Last Update 10 Mar 26

Fair value Increased 6.24%

DELL: Once In A Generation Memory Cycle Will Pressure Future Earnings Power

Narrative Update: Dell Technologies

Our updated Dell Technologies price target increases from $118.53 to $125.92 as analysts point to strong AI server demand, higher storage attach opportunities, and raised long term earnings guidance, while still highlighting uncertainty around memory pricing, demand, and margins.

Analyst Commentary

Recent Street research on Dell Technologies reflects a split view. Several firms are lifting targets and estimates on the back of strong AI server orders, higher storage attach potential, and higher long term earnings guidance into fiscal 2027 and 2028. At the same time, a group of Bearish analysts is dialing back price targets or keeping more cautious ratings, largely around memory costs, sustainability of demand, and margin risk.

On the more constructive side, firms raising targets into the US$165 to US$180 range point to a strong Q4 print, what they describe as "exceptional beat and raise" results, and what they view as stand out execution. They also highlight AI orders that were reported at US$34b, almost triple quarter over quarter, and a high margin storage attach opportunity as key support for their updated fiscal 2027 and 2028 earnings assumptions and higher valuation frameworks.

JPMorgan and Goldman Sachs sit firmly in this camp, emphasizing Dell's position in AI servers, management's decision to raise earnings guidance despite higher memory costs, and the view that this guidance reset lowers perceived downside risk to the outlook. These more positive takes generally rest on the idea that AI infrastructure demand and storage economics can support both growth and profitability, even with what some describe as unprecedented memory cost pressure.

In contrast, Bearish analysts focus more on what they see as a once in a generation memory cycle, where pricing, demand and margins may not all remain favorable year over year. Even when they acknowledge that upcoming quarters could be solid, they question how much of the current strength is already reflected in the share price and whether earnings power through fiscal 2027 is as durable as the more bullish targets imply.

For you as an investor, the key tension across these notes is simple. Bulls are leaning on AI server momentum, storage attach and management guidance to justify higher earnings trajectories and elevated targets. Bearish analysts are more focused on execution risk in a complex memory cost environment, the possibility that current order strength is front loaded, and the chance that margins come under pressure if memory costs or pricing dynamics move against Dell. Your own view on these moving parts, and how much you are willing to pay for that earnings path, will likely drive where you land between these camps.

Bearish Takeaways

Bearish analysts highlight what they call a once in a generation memory cycle and struggle to model a scenario where pricing, demand and margins all stay favorable year over year, which they see as a key risk to sustaining current earnings assumptions.
Some Bearish analysts have trimmed Dell's price targets into the US$101 to US$160 range, even while expecting solid upcoming quarters, reflecting concerns that the current share price already prices in strong AI server demand and may not fully account for memory related volatility.
One preview into fiscal Q4 flags impending memory headwinds and reduces a fiscal 2027 EPS estimate by US$0.86 to US$10.00, arguing that higher memory costs could pressure profitability, even if the near term print is strong.
Within broader IT hardware coverage, Bearish analysts say they are gaining conviction in a more cautious memory thesis, which for Dell could translate into tighter valuation multiples if investors start to question how much of the AI server and storage story is already reflected in forward expectations.

What's in the News

Dell, Lenovo and other PC makers are reported to be working with Nvidia on Arm based Nvidia MediaTek SoC laptops that could launch in the first half of 2026, with Nvidia also collaborating with Intel on chips that integrate Intel CPUs with Nvidia graphics and AI technology (The Wall Street Journal).
HP, Dell and Acer are reported to be considering the use of Chinese memory chips in future products, which ties directly into Street debates around memory sourcing, cost and supply risk for PC and server vendors (Nikkei Asia).
Dell declared a quarterly cash dividend of $0.63 per common share, payable May 1, 2026 to shareholders of record on April 21, 2026.
Between November 1, 2025 and January 30, 2026, Dell repurchased 14,900,000 shares for $1,927.74m, and has now completed the repurchase of 183,948,697 shares for $14,268.04m under the buyback that began on September 23, 2021. Dell also increased its equity buyback authorization by $10b to a total of $30b on February 26, 2026.
Dell issued earnings guidance for fiscal 2027, with full year revenue expected between $138b and $142b and GAAP diluted EPS expected to be $11.52 at the midpoint. First quarter fiscal 2027 revenue is expected between $34.7b and $35.7b, with GAAP diluted EPS expected to be $2.55 at the midpoint.

