Dell Technologies DELL shares have declined 9.9% since it reported third-quarter fiscal 2024 results on Nov. 26. Although DELL’s earnings and revenues increased on a year-over-year basis, muted guidance due to continued weakness in demand for consumer PCs and challenging macroeconomic environment led to the decline.
However, does the dip post fiscal third-quarter earnings offer a buying opportunity for investors? Let’s dig deep to find out.
DELL shares have returned 84.1% in the trailing 12 months, outperforming the Zacks Computer – Micro Computers industry’s appreciation of 26.2% and the broader Zacks Computer & Technology sector’s return of 35.7%.
Strong demand for AI servers, driven by ongoing digital transformation and heightened interest in generative AI (GenAI) applications, has been a key catalyst.
The Dell AI Factory, which combines Dell Technologies’ solutions and services optimized for AI workloads and supports an open ecosystem of partners comprising NVIDIA NVDA, Meta Platforms META, Microsoft MSFT and Hugging Face, has been a game changer.
YTD Performance
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Dell Stock Rides on Strong Portfolio, Partner Base
DELL’s leading-edge air and liquid-cooled AI servers, networking and storage tuned and optimized for maximum performance at the node and rack level are driving top-line growth.
Dell Technologies, supported by NVIDIA, AMD and Intel, offers 10 AI-optimized servers, namely XE9712, XE9685L, XE7745, XE7740, XE9680L, XE9680, XE9640, XE8640, R750XA, R760XA. AI-optimized server pipeline grew 50% sequentially in the fiscal third quarter, with growth across all customer types.
In third-quarter fiscal 2025, orders were $3.6 billion, primarily driven by Tier-2 cloud service providers (CSPs). Strong demand for the XE9680 product has been a key catalyst. Dell shipped $2.9 billion of AI servers in the fiscal third quarter and the AI server backlog was $4.5 billion exiting the reported quarter.
AI server pipeline is expanding across Tier-2 CSPs and enterprise customers. Dell Technologies expects strong top-line growth for the second half of fiscal 2025, driven by robust AI demand.
DELL’s expanding partner base, which includes the likes of AMD, NVDA, META, MSFT and Intel, is helping it gain customers.
DELL is also benefiting from improving demand for traditional servers (up year over year for the fourth consecutive quarter), driven by higher volume and average selling prices with more enterprise-oriented configurations.
DELL Offers Positive View for Fiscal 2026
Dell Technologies believes that the AI hardware and services market will be worth $174 billion by 2027, witnessing a CAGR of more than 22% between 2023 and 2027. The company is strengthening engineering capabilities, including data center networking and design, to support its AI-related initiatives.
DELL expects the upcoming PC refreshment cycle with new AI-powered PCs to boost revenues in fiscal 2026. This is expected to drive CSG’s top-line growth.
ISG’s performance is expected to be driven by strong demand for AI servers, followed by traditional servers and then storage. It saw double-digit demand for PowerStore and PowerFlex in the fiscal third quarter. DELL’s continuing focus on the mid-range market and a richer portfolio with enhancements is expected to drive top-line and margin expansion over the long haul.
Earnings Estimate Revisions Show Mix Trend for DELL
The Zacks Consensus Estimate for DELL’s fiscal 2025 earnings is pegged at $7.82 per share, down 3 cents over the past 30 days and indicating 9.68% year-over-year growth.
The consensus mark for DELL’s fiscal 2026 earnings is pegged at $9.61 per share up couple of cents over the past 30 days, indicating year-over-year growth of 22.82%.
DELL’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.44%.
Dell Technologies Inc. Price and Consensus
Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
DELL Shares Trading Cheap
Dell Technologies shares are cheap, as suggested by a Value Score of A.
The DELL stock is trading at a significant discount with a forward 12-month P/E of 13.69X compared with the sector’s 26.53X.
DELL’s P/E Ratio (F12M)
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DELL shares are also trading above the 50-day and 200-day moving averages, indicating a bullish trend.
DELL Shares Trade Above 50-Day & 200-Day SMA
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What Should Investors Do With DELL Shares?
DELL’s robust portfolio and expanding partner base are key drivers that make the stock attractive for long-term investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
Continuing weakness in the consumer segment of the PC market is a concern for DELL’s investors. Cautious spending by enterprises and large customers on PCs and storage IT is hurting near-term prospects.
DELL currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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