Dell’s AI server story is just starting. Why Deutsche Bank thinks the stock is a buy.

Dell Technologies (NYSE:DELL) shares have gained more than 60% year-to-date and 80% over the past 12 months, as the company has benefited from the artificial intelligence spending boom tied to servers.

Deutsche Bank thinks there is more room to run.

“We expect top-line growth to accelerate into the double-digits over the next several quarters, as DELL benefits from a confluence of tailwinds across key segments, where it is a share leader (servers, storage and commercial PCs),” Deutsche Bank analyst Matt Niknam wrote in a note.

Niknam, who has a Buy rating and $144 price target on Dell, added that the company’s “ongoing momentum” in AI servers — with the enterprise segment picking up — as well as a recovery in the traditional server market, should help the company over the medium and long term.

“We believe DELL is well positioned to capitalize on the next legs of AI growth/proliferation across enterprises, given its product scale, breadth of services/solutions and go to market footprint,” Niknam added.

PCs

While Dell has obviously benefited from the rise in AI-related server spending, the PC market has had fits and starts. However, Niknam believes a PC refresh cycle could help the company’s Client Solutions Group, especially given that it tends to skew more towards the commercial end of the market.

“All in, our forecasts imply low/mid-teens growth (10-15%) over the next three quarters, with consolidated growth of 8%/6% in FY26E/FY27E (nicely ahead of DELL’s multi-year outlook for 3-4%),” Niknam explained.

Capital return

Dell shareholders have also benefited from a strong capital return program in recent memory, and Niknam sees that continuing for the foreseeable future.

He is expecting earnings per share to grow at a compound annual rate of 14% between fiscal 2025 and fiscal 2028, with net income growing 12% due in part to share buybacks. That’s well above the company’s own 8% long-term target for earnings growth.

And with approximately 80% of free cash flow returned to shareholders in the form of dividends and buybacks, it provides a “clean and simple capital allocation framework,” Niknam posited. He expects adjusted free cash flow to reach $4.8B this year and grow to $7.4B in fiscal 2028.

Dell currently pays $1.78 in annual dividends, but Niknam is expecting that to grow between 10% and 12% over the next several years.