Dell Technologies (DELL) is expected to see continued momentum in its server business and further growth in orders in its fiscal fourth quarter, with artificial intelligence servers and AI-enabled personal computers likely to drive growth in the medium term, BofA Securities said.
The computer maker is scheduled to report its fourth-quarter financial results Thursday. BofA projects per-share earnings at $1.73 on revenue of about $22.24 billion. Wall Street is looking for $1.72 and $22.15 billion, respectively, according to the brokerage.
In the previous quarter, the company’s pipeline for AI-optimized servers tripled sequentially, Chief Operating Officer Jeff Clarke said in November on a call discussing Dell’s third-quarter results, according to a Capital IQ transcript. Demand was ahead of supply, Clarke told analysts at the time, adding that the company was working to convert its pipeline “into real sales, into orders.”
“Given its focus on enterprise (versus) hyperscale, Dell should see strong demand as companies start fine-tuning trained AI models and then ramp inferencing with those models,” BofA analyst Wamsi Mohan said in a note e-mailed Friday. The brokerage expects fourth-quarter revenue in Dell’s infrastructure solutions group and client solutions group to drop by double-digit percentage each, but roughly match the Street’s views.
The company is expected to benefit in the second half of the year from the launch of AI-enabled PCs even as the overall recovery in the PC market is slower than BofA’s original estimates, according to the note. “We see Dell benefiting in (the second half of 2024) from IT spending recovery with large corporate and enterprise customers, especially in the US,” Mohan said.
Late Wednesday, Nvidia (NVDA) posted stronger-than-projected fiscal fourth-quarter results amid record data center revenue led by strong demand for generative AI. “We expect our next-generation products to be supply-constrained as demand far exceeds supply,” Nvidia Chief Financial Officer Colette Kress said on an earnings conference call late Wednesday, according to a Capital IQ transcript.
For Dell, BofA projects 5% annual growth in revenue in fiscal 2025. The brokerage raised its price objective on the Dell stock to $98 from $82 while reiterating its buy rating.
On Wednesday, Morgan Stanley said Dell likely faces a “tricky” earnings setup amid subdued near-term hardware spending, though most of the updates from the company on Thursday are expected to trend favorably.