Barclays upgrades Dell on strong AI server orders, enterprise recovery

Investing.com -- Barclays has upgraded Dell Technologies (NYSE: DELL) to Overweight (OW) from Equal Weight amid growing confidence in the company’s position across AI servers as well as improving opportunities in enterprise server and storage markets.

The bank kept its price target unchanged at $148.

“We are encouraged by what we are seeing now and upgrading the name to OW from EW as we see more upside to come,” analyst Tim Long said in a Thursday note.

The move is driven primarily by stronger-than-expected AI server orders. Barclays said it has become more comfortable with the margin profile of the AI server business, noting that while gross margins remain pressured, operating margins have been resilient.

“We are more positive on DELL given the strength in AI server orders, stability of AI op margins, expanding opportunities in enterprise server and storage, and DELL’s consistent disciplined opex management,” Long wrote.

The analyst highlighted Dell’s plans to ship around $9.4 billion of AI servers in the fourth quarter, which would lift full-year AI server shipments to about $25 billion. He now models 155% and 60% growth in AI orders in fiscal 2026 (FY26) and FY27.

Long said he had previously been concerned about the dilutive gross margin profile of AI servers. But while gross margins are still likely to remain in the high single-digit (HSD) range, this is now largely understood by the market, he added.

“[We] are encouraged that the company is managing to mid-singe-digit op margins for the business,” Long said.

Beyond AI, the analyst points to a recovery in traditional enterprise server and storage markets.

He said Dell continues to increase the mix of its intellectual property offerings in storage and sees meaningful upgrade potential, with a large portion of the installed base still running on older-generation servers.

“We think DELL’s supply chain leadership can help better navigate the current commodity environment,” he continued.

Long maintained a neutral view on the broader hardware sector, flagging AI servers as the key growth driver but warning that low margins and rising memory costs could limit upside across the industry.

He also downgraded Nutanix (NASDAQ: NTNX) to Equal Weight, pointing to longer deal cycles and less visibility on bookings momentum.

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