Dell Could Be Poised to Benefit From AI Boom, Despite ‘Messy’ Results, Analysts Say

Dell Technologies (DELL) shares tumbled Wednesday in the wake of what JPMorgan called “admittedly messy” third-quarter results, but the bank’s analysts said Dell could still be positioned to benefit long-term from the artificial intelligence (AI) boom.

The server and personal computer maker delivered third-quarter revenue of $24.4 billion, a 10% rise year-over-year but below the analyst consensus from Visible Alpha. Its outlook for the fourth quarter also disappointed.

Shares of Dell fell over 12% Wednesday to close at $124.38, though even with Wednesday’s losses, they’ve gained more than 62% since the start of the year.

Building AI Server Demand

JPMorgan reiterated its “overweight” rating and price target of $160 following Dell’s results. Despite the revenue miss, “AI server demand momentum continues to build,” the analysts noted, pointing to Dell’s record quarterly backlog of $4.5 billion. Such a strong backlog, coupled with near-record AI server revenue, suggest “concerns on the results and [guidance] are likely overblown,” they said.

Morgan Stanley similarly maintained an “overweight” rating and a price target of $154. “DELL delivered where it needed to,” the analysts said, adding “we have strong conviction that DELL is gaining momentum in a fast-growing market, supporting our view that AI server revenue will ramp well into next year.”

Notably, Dell makes servers that use Nvidia (NVDA) AI chips, drawing a shoutout from the chipmaker in its earnings call last week.