To The Moon

$Dell Technologies Inc.(DELL)$ is scheduled to report its fiscal Q1 2026 earnings on May 29, 2025.

Revenue: Dell has guided for Q1 fiscal 2026 revenue to be between $22.5 billion and $23.5 billion, with a midpoint of $23.0 billion, suggesting approximately 3% year-over-year growth. The Zacks Consensus Estimate is slightly higher at $23.10 billion, implying 3.86% year-over-year growth.

Earnings Per Share (EPS): Dell's guidance for non-GAAP diluted EPS is $1.65 per share (+/- 10 cents), which would represent a 25% year-over-year increase at the midpoint. The Zacks Consensus Estimate is a bit more optimistic at $1.71 per share, suggesting a 34.65% year-over-year growth.

Dell Technologies (DELL) Last Positive Earnings Call Saw Share Price Gain 4.64%

Dell Technologies had a positive earnings call on 27 Feb 2025 which saw its share price gained by 4.64% since.

Dell Technologies showed strong financial performance in FY '25, with significant growth in revenue and EPS. The AI business and ISG are major growth drivers, and the company is optimistic about its FY '26 outlook, expecting substantial growth in AI server shipments. However, challenges persist in the consumer market, and there is a competitive pricing environment that could impact margins.

Dell Technologies (DELL) Guidance

During Dell Technologies' fiscal year 2025 fourth-quarter earnings call, the company provided guidance for FY '26, anticipating revenue between $101 billion and $105 billion, with a midpoint growth of 8%. Dell expects its Infrastructure Solutions Group (ISG) to grow in the high teens, driven by at least $15 billion in AI server shipments. Meanwhile, the Client Solutions Group (CSG) is projected to grow low to mid-single digits, more weighted towards the second half of the year.

Despite an anticipated decline in the gross margin rate by approximately 100 basis points due to a higher mix of AI-optimized servers, operating expenses are expected to decrease by low single digits year-over-year. Dell forecasts diluted non-GAAP EPS to increase by 14% to $9.30, plus or minus $0.25, with FY '26 Q1 revenue expected to be between $22.5 billion and $23.5 billion, representing a 3% increase at the midpoint.

Segment Performance

Infrastructure Solutions Group (ISG): Expected to be the primary growth driver. Dell anticipates low-teens year-over-year growth for ISG. The Zacks Consensus Estimate for ISG revenue is $10.379 billion, indicating an 11.2% year-over-year increase. This segment includes servers, networking, and storage, and is benefiting significantly from demand for AI-optimized servers.

Client Solutions Group (CSG): Expected to be flat year-over-year. The Zacks Consensus Estimate for CSG revenue is $12.237 billion, suggesting a 2.25% year-over-year growth. This segment includes commercial and consumer PCs.

Key Factors and Trends to Watch

AI Server Demand - The Primary Catalyst

Dell's AI-optimized server business is gaining significant momentum and is expected to be the key driver of ISG revenue growth. The company reported a substantial increase in AI server orders in Q4 fiscal 2025 (an additional $1.7 billion) and shipped $2.1 billion worth of AI servers, with a healthy backlog of $4.1 billion.

Analysts believe Dell could see nearly $20 billion in AI server revenue in the current fiscal year (FY26), contributing to an overall AI infrastructure market swelling to over $150 billion.

Dell's strategic partnerships (e.g., with NVIDIA, Meta Platforms, AMD, xAI) to deliver AI solutions and large-scale AI clusters are crucial for its continued success in this space.

PC Market Recovery and AI PCs (CSG)

While the overall PC market recovery has been slower than anticipated, there's growing excitement around "AI-enabled PCs" and the upcoming refresh cycle driven by the end-of-life for Windows 10 support.

However, challenges exist, such as cautious enterprise spending on PCs and storage IT, and competitive pricing pressures in the CSG segment. Consumer revenue was down 12% to $1.9 billion in Q4, with the demand environment remaining soft and profitability challenged.

The availability of Copilot+ class AI PC options in volume sales price tiers is expected to improve in the May-June 2025 timeframe (with AMD's Ryzen AI 300 processors) and early 2026 (with Intel's Core Ultra update). Dell's performance in this segment will be closely watched for signs of a more robust PC refresh.

Gross margin was down 50 basis points due to a competitive pricing environment, particularly affecting CSG.

Gross Margins and Profitability

Despite strong demand for AI servers, the higher mix of AI-optimized servers, which often come with higher production costs, is expected to put pressure on gross margins in the near term. Dell has previously forecasted a decline in its adjusted gross margin rate for fiscal 2026 by approximately 100 basis points.

Investors will look for any updates on this trend and how Dell plans to manage the profitability of its AI server business as volumes scale. The transcript highlighted concerns regarding potential impacts from tariffs and dynamic trade regulations, which could affect pricing and supply chain.

Overall Revenue Growth and Full-Year Guidance

Dell has a strong track record of beating earnings estimates, doing so in all of the trailing four quarters. Dell Technologies reported FY '25 revenue of $95.6 billion, up 8%, and operating income of $8.5 billion. Record EPS was at $8.14, up 10%, with a cash flow of $4.5 billion.

For the full fiscal year 2026, Dell previously guided for revenue between $101 billion and $105 billion (an 8% year-over-year increase at the midpoint) and non-GAAP diluted EPS of $9.30 (up 14% year-over-year).

While Q1 is expected to show growth, analysts like Morgan Stanley suggest Dell might not raise full-year guidance this quarter due to ongoing tariff uncertainty, but anticipate stronger growth in the second half of the year.

Dell Technologies (DELL) Price Target

Based on 20 analysts from Tiger Brokers offering 12 month price targets for Dell Technologies in the last 3 months. The average price target is $133.67 with a high forecast of $185.00 and a low forecast of $95.00. The average price target represents a 19.23% change from the last price of $112.11.

Technical Analysis - Exponential Moving Average (EMA)

Dell is still trying to break out from the sideway consolidation though the momentum remains positive, but we need to see a stronger earnings report from their ISG group, this could determine how much market share does Dell would hold moving forward.

For now, I think investors would remain cautious maybe we will have to see if there is any buying demand coming on Tuesday (27 May).

Summary

Dell's Q1 fiscal 2026 earnings are expected to be primarily driven by the robust demand for its AI-optimized servers within its Infrastructure Solutions Group (ISG). While the Client Solutions Group (CSG) is expected to see more modest growth, the long-term outlook for PC upgrades and AI PCs remains a factor.

I will be watching for the earnings call for the actual numbers for AI server orders and backlog, the impact on gross margins, and any updated commentary from management on the full-year outlook and macroeconomic conditions.

Appreciate if you could share your thoughts in the comment section whether you think Dell can show much improved earnings driven by robust demand for its AI-optimized servers.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.