Dell Technologies’ (DELL) revenue from artificial intelligence server orders has surged more than 150% during fiscal 2026 to $30B in orders so far this year, and analysts expect momentum to continue in fiscal 2027.
Dell shares had increased 5% by Wednesday morning market action following its third quarter fiscal 2026 financial results.
“FY26 will be another record year, and we’re raising our AI shipment guidance to roughly $25B, up over 150% year over year, and revenue guidance to $111.7B, up 17%,” said Dell Chief Financial Officer David Kennedy.
Morgan Stanley expects AI server revenue to jump 50% in fiscal 2027 to total $37B.
However, despite the robust growth stemming from AI servers, Dell still has to contend with the memory supercycle, which is prompting price spikes and supply issues.
“AI servers are no longer the core of the debate on DELL – the impact of memory price inflation/supply shortages on demand and margins in FY27 (CY26) is,” said Morgan Stanley analysts, led by Erik Woodring, in a Wednesday investor note. “In our view, DELL properly contextualized how unprecedented this memory supercycle is, acknowledging its cost basis is going up for every product/that every product category will be impacted by memory inflation.”
“But it also communicated a message of resilience – mgmt believes that memory supply scarcity, and its ability to better procure supply than others, will allow it to move demand to where supply is, and reprice effectively with little impact to demand or margins,” he added. “In fact, while DELL didn’t officially guide FY27, it pointed to its 7-9% revenue growth and 15%+ EPS growth multi-year model as the starting point Wall Street should use for forecasting FY27, guiding above consensus.”
Morgan Stanley retained its Underweight rating on the stock but nudged up its price target to $113 from $110.
Meanwhile, Citi maintained its Buy rating and $175 price target.
“While memory prices are likely to remain an overhang, we expect Dell to outperform OEM peers based on their execution and maintain our Buy rating,” said Citi analyst Asiya Merchant in a note.
“The company’s AI server revenue mix is primarily neo cloud, while enterprise was on trend and some more sovereign in the quarter. Expect AI server margins to be generally in the msd range, assuming the mix of customers does not deviate materially from the current mix given that a predominant amount of the dollar value originates from neo clouds,” Merchant added.
Competitor Hewlett Packard Enterprise (HPE) was flat, while Cisco Systems (CSCO) had inched down 0.2%.