Dell Technologies Set to Announce Strong Q3 Results Amid Market Challenges
Dell Technologies DELL is slated to release its third-quarter fiscal 2025 earnings report on Nov. 26.
The company anticipates third-quarter revenues between $24 billion and $25 billion, with a midpoint of $24.5 billion, reflecting an estimated growth of 10%. Expected earnings are around $2 per share, with a margin of +/- 10 cents.
According to the Zacks Consensus Estimate, revenues are projected at $24.53 billion, indicating a year-over-year growth of 10.25%. The consensus for quarterly earnings stands at $2.05 per share, which remains unchanged over the last two months, reflecting a 9.04% increase compared to the previous year.
Dell has consistently exceeded the Zacks Consensus Estimate in the past four quarters, with an average earnings surprise of 16.32%.
Dell Technologies Inc. Price and EPS Surprise
Dell Technologies Inc. price-EPS surprise | Dell Technologies Inc. Quote
Check out the latest EPS estimates and surprises on Zacks Earnings Calendar.
Let’s explore the current landscape for DELL shares ahead of this announcement.
DELL’s Position Ahead of Q3
Dell is in a strong position to report good results in the fiscal third quarter, thanks to its robust product lineup and an expanding partner network that features NVIDIA NVDA, Advanced Micro Devices AMD, Intel INTC, and Nokia.
Strong demand for AI-optimized servers is expected to have positively impacted Dell’s financials. In the fiscal second quarter, demand for these servers increased to $3.2 billion, a 23% increase from the previous quarter, with shipments reaching $3.1 billion.
Nevertheless, declining consumer revenue and stagnant commercial client revenue indicate weakening demand across significant market segments.
Sluggish PC shipments in the consumer sector are anticipated to have negatively impacted Dell’s revenue growth in the upcoming report amid ongoing challenges and competition affecting consumer demand.
According to the latest Gartner report, Dell experienced a notable decline in global PC shipments during the third quarter of 2024, with a 3.9% decrease compared to the previous year, with ASUS closely following at a 3% decline. Dell and ASUS were the only vendors reporting year-over-year shipment decreases.
DELL’s Strong Stock Performance
So far this year, DELL shares have jumped 81.6%, significantly outperforming the overall Zacks Computer & Technology sector, which returned 27.4%, and the Zacks Computer-Micro Computer industry with a 19.8% return.
Aside from NVIDIA, Dell’s shares have outdone competitors like HPQ, Apple, and Lenovo. Year-to-date, NVIDIA has surged by 196.1%, while HPQ and Apple have returned 26% and 18.7%, respectively. Meanwhile, Lenovo shares have dropped 15.2% this year.
Year-to-Date Performance Chart
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DELL stock is currently considered affordable, with a Value Score of B.
With a forward 12-month Price/Earnings (P/E) ratio of 14.89X, Dell trades at a notable discount compared to the Zacks Computer-Micro Computer industry average of 26.86X.
P/E Ratio (F12M)
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Dell’s Expansion in AI and Partnerships
Dell’s shares are thriving on strong demand for AI servers, fueled by ongoing digital transformation and growing interest in generative AI (GenAI) applications. The total addressable market (TAM) for AI hardware and services is estimated at $174 billion and is expected to grow at a Compound Annual Growth Rate of 22%.
In the second quarter of fiscal 2025, Dell’s AI server backlog reached $3.8 billion.
The launch of Dell’s AI Factory has been a significant driver for the company. This initiative integrates Dell’s solutions and services, optimized for AI workloads, and supports an open network of partners, including NVIDIA, Meta Platforms, Microsoft, and Hugging Face.
NVIDIA has been crucial in developing the Dell AI Factory, allowing Dell’s services to enhance compute capabilities and simplify the development of AI applications.
Dell is also teaming up with Ericsson to create customized cloud infrastructure solutions and provide guidance to communications service providers on their cloud transitions. Notably, the introduction of Ericsson’s Cloud RAN software on Dell PowerEdge servers includes ongoing testing and management.
Additionally, Dell has partnered with Nutanix to boost digital transformation by merging the Nutanix Cloud Platform with Dell’s server and storage systems, paving the way for smoother hybrid multi-cloud implementations.
Dell continues to have a strong portfolio of IP core storage products, including PowerMax, PowerScale, PowerStore, and PowerProtect Data Domain, all of which are experiencing robust demand.
Investor Considerations for DELL Stock
The strength of Dell’s expanding partner network makes its stock appealing to long-term investors. The company’s Growth Score of B enhances its attractiveness for growth-oriented portfolios.
Investors who already hold DELL stock may find rewarding growth opportunities ahead.
Currently, DELL shares trade above both the 50-day and 200-day moving averages, suggesting a positive trend.
Image Source: Zacks Investment Research
However, challenges in the PC sector pose a potential hurdle in the short term.
Currently, DELL holds a Zacks Rank #3 (Hold), indicating that it may be prudent to wait for a better entry point for investment. You can review the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
