North America Hardware & Storage_ Broader Recovery In Infrastructure Demand With Near Term AI Lumpiness, PC Demand More Tempered But Expected to Recover

Summary of North America Hardware & Storage Conference Call Industry Overview - The North American hardware and storage industry is experiencing a broader recovery in infrastructure demand, with AI-related demand showing near-term volatility due to chip transitions and margin pressures [1][2][25]. - PC demand is expected to recover in 2025, driven by the end of life for Windows 10, although current demand remains subdued [1][2]. Key Company Insights Dell Technologies (DELL) - Dell is expected to report results on February 27, 2025, with shares underperforming the broader hardware index due to waning AI enthusiasm and margin pressures [25]. - Adjusted target price is set at $145, down from $156, reflecting a price-to-earnings ratio of approximately 13-14x [2][25]. - AI server margins are anticipated to improve as adoption broadens, despite near-term pressures [2][25]. - Dell is positioned to benefit from strong AI demand, with potential contracts worth ~$5 billion for AI servers [25]. - Revenue estimates for the upcoming quarters include $24.63 billion for Q4 2025 (+10% y/y) and $23.1 billion for Q1 2026 (+4% y/y) [27][30]. HP Inc. (HPQ) - HPQ is maintaining a Neutral rating with a target price of $36.50, as limited upside in PC demand is expected [3][32]. - The company anticipates a decline in PC segment revenues, with expectations of mid-single-digit declines [32][33]. - HP gained market share in the printer segment, achieving a 34.2% share, but overall market dynamics remain challenging [34][35]. Pure Storage (PSTG) - Pure Storage maintains a Buy rating, with a revised target price of $80, up from $75, due to momentum in Flash and Storage as a Service (StaaS) [4]. - The company is expected to benefit from a moderately improving spending environment despite competition from server vendors [4]. NetApp Inc. (NTAP) - NetApp is well-positioned for long-term storage infrastructure modernization but faces tough comparisons and competition from Dell [5]. - The company maintains a Neutral rating, with meaningful upside unlikely until enterprise storage spending increases significantly [5]. Market Dynamics - The overall infrastructure hardware demand remains strong as enterprises modernize their data centers with power-efficient hardware [2][25]. - AI server demand is projected to grow significantly, with orders placed increasing from $1.2 billion in July 2023 to an estimated $3.8 billion by January 2025 [29]. - The PC market is projected to see a slight recovery in 2025, with total client PCs expected to reach 266 million units, a 4% increase from 2024 [18]. Financial Projections - Dell's expected revenues for FY25 are projected at $103.1 billion, reflecting a 7% year-over-year growth, with EPS estimated at $9.40 [30]. - HPQ's FY25 revenue is modeled at $54.76 billion, with EPS of $3.65, slightly below consensus [38]. Conclusion - The North American hardware and storage industry is navigating a complex landscape with strong long-term demand for infrastructure and AI solutions, while facing near-term challenges in PC demand and competitive pressures. Companies like Dell and Pure Storage are positioned to capitalize on these trends, while HP and NetApp are managing more cautious outlooks.