Dell Technologies (DELL) was down about 5% on Monday, as of writing, after UBS downgraded its rating for the PC and AI server provider to Hold from Buy ahead of the company’s Q1 FY27 earnings on May 28. DELL stock has rallied more than 100% year-to-date, driven by robust demand for AI servers. While UBS analyst David Vogt raised his price target for DELL to $243 from $167, he downgraded the stock, noting that it has significantly outperformed the S&P 500 Index (SPX) over the past year and “the risk/reward going forward is more balanced following strong execution over the past 12 months.”
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Large language models such as Anthropic’s Claude and OpenAI’s ChatGPT are boosting demand for AI processing power and capacity, driving demand for Dell’s AI server business. Dell expects its AI server revenue to be $13 billion in the first quarter of Fiscal 2027.
Meanwhile, Wall Street expects Dell to report Q1 FY27 earnings per share (EPS) of $2.88, reflecting 86% year-over-year growth. Revenue is expected to rise 49% to $34.81 billion.
UBS Analyst Moves to the Sidelines on DELL Stock
Vogt noted that Dell’s differentiated technology and supply chain strategy have fueled strong growth in its AI-optimized servers, while helping the company navigate potential disruptions from rising input costs such as memory.
The 4-star analyst expects Dell to grow its Fiscal 2027 earnings by more than 25%, driven by more than a 100% rise in the AI-optimized server business. That said, he noted that investor expectations are likely priced into EPS growth of at least about 30% to 35%, compared to the company’s long-term mid-teens growth algorithm.
The analyst noted that DELL stock is trading at about 20x and 18x his calendar-year 2026 and 2027 EPS estimates, respectively, up from nearly 10x NTM (next 12 months) consensus EPS estimate in February. Based on investor expectations, Vogt added that many forecast that Dell’s 2027 EPS could reach $17 per share, which is 25% above his estimate and suggests that future growth may already be priced into the stock.
Vogt also observed that Dell’s AI business is primarily driven by neocloud and enterprise customers. Spending by these customers is expected to grow more slowly than hyperscalers’, as companies like Meta Platforms (META), Alphabet (GOOGL), Amazon (AMZN), and Microsoft (MSFT) have stronger balance sheets and generate higher cash flow.
Is DELL a Good Stock to Buy Now?
Overall, Wall Street has a Moderate Buy consensus rating on Dell Technologies stock based on 11 Buys, four Holds, and one Sell. The average DELL stock price target of $199.21 indicates 20.4% downside risk from current levels.
