Core Viewpoint - Dell Technologies (DELL) shares are currently undervalued, trading at a forward 12-month P/E of 11.51X compared to the sector average of 23.15X, despite a year-to-date decline of 18.3% in share price [1][5] Financial Performance - DELL's share price has decreased by 18.3% year-to-date, underperforming the Zacks Computer and Technology sector's decline of 11.2% and the Computer - Micro Computers industry's drop of 16% [1] - For the first quarter of fiscal 2026, DELL expects revenues between $22.5 billion and $23.5 billion, indicating a 3% year-over-year growth at the midpoint [12] - The Zacks Consensus Estimate for first-quarter fiscal 2026 revenues is $23.16 billion, suggesting a growth of 4.13% year-over-year [13] - Non-GAAP earnings are projected at $1.65 per share, indicating a 25% growth at the midpoint [13] Market Dynamics - The recent decline in DELL's share price is attributed to broader market weakness and rising trade tensions, which have negatively impacted investor sentiment [5] - DELL is experiencing challenges in the consumer segment of the PC market, with cautious spending from enterprises and large customers [5] Growth Drivers - DELL is benefiting from strong demand for AI servers, with a reported increase of $1.7 billion in orders for AI-optimized servers in the fourth quarter of fiscal 2025 [7] - The company shipped $2.1 billion worth of AI servers in the same quarter, with a healthy backlog of $4.1 billion [7] - DELL's expanding partner base includes major companies like NVIDIA, Microsoft, and Meta Platforms, enhancing its market position [9][10] Strategic Initiatives - DELL is expanding its AI Factory portfolio with new AI PCs, infrastructure, software, and services to accelerate enterprise AI adoption [10] - Collaborations with Meta Platforms and Advanced Micro Devices aim to enhance AI solutions and telecom network management [11] Long-term Outlook - DELL anticipates a long-term revenue CAGR of 3% to 4%, with ISG expected to grow by 6-8% and CSG by 2-3% [14] - Earnings are projected to see a CAGR of over 8% due to gross margin expansion and disciplined cost management [14]

Core Insights - The AI infrastructure market is expected to exceed $200 billion in spending by 2028, with both Dell Technologies and Hewlett Packard Enterprise well-positioned to benefit from this growth opportunity [2] Dell Technologies - Dell Technologies is experiencing strong demand for its AI-optimized servers, particularly the PowerEdge XE9680L, driven by digital transformation and interest in generative AI applications [3] - In Q4 of fiscal 2025, Dell's AI-optimized server orders increased by $1.7 billion, with shipments totaling $2.1 billion and a backlog of $4.1 billion [5] - Dell's partnership with companies like NVIDIA and Microsoft is expanding, enhancing its AI capabilities and enterprise AI adoption [6] - Dell's shares are trading at a forward Price/Sales ratio of 0.5X, indicating a relatively low valuation [13] - The Zacks Consensus Estimate for Dell's fiscal 2026 earnings is $9.34 per share, reflecting a 14.74% year-over-year increase [15] Hewlett Packard Enterprise - Hewlett Packard is also benefiting from strong demand for its AI-optimized servers, with its server business growing 30% year-over-year to $4.3 billion in Q1 of fiscal 2025 [7] - The launch of HPE's ProLiant Gen 12 server platform is expected to improve performance and energy efficiency, potentially replacing multiple older server generations and reducing power consumption by at least 65% [8] - HPE's GreenLake cloud product has achieved significant growth, with annual recurring revenue surpassing $2 billion, a 46% increase year-over-year [9] - HPE's shares are trading at a forward Price/Sales ratio of 0.52X, slightly higher than Dell's [13] - The Zacks Consensus Estimate for HPE's fiscal 2025 earnings is $1.94 per share, indicating a 2.51% decline year-over-year [15] Stock Performance - Year-to-date, Dell's shares have decreased by 34.9%, while HPE's shares have dropped by 37.6%, largely due to broader market weaknesses and rising trade tensions [10] - Dell holds a Zacks Rank of 3 (Hold), making it a stronger pick compared to HPE, which has a Zacks Rank of 4 (Sell) [17]