4 billion to shareholders through buybacks and dividends, emphasizing its commitment to shareholder returns. These developments underscore Dell’s focus on leveraging its AI capabilities to drive future growth and enhance its market position.
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