Dell Technologies' (DELL) latest results and guidance indicated "broad-based strength," though there are concerns that artificial intelligence-driven compute and storage growth may decelerate sharply in fiscal 2028 or 2029 amid rising prices, UBS Securities said in a note e-mailed Wednesday.
Late Tuesday, the computer maker raised its full-year financial projections after delivering a second-quarter beat amid record AI server demand.
"We've had a strong first half of the year, and we expect the second half to be stronger," Dell Chief Financial Officer David Kennedy said on an earnings conference call, according to a FactSet transcript. "The momentum we've seen continues, and we are raising our expectations across every line of business."
Dell's latest print showed "broad-based strength," UBS analysts David Vogt and Andrew Spinola said in a note to clients.
The brokerage raised its price target on the company's stock to $500 from $455, but reiterated its neutral rating, citing limited visibility into sustained growth in 2028 following "exceptional" strength expected in 2027.
"While near-term momentum and enterprise AI demand remain strong, steep industrywide price increases raise durability concerns for server, storage, and (personal computer) demand," Vogt and Spinola said.
There are concerns that AI-driven compute and storage growth could slow sharply in fiscal 2028 or 2029, according to the note. "The muted response after two quarters of sizable revisions suggests investors still view the cycle as potentially cyclical rather than secular."
Dell shares were up 14% in Wednesday late-afternoon trade, bringing its gains to nearly 286% so far this year.
UBS boosted its earnings forecast for the company to $26 a share from $19.41 for fiscal 2027 and to $29.86 from $21.90 for 2028. The brokerage also increased its 2027 and 2028 revenue estimates to about $193 billion and $232 billion, respectively, from $178 billion and $202 billion, according to the note.
"Despite rising near-term estimates, the key debate is whether server, storage, and PC demand can remain durable after steep industrywide price increases," Vogt and Spinola wrote. "Our framework balances solid near-term momentum and growing enterprise AI demand against the risk of a cyclical slowdown after the price-driven refresh cycle."
AI server maker Hewlett Packard Enterprise (HPE) is scheduled to report its fiscal third-quarter results after the closing bell Wednesday.
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