Dell Technologies (DELL, Financials) reported third-quarter earnings that were mostly in line with expectations, but guidance for the next quarter came in below analyst estimates, partly due to delays in Nvidia's (NVDA, Financials) Blackwell GPUs impacting AI-related revenue.
DELL stock is down 11.9%, changing hands for $124.83 in Wednesday's market open.
Dell projected below the analyst expectation of $2.65 adjusted profits for the fourth quarter between $2.40 to $2.60 per share. Though missing the $25.59 billion estimate, revenue for the quarter is projected to be between $24 billion and $25 billion.
Asiya Merchant, a Citi analyst, underlined a good view of Dell's future despite the less direction. Merchant observed that while the company's AI revenue dropped 6% quarter-over-quarter, the order book climbed by 11% and the pipeline expanded by 50%, presently projected at over $23 billion. Merchant kept his Buy recommendation but dropped the price target from $160 to $156.
Driven by an aging installed base in PCs and conventional servers requiring updates, Dell said it anticipated several growth drivers until fiscal 2026 including increasing artificial intelligence demand. Along with indications of PC sales revival, the mainstream server and storage industries are also healing.
Citing developing pains and slower-than-expected upgrades in PCs and storage, Mizuho Securities analyst Vijay Rakesh reaffirmed a Buy recommendation on Dell but dropped the price objective to $150. With AI sales predicted to rise in 2025 and 2026, Rakesh also said that Dell is getting orders for AI servers among the uncertainty experienced by rivals.
Maintaining a Hold rating with a price objective of $128, TD Cowen analyst Krish Sankar also expressed a cautious approach Sankar pointed out that despite delays from Nvidia's Blackwell GPUs affecting certain AI-related business, Dell's AI server capability is still strong.
While Dell is having difficulties in the PC and storage sectors, its prospects for artificial intelligence servers and larger market prospects looking beyond fiscal 2026 show promise.
