Dell (DELL) is set to announce third quarter earnings on Tuesday, and investors will focus on AI server shipments and margin resilience amid significant increases in memory costs.
Wall Street expects the Texas-based firm to post EPS of $2.48, implying a 15.3% increase, while revenue is expected to rise 12% to $27.29 billion for the quarter.
The technology company, during its Q2 earnings call, increased its AI server shipment guidance to $20 billion for FY 2026 as demand for traditional servers and storage is expected to persist in the second half.
The firm expects Q3 revenue between $26.5 billion and $27.5 billion and non-GAAP EPS of $2.45, plus or minus $0.10.
BofA Securities reiterated its Buy rating with a price target of $160, saying that we are in the early stages of AI adoption and tailwinds from personal computers (PCs) refresh and AI PCs.
“Given the nature of pricing competition in the AI server space, we assume Dell will take minimal pricing actions to offset DRAM (dynamic random-access memory) and NAND (not-and-memory) costs,” noted BofA analyst Wamsi Mohan.
However, Morgan Stanley last week double-downgraded DELL to UnderWeight, saying that memory, a key cost component for servers, storage arrays, PCs, smartphones, etc., is in the midst of a pricing supercycle – driven by accelerating demand from hyperscalers. DELL and HPQ are among the most vulnerable US OEMs due to their higher DRAM exposure.
On the contrary, Seeking Alpha’s Quant Ratings, Seeking Alpha analysts and Wall Street are bullish and have rated the stock a Buy.
Seeking Alpha analyst The J Thesis rated the stock as Strong Buy, highlighting that DELL is well-positioned for AI and cloud growth, supported by partnerships with Nvidia and Hive Digital to expand AI infrastructure.
“The company is experiencing substantial demand in the AI-powered space, resulting in high-double-digit revenue growth. Dell’s profitability metrics are improving, and that offsets its moderately leveraged capital structure,” added The J Thesis.
Over the last two years, DELL has beaten EPS estimates 75% of the time and has beaten revenue estimates 63% of the time.
Over the last three months, EPS estimates have seen six upward revisions and 11 downward moves, while revenue estimates have seen 13 upward revisions, compared to three downward revisions.
The stock has gained nearly 9% so far this year, compared to the over 12.2% rise in the broader S&P500 Index.