SKN | Barclays Upgrades Dell as AI Server Momentum Strengthens Investment Case

Key Takeaways

• Barclays upgraded Dell to Overweight, citing accelerating AI server orders and resilient operating margins.

• AI infrastructure demand is reshaping Dell’s earnings mix, with FY26–27 growth expectations materially revised higher.

• A recovery in enterprise server and storage spending adds a second leg of support beyond AI-driven growth.

Upgrade Signals Rising Conviction in AI Infrastructure

Barclays upgraded Dell Technologies to Overweight from Equal Weight, reflecting growing confidence in the company’s positioning at the center of enterprise AI infrastructure. The bank maintained its $148 price target, signaling that the upgrade is driven less by valuation expansion and more by improving earnings visibility.

The catalyst is stronger-than-expected AI server orders, an area where Dell has rapidly scaled its presence as hyperscalers and large enterprises expand compute capacity. Barclays analyst Tim Long highlighted that while AI servers remain a lower gross-margin business, operating margins have proven more resilient than initially feared.

AI Server Orders Drive Revisions to Growth Outlook

Barclays now expects Dell to ship approximately $9.4 billion of AI servers in the fourth quarter alone, bringing full-year AI server shipments to roughly $25 billion. On that basis, the bank models AI order growth of 155% in fiscal 2026 and 60% in fiscal 2027.

Importantly for investors, the market has largely digested the high single-digit gross margin profile of AI servers. The focus has shifted toward operating discipline, where Dell has demonstrated an ability to sustain mid-single-digit operating margins through tight cost control and scale benefits.

For long-term allocators, this reduces the risk that AI growth comes at the expense of overall profitability.

Enterprise Server and Storage Recovery Adds Support

Beyond AI, Barclays pointed to early signs of recovery in traditional enterprise server and storage markets. Dell continues to increase the mix of proprietary intellectual property in its storage offerings, improving economics and differentiation.

A significant portion of the installed enterprise base remains on older-generation hardware, creating a multi-year upgrade opportunity. In this context, Dell’s supply chain scale and execution discipline are viewed as competitive advantages, particularly amid volatile component pricing and rising memory costs.

This diversification matters. It positions Dell not only as an AI infrastructure play, but also as a beneficiary of a broader enterprise refresh cycle.

Sector Context: Selective Optimism Within Hardware

While Barclays maintained a neutral stance on the broader hardware sector, it clearly differentiated AI-exposed platforms from more cyclical names. Low margins and cost pressures remain a constraint across the industry, but Dell’s scale and execution have elevated it into a more defensible category.

The firm’s simultaneous downgrade of Nutanix underscores this selectivity, highlighting longer deal cycles and weaker visibility elsewhere in enterprise IT.

Forward-Looking Perspective

The upgrade reflects a shift in how Dell is being assessed by the market. Rather than focusing on margin dilution risks, investors are increasingly weighing scale, execution, and strategic relevance within the AI buildout.

As AI infrastructure spending continues to concentrate among a smaller group of capable suppliers, Dell’s ability to pair volume growth with disciplined operating control strengthens its role as a core holding within the hardware segment.

For a confidential discussion on how AI infrastructure leaders like Dell fit within a balanced technology allocation focused on durability and execution risk, contact our senior advisory team.

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