On Wednesday, Goldman Sachs maintained a Buy rating on Dell Technologies Inc. (NYSE:DELL) stock and increased its price target to $165 from $155. The firm's analyst cited the company's third-quarter fiscal year 2025 results as a positive indicator, despite a forecast for the fourth quarter that fell short of market expectations.
Dell's anticipated earnings per share (EPS) for the fourth quarter of fiscal 2025 are projected to be between $2.40 and $2.60, compared to the consensus estimate of $2.65. Revenue expectations are set at $24 to $25 billion, which also misses the consensus of $25.6 billion. The company's Infrastructure Solutions Group (ISG) is expected to see year-over-year growth in the mid-twenties percentage, which is below the consensus of a 29% increase. The Client Solutions Group (CSG) is forecasted to grow at a low single-digit percentage year-over-year, trailing the expected 7%.
The analyst noted that revenue from AI servers is predicted to decline quarter-over-quarter in the next quarter. This is attributed to an increased mix of Blackwell servers and a lack of component availability. Additionally, the PC refresh cycle is weaker than anticipated. Despite these factors, the analyst remains optimistic about the company's prospects.
The outlook for Dell's stock was expected to be weaker due to high expectations ahead of the earnings call, particularly regarding share gains related to Super Micro Computer, Inc. (NASDAQ:SMCI). These gains could potentially be reflected in orders in the following quarter. The firm reaffirms its Buy rating on Dell shares, highlighting the growing demand for AI servers and the upcoming PC refresh cycle as attractive factors for the company's future.
In other recent news, Dell Technologies Inc. reported a 10% increase in total revenue for the third quarter, reaching $24.4 billion, largely driven by the Infrastructure Solutions Group (ISG). Despite a slight miss in Q3 earnings, the company's focus on AI infrastructure and server solutions resulted in a record $3.6 billion in AI server orders. Bernstein SocGen Group maintained its Outperform rating on Dell with a price target of $140.00, following the company's Q3 earnings report.
The firm's analysis indicated that Dell's revenue for the quarter was slightly below forecast, and the guidance for Q4 revenue was nearly $1 billion less than anticipated. However, Dell's AI server order pipeline has shown improvement, now estimated to be between $15 billion and $20 billion. Despite concerns over the health of the Tier 2 cloud service provider market, the firm's rating and price target for Dell remain unchanged.
In the wake of these recent developments, Dell demonstrated robust growth in its ISG, with revenue surging due to a concentrated effort on AI infrastructure and server solutions. The company's earnings per share also increased to $2.15, marking a 14% year-over-year increase. Despite a slight decrease in the Client Solutions Group (CSG) revenue, Dell remains optimistic about fiscal year 2026, expecting growth in PC and server refresh cycles and a continued rise in demand for AI servers.
InvestingPro Insights
Dell Technologies Inc. (NYSE:DELL) continues to show strong performance despite some near-term challenges. According to InvestingPro data, the company's market capitalization stands at $99.5 billion, reflecting its significant presence in the Technology Hardware, Storage & Peripherals industry.
Dell's financial health appears robust, with a revenue of $91.84 billion over the last twelve months as of Q2 2025. The company's profitability is evident from its adjusted operating income of $5.895 billion and an EBITDA of $8.726 billion for the same period. These figures align with Goldman Sachs' optimistic outlook on the company's future prospects.
InvestingPro Tips highlight Dell's aggressive share buyback program and high shareholder yield, which could be seen as positive signals for investors. The company has also raised its dividend for three consecutive years, with a current dividend yield of 1.26%. This commitment to shareholder returns supports Goldman Sachs' Buy rating.
Moreover, Dell is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.23. This suggests that the stock may be undervalued compared to its growth potential, particularly considering the anticipated demand for AI servers and the upcoming PC refresh cycle mentioned in the article.
It's worth noting that InvestingPro offers 13 additional tips for Dell, providing investors with a comprehensive analysis of the company's position and potential. These insights can be valuable for those looking to make informed investment decisions in the dynamic tech hardware sector.
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