Morgan Stanley Upgrades Dell as AI Server Boom Drives Record Earnings
Dell Technologies shares surged 84% over the past month, with AI server revenue jumping 757% year-on-year, prompting a rating upgrade and higher full-year guidance.
Morgan Stanley has upgraded Dell Technologies to an Equal-Weight rating from Underweight, raising its price target to $448 from $170. The move follows the company’s first-quarter fiscal 2027 earnings report, which revealed a 757% year-on-year increase in AI server revenue. The upgrade underscores the market’s growing confidence in Dell’s ability to capitalise on the artificial intelligence hardware boom, with shares rising approximately 11% on June 1 to reach a new high of $469.47.
The financial results were robust, with total revenue jumping 88% to $43.84 billion. Adjusted earnings per share climbed 214% to $4.86, while GAAP profit reached $3.44 billion. A significant portion of this growth came from the Infrastructure Solutions Group, where revenue surged 181% to $29 billion. AI-optimized server revenue alone exploded to $16.1 billion, highlighting the rapid expansion of Dell’s data centre business.
In response to the strong performance, Dell raised its full-year fiscal 2027 revenue guidance to a range of $165 billion to $169 billion, up from the previous estimate of $138 billion to $142 billion. The company also lifted its adjusted earnings per share guidance to $17.90 and expects AI server revenue for the full year to reach approximately $60 billion. Management further projected second-quarter revenue between $44 billion and $45 billion.
Beyond the data centre segment, Dell secured a $9.7 billion contract from the US Department of Defence to consolidate Microsoft services across military operations. This win highlights the company’s deepening presence in government and enterprise IT. On the consumer side, Dell launched a new XPS 13 laptop starting at $699, positioning it as its most affordable XPS model to compete directly with Apple’s MacBook Neo.
The stock has climbed 216% year-to-date in 2026, with a market capitalisation of approximately $272.5 billion. While Dell’s forward price-to-earnings ratio of 32.5 times sits above the tech sector average of 28 times, analysts remain optimistic. Susquehanna recently raised its target to $700, and the consensus among 25 covering analysts stands at a Moderate Buy with an average target of $485.95.
