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The Key Takeaways
- Dell Technologies shares dropped Wednesday following the announcement that third quarter revenue missed Wall Street’s expectations.
- JPMorgan analysts said, however, that the demand for AI server continues to grow, and Dell might be well positioned in the future to reap benefits.
- Dell makes servers that use Nvidia AI chips, drawing a shoutout from the chipmaker in its earnings call last week.
Dell Technologies’ (DELL), shares plunged on Wednesday following what JPMorgan termed “a scathing report” “admittedly messy” The bank analysts did not expect Dell to have a strong third quarter, but they said the company was still well positioned for long-term gains from artificial intelligence.
Visible Alpha’s analyst consensus was $24.4 billion for the third quarter, which is a rise of 10% year over year but still below what Visible Alpha reported. Also, its outlook for the next quarter was disappointing.
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 Demand
JPMorgan reiterated its "overweight" rating and price target of $160 following Dell's results. The revenue shortfall was not enough to deter JPMorgan. “AI server demand momentum continues to build,” The analysts pointed to Dell’s record quarter backlog of $4.55 billion. This strong backlog coupled with AI server revenues nearing record levels suggests “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.
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