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On Friday, Goldman Sachs reiterated its Buy rating on Dell Technologies Inc. (NYSE:DELL), with a steady price target of $130.00. The firm’s analyst cited the strength in AI server orders and share buybacks as key factors that counterbalance a miss in earnings per share (EPS) and a reduced earnings before interest and taxes (EBIT) outlook for fiscal year 2026. Currently trading at $113.63, Dell maintains a strong "Buy" consensus among analysts, with targets ranging from $91 to $150. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation.
Dell’s first-quarter fiscal 2026 EPS and EBIT fell short of expectations due to lower-than-anticipated profits in its Infrastructure Solutions Group (ISG). The company also revised its fiscal 2026 EBIT forecast downward from the previously estimated range of $9.2-$9.6 billion to a new range of $9.1-$9.5 billion. This adjustment was attributed to slower market growth projections for traditional servers, personal computers (PCs), and storage solutions. Despite these challenges, InvestingPro data shows Dell maintains robust revenue of $95.57 billion over the last twelve months, with a revenue growth rate of 8.08%.
Despite the downward revision in EBIT outlook, Dell reported a record $12.1 billion in AI server orders, which was significantly higher than Goldman Sachs’ estimate of $7.2 billion. Approximately $7 billion of these orders are expected to convert to revenue in the second quarter of fiscal 2026. The AI server pipeline has grown quarter-over-quarter and includes a variety of opportunities from sovereign entities, including those in the Middle East, AI cloud services, and enterprise clients.
The ISG margins came in at 9.7%, below the 10.8% Goldman Sachs had anticipated, primarily due to a mix of traditional server customers and geographic distribution that favored larger customers and less exposure to North America. However, the shortfall in margins did not extend to AI server margins.
Contrary to concerns about PC margins following the second-quarter fiscal 2025 results from HP Inc. (NYSE:HPQ), Dell’s Client Solutions Group (CSG) EBIT aligned with expectations, and the outlook was more positive than anticipated. Dell is experiencing deflationary commodity costs, including tariffs on CPUs, DRAM, and displays.
In a display of confidence in its stock, Dell executed a record $1.98 billion in share buybacks, purchasing 22.1 million shares at an average price of $90 per share. Despite the cut in EBIT guidance for fiscal 2026, Dell raised its EPS guidance for the same period by $0.10, now projecting $9.15-$9.65, up from the previous range of $9.05-$9.55, due to the impact of the aggressive buyback strategy.
In other recent news, Dell Technologies Inc. has seen a series of updates from financial analysts following its first-quarter fiscal year 2026 report. The company reported a significant increase in its artificial intelligence (AI) server backlog, reaching $14.4 billion, with $12.1 billion in orders during the quarter. Despite these impressive figures, Dell’s overall outlook remains cautious due to softer traditional enterprise demand. JPMorgan raised its price target for Dell to $125, maintaining an Overweight rating, while Raymond (NSE:RYMD) James increased its target to $150, citing strong AI server revenue guidance.
BofA Securities also raised Dell’s price target to $155, maintaining a Buy rating, and highlighted the potential for over $30 billion in AI server revenues over the next two years. Barclays (LON:BARC) increased its target to $123, maintaining an Equalweight rating, noting challenges in converting AI orders into revenues due to delays in rack scale deployments. Morgan Stanley (NYSE:MS) adjusted its price target to $135, keeping an Overweight rating, and pointed out Dell’s robust performance in gaining market share in traditional enterprise markets. Despite the positive outlooks, analysts remain cautious about the competitive landscape in the AI server market and potential pressures on profitability.
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