Key Takeaways
- Dell stock is down about 18.5% in the past month after Barclays downgraded it on Oct. 14, saying it sees no meaningful AI inflection in enterprise spending.
- Barclays thinks higher memory prices are behind most of Dell’s 58% revenue growth, which leaves sales exposed if those prices level off.
- Dell’s $95 billion AI backlog still stands, and Super Micro, down 21% over the same month, just reported preliminary quarterly revenue well above its own forecast.
- Dell’s fiscal third-quarter report on Nov. 24 will show how much of that backlog is turning into free cash flow.
Dell Technologies (DELL) is down about 18.5% in the past month, trading near $459 on Monday. Most of that drop came on Oct. 14, when Barclays downgraded the stock.
Barclays wants to see AI in enterprise budgets
Analyst Tim Long cut Dell to Equal Weight from Overweight and trimmed his target to $574 from $603. He hasn’t seen a “meaningful AI inflection” in enterprise spending. And he credits most of Dell’s revenue growth to higher memory prices.
Barclays found that businesses spend only about 5% of their IT budgets on AI, with roughly a quarter of that on hardware. If memory prices flatten out, Dell’s sales could too.
On Dell’s fiscal second-quarter call, Vice Chairman and COO Jeff Clarke conceded, “There’s a notion of inflation inside our growth.”
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The orders are still there
Price increases don’t explain everything, though. In that quarter, revenue jumped 58% to a record $47.0 billion. Dell also booked $60.9 billion of AI server orders, and its AI backlog reached $95 billion.
Wall Street sees about $193 billion of revenue this fiscal year (ending January 2027), then $229 billion next year…
Barclays thinks those estimates lean on memory prices.
Super Micro Computer (SMCI) backed up the demand side on Oct. 20. Its preliminary fiscal first-quarter revenue of $18.5 billion to $19.5 billion beat its own $14.5 billion to $15.5 billion forecast. Yet the stock is still down 21% in the past month.
Cheaper, but the cash has to show up
Dell now trades at 16x forward earnings, down from 26x in August. That’s still above its five-year average of 12x.
The average analyst target of $593 sits about 31% above Thursday’s close.
Cash is the bigger question. Free cash flow fell 47% to $986 million in the same quarter, as customer financing tied up $6.7 billion. Dell needs roughly $8 billion in the second half to hit the $12 billion consensus for the year.
My take: the backlog and Super Micro’s numbers show AI server demand is real. At 16x, Dell looks like a reasonable buy, with memory prices the risk to watch.
Still, Dell’s fiscal third-quarter report on Nov. 24 will show how much of that backlog is turning into cash. Another quarter of free cash flow under $1 billion would make Barclays look right.
So what is Dell stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
