Shares of Dell Technologies (DELL) traded near $305 late Wednesday, retreating from an early high of $327.75, as investors braced for the company's fiscal first-quarter earnings report due Thursday. The stock's pullback reflects growing caution around whether AI server demand can sustain the hardware sector's rally this year, especially after Dell surged 17% on Friday and added 3.4% on Tuesday following positive signals from Lenovo.
Lenovo and HP Set the Stage
Lenovo, the Chinese PC maker, reported fourth-quarter revenue of $21.6 billion, a 27% year-over-year gain, with AI-related revenue jumping 84% to now represent 38% of total sales. Chairman and CEO Yuanqing Yang called it Lenovo's “best year ever,” highlighting “hyper-growth” in its infrastructure business driven by AI. HP also reported after the bell Wednesday, posting a 9% increase in fiscal Q2 revenue to $14.4 billion and non-GAAP EPS of 86 cents. Its Personal Systems unit, the core PC business, saw revenue climb 13%, though HP noted higher commodity costs.
Dell's High Bar and Analyst Expectations
Dell has set ambitious targets. In February, the company guided fiscal Q1 revenue of $34.7 billion to $35.7 billion and non-GAAP EPS of $2.90 at the midpoint. It also forecast annual AI-optimized server revenue of about $50 billion, a 103% increase, after accumulating over $64 billion in AI server orders during fiscal 2026 and starting fiscal 2027 with a $43 billion backlog. Analysts, per Visible Alpha, expect fiscal Q1 revenue of $36.18 billion and adjusted EPS of $2.97, slightly above Dell's own outlook. Option markets implied traders were bracing for a potential 10% swing in the stock by week's end.
Wall Street Views: Optimism Tempered by Margin Concerns
Wall Street analysts are divided. Evercore's Amit Daryanani was “constructive on the setup,” citing “continued momentum” in AI infrastructure. Wells Fargo's Aaron Rakers said Dell shares need “continued AI-driven upside” and estimate bumps to maintain their climb. However, Morgan Stanley's Erik Woodring raised his price target but stuck with an Underweight rating, warning that first-half strength could lead to weaker demand later. He also flagged “structural margin headwinds” that could make the current stock price hard to justify. Seeking Alpha's George Atuan highlighted AI server margin concerns and rising component costs as key risks.
IREN Deal Highlights AI Demand
Dell's order book gained attention after IREN announced it would buy $1.6 billion in Nvidia Blackwell systems through Dell for a cloud AI project. IREN co-CEO Daniel Roberts emphasized that “time-to-compute is everything” right now, underscoring the urgency in AI infrastructure spending.
Competitive Landscape and Nvidia Benchmark
Lenovo's PC share reached 24.4% last quarter, outpacing the market, while HP's results showed corporate device buying remains robust. Dell, however, faces the dual challenge of growing server sales without margin compression. Nvidia, the broader AI benchmark, reported first-quarter revenue of $81.6 billion on May 20, up 85% year-over-year, reinforcing that AI data-center spending continues to climb. For server names like Dell and Super Micro, the critical question is whether that demand translates into sustainable profit, not just volume.
Outlook: Profitability in Focus
Thursday's results will likely determine whether Dell can convert AI demand into profit, not just confirm that demand exists. If the company beats estimates but does not raise guidance, or if server sales are strong but margins disappoint, the stock could appear overvalued. Dell has already surpassed many analyst price targets, making the earnings report a pivotal moment for its near-term trajectory.