Valuation Changes

Fair Value: Adjusted from $118.53 to $125.92, reflecting a modest uplift in the modeled estimate.
Discount Rate: Adjusted from 9.27% to 9.11%, reflecting a slight reduction in the required rate of return used in the analysis.
Revenue Growth: Adjusted from 9.15% to 7.87%, reflecting a lower projected top line growth rate in the updated model.
Net Profit Margin: Adjusted from 6.27% to 6.22%, reflecting a small trim to expected profitability levels.
Future P/E: Adjusted from 10.34x to 10.46x, reflecting a minor upward adjustment in the valuation multiple applied to forward earnings.

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Key Takeaways

Cloud migration and greater SaaS adoption are eroding demand for Dell's traditional hardware, undermining future growth and exposing weaknesses in its business model.
Ongoing reliance on low-margin products and slow adoption of higher-value recurring revenue streams limit stability in the face of stiffening competition and supply chain risks.
Strategic focus on AI infrastructure, proprietary solutions, and recurring revenue is driving profitability, market share gains, and margin expansion amid strong commercial demand and supply chain efficiency.

Catalysts

About Dell Technologies

Designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally.What are the underlying business or industry changes driving this perspective?

Cloud migration and SaaS adoption are continuously eroding demand for Dell's core on-premise infrastructure and personal computers, threatening long-term revenue growth despite the current AI-fueled surge in server sales and a seemingly robust pipeline.
Intensifying global competition, geopolitical instability, and the risk of ongoing supply chain disruptions are likely to raise input costs and add operational complexity, compressing net margins for Dell's hardware-centric business far beyond temporary one-time expenses.
The company's persistent reliance on low-margin PC and commodity server sales leaves it exposed to industry-wide commoditization, which exerts downward pressure on average selling prices and gross margins, undermining the sustainability of recent earnings strength as early AI deployments normalize.
Dell's shift towards higher-value as-a-service and recurring revenue streams is progressing slowly, leaving the company's top-line and earnings exposed to secular declines in traditional infrastructure spending and limiting the stability that comes from software-centric business models embraced by competitors.
The rising dominance of hyperscale cloud providers such as AWS, Microsoft Azure, and Google Cloud, which continue to internalize hardware needs and develop custom AI solutions, is shrinking Dell's future addressable market and threatens to cause long-term stagnation in both revenue and operating income.

Dell Technologies Earnings and Revenue Growth

Dell Technologies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Dell Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Dell Technologies's revenue will grow by 5.3% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from 4.8% today to 6.4% in 3 years time.
The bearish analysts expect earnings to reach $7.6 billion (and earnings per share of $11.27) by about September 2028, up from $4.8 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, down from 17.3x today. This future PE is lower than the current PE for the US Tech industry at 24.3x.
Analysts expect the number of shares outstanding to decline by 4.27% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.98%, as per the Simply Wall St company report.

Dell Technologies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Continued rapid growth in demand for AI infrastructure is driving record revenues and expanding pipelines for Dell, particularly through large-scale deployments and enterprise adoption, which directly supports robust revenue and earnings growth in the coming years.
Dell's strategic shift towards higher-margin proprietary storage solutions and recurring revenue streams, such as as-a-service models and integrated AI life cycle solutions, is increasing profitability and providing greater revenue visibility, thereby supporting sustained margin expansion.
The accelerating PC refresh cycle, driven by the Windows 10 end-of-life event and the large portion of the installed base still in need of upgrades, positions Dell to benefit from continued commercial and SMB demand, maintaining or improving both revenue and net profit margins.
Dell's effective supply chain management and ongoing modernization initiatives are reducing operational costs while supporting the company's ability to absorb shocks from tariffs and input cost volatility, which can help stabilize and potentially improve net margins and free cash flow.
Strengthening customer traction across new enterprise and sovereign segments, alongside differentiated AI and storage offerings, is creating opportunities for market share gains, enhancing top-line revenue growth and improving the potential for higher earnings through cross-selling of services and solutions.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for Dell Technologies is $112.19, which represents two standard deviations below the consensus price target of $147.62. This valuation is based on what can be assumed as the expectations of Dell Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $180.0, and the most bearish reporting a price target of just $104.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $118.5 billion, earnings will come to $7.6 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 9.0%.
Given the current share price of $124.45, the bearish analyst price target of $112.19 is 10.9% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cloud Migration Will Erode Hardware Margins Amid Global Rivalry