Dell Technologies Projects Strong Growth in AI Server Market

Dell Technologies Inc. DELL reported a mixed performance in its fourth quarter, yet the management highlighted an 18% increase in the annual dividend. Additionally, they anticipate the artificial intelligence server segment will grow by at least $15 billion in fiscal year 2026.

Fourth Quarter Overview: While Dell experienced a revenue miss in the fourth quarter, its executives expressed optimism about the future during the earnings call.

“We expect our AI business will grow to at least $15 billion given our robust opportunity pipeline, engineering capabilities, services, and financing advantages,” said COO Jeff Clarke. He emphasized that this AI segment contributes to incremental operating profit and is EPS-accretive.

Furthermore, Dell’s Infrastructure Solutions Group (ISG), which offers IT infrastructure, software, and services, is also set to grow, bolstered by the AI business. CEO Yvonne McGill projected ISG will rise in the high teens, fueled by $15 billion of AI server shipments, alongside steady growth in traditional server and storage markets.

McGill stated the company would continue to refine its estimates as the fiscal year progresses.

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Significance of the Report: Dell exceeded fourth quarter earnings estimates with an EPS of $2.68 but fell short on revenue, which totaled $23.9 billion. For fiscal 2026, the company projects revenue between $101 billion and $105 billion, along with adjusted EPS of $9.30, aligning closely with analyst expectations.

“We’re raising our annual dividend by 18%, showcasing our commitment to shareholder returns and our confidence in potential growth for FY26,” remarked CEO McGill.

Price Movements: Following the announcement, Dell’s stock declined by 6.77% on Thursday, with an additional 1.23% drop in after-hours trading. This performance surpassed the 2.66% decline of the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 index.

Year-to-date, Dell’s shares are down 7.47%, though they have increased by 15.64% over the past year.

Benzinga monitors 20 analysts who have an average price target of $134.05 for the stock, indicating a “buy” rating. Predictions vary significantly, ranging from $53 to $185. Recent evaluations from Northland Citigroup, B of A Securities, and Morgan Stanley average around $141, suggesting a potential upside of 32.39%.

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