Dell: Mizuho cuts PT on weak earnings, but sees long-term AI tailwinds
Investing.com– Analysts at Mizuho cut their price target on Dell Technologies (NYSE:DELL) following weak earnings and guidance from the PC maker, but noted that Dell remains well-positioned to capitalize on the artificial intelligence boom.
Mizuho (NYSE:MFG) cut Dell’s price target to $150 from $155, and maintained the stock at Outperform.
Dell reported revenue of $24.4 billion in the third-quarter, slightly below analyst expectations of $24.6 billion, and provided a conservative guidance for the fourth quarter, projecting revenue of $24.5 billion—below the consensus estimate of $25.4 billion, according to Mizuho.
Despite a 13% quarter-over-quarter increase in AI server orders, reaching $3.6 billion, revenue from AI servers fell 6% from the previous quarter. The slowdown in AI server revenue, coupled with modest guidance for the January quarter, led to a drop in Dell’s stock price after hours.
Dell shares slumped 11.3% to $125.75 in extended trading.
However, the company’s AI server backlog grew 18% to $4.5 billion, signaling long-term demand. Mizuho believes that Dell is gaining market share in AI servers, driven by innovations in power management and software integration.
While AI server growth has faced “growing pains,” Dell remains well-positioned to capitalize on the AI boom, with its pipeline increasing by over 50% quarter-over-quarter, the brokerage said in a note. The company’s Infrastructure Solutions Group (ISG) posted a solid operating margin of 13.3%, up 230 basis points, despite the AI revenue decline.
“We believe DELL’s AI server ramp continues to take shape as it begins the ramp of Blackwell into 2025,” analysts added. Blackwell is the upcoming line of next-generation AI chips from NVIDIA Corporation (NASDAQ:NVDA).
Looking ahead, Mizuho sees strong tailwinds for Dell in 2025, including the ramp-up of its Blackwell AI servers and the upcoming Windows 10 end-of-life in 2025, which is expected to drive commercial PC sales.
