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Should You Buy Dell Technologies (DELL) Ahead of Q1 Earnings?

Dell Technologies DELL is set to report its first-quarter fiscal 2025 results on May 30.

Dell expects fiscal first-quarter revenues in the range of $21-$22 billion, with a midpoint of $21.5 billion indicating a 3% growth. Earnings are expected to be $1.15 per share (+/- 10 cents).

The Zacks Consensus Estimate for revenues is pegged at $21.7 billion, suggesting a 3.73% growth from the figure reported in the year-ago quarter.

The consensus mark for quarterly earnings is pegged at $1.25 per share, indicating a 4.58% decline from the year-ago quarter’s figure. The consensus estimate for earnings has increased 3.3% in the past 30 days.

Dell’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with an earnings surprise of 39.9% on average.

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. Price and EPS Surprise
Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote

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Dell is well-poised to report solid results in the fiscal first quarter, driven by its portfolio strength and an expanding partner base that includes the likes of NVIDIA NVDA, CrowdStrike CRWD, Nokia NOK, AMD, Ericsson, Intel and Commvault, among others.

Dell shares have jumped 109.4% year to date compared with the Zacks Computer & Technology sector's growth of 17.3%. We believe shares have further room for expansion given the robust demand for AI servers, including its PowerEdge XE9680 AI-optimized server. Stringent cost control is expected to help margins expand in the long haul.

Dell currently carries a Zacks Rank #2 (Buy) with a Growth Score of A, a combination that offers a good investment opportunity, per the Zacks proprietary methodology. A Momentum Score of B makes DELL further attractive to investors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dell’s Prospects Ride on Strong Portfolio, Partner Base

Dell is benefiting from strong demand for AI servers driven by ongoing digital transformation and heightened interest in generative AI applications. In fourth-quarter 2024, its AI-optimized server witnessed a sequential increase of approximately 40% in orders.

DELL enhanced its generative AI solutions offerings to include support for the AMD Instinct MI300X accelerator in PowerEdge XE9680 servers and introduced the Dell Validated Design for Generative AI with AMD ROCm-powered AI frameworks.

Dell’s end-to-end AI portfolio spanning client devices, servers, storage, data protection and networking form the foundation of the Dell AI Factory. It recently introduced Copilot+ laptops based on Snapdragon X Elite and Snapdragon X Plus processors and featuring new Microsoft AI experiences.

DELL launched next-generation PowerProtect Data Domain appliances to enhance performance, efficiency and security.

A strong partner base has been a game-changer for Dell. It recently expanded its Dell AI Factory with NVIDIA, offering advancements in servers, edge solutions and services to accelerate AI adoption. The collaboration integrates Dell’s portfolio with NVIDIA’s AI Enterprise software platform and Tensor Core GPUs, enhancing compute power and simplifying AI application development and deployment for faster time to value.

Dell has become Nokia’s preferred infrastructure partner, while with CrowdStrike it entered into an extended partnership to integrate Dell’s Managed Detection and Response services with CrowdStrike’s Falcon XDR platform.

Dell and Ericsson have been collaborating to develop Cloud RAN solutions, leveraging Ericsson Cloud RAN software and RAN equipment paired with Dell Technologies infrastructure. Most recently, Dell and Ericsson entered into a partnership agreement that will help communications service providers develop simple and reliable Open RAN-based network cloud transformation strategies.

Dell has expanded its edge partner base with the addition of Intel and Hyundai AutoEver. These companies are collaborating to help manufacturers transition to an AI-enhanced factory environment. Dell has introduced updates to the Dell Validated Design for Manufacturing Edge with the integration of Hyundai AutoEver. It has updated Dell NativeEdge Blueprints with Intel's OpenVINO Developer Toolbox.

Conclusion

Dell is well-poised to benefit from a robust portfolio with strong demand for its AI-optimized server portfolio, which bodes well for the Infrastructure Solutions Group. Broader adoption of AI by enterprises is a tailwind, and an expanding portfolio of AI-powered PCs is expected to drive Client Solutions Group growth.

Dell is trading at a significant discount with a forward 12-month P/E of 19.26X compared with the Zacks Computers - IT Services industry’s 35.96X. This makes the stock an attractive pick for investors at the current level.

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