On October 20-22, along the banks of Shanghai's Huangpu River, the 2026 Sustainable Global Leaders Conference returns once again. Nobel and Turing Award winners will share their visions of technology's future and trends, and the widely followed professors who "rescue" people from anxiety and the era of intense competition, Macfarlane and Xiang Biao, will hold a live dialogue!
Limited seats available, first come first served. Let us journey together toward sustainability! [Click to register] Dell Technologies Inc. (DELL) was downgraded by Barclays from "Overweight" to "Neutral" recently, with its price target cut from $603 to $574. The main concerns are the company's excessive valuation, persistently rising memory costs, and a possible slowdown in revenue growth over the next two years.
Even though Dell shares have climbed 259% cumulatively since the start of 2026, with AI server backlog hitting a record $95 billion, Barclays believes that a considerable portion of the company's recent rapid revenue growth stems from higher average selling prices driven by rising memory prices, rather than a synchronized expansion in actual demand. On October 14, Dell shares plunged more than 11% in a single day, closing at $507.93.
AI server revenue doubles, Dell quarterly revenue grows 58%
Dell previously reported fiscal 2027 second-quarter results that significantly beat market expectations, with revenue reaching a record $46.97 billion, up 58% year over year and above the market's roughly $45 billion estimate. Adjusted earnings per share reached $7.04, well above the market's expectation of $4.97 and up 203% from $2.32 in the same period last year.
Among the segments, the Infrastructure Solutions Group (ISG), which handles servers, storage, and data center infrastructure, delivered the strongest performance. The segment's second-quarter revenue reached $31.8 billion, up 89% year over year, a record high. Specifically: AI-optimized server revenue reached $16.4 billion, up about 100% year over year. Traditional server and networking revenue reached $10.5 billion, up 122% year over year. Storage revenue reached $4.9 billion, up 26% year over year.
At the same time, the Client Solutions Group (CSG), which includes commercial and consumer PCs, generated $15 billion in revenue, up 20% year over year. The company's operating cash flow for the quarter reached $2.2 billion, and it returned a record $4.3 billion to shareholders through dividends and share buybacks.
Full-year revenue guidance raised by $25 billion, AI server backlog reaches $95 billion
Strong business performance prompted Dell to sharply raise its full-year outlook. The company lifted its fiscal 2027 revenue forecast by $25 billion to $192 billion, corresponding to 69% year-over-year growth. Management expects full-year GAAP diluted earnings per share of $24.37 and adjusted earnings per share of $25.50.
For the third quarter, Dell expects revenue of about $49 billion and adjusted earnings per share of about $6.50. On the order front, Dell disclosed a record AI server backlog of $95 billion, reflecting continued demand from major technology companies and data center operators for AI computing infrastructure. This is also one of the core factors driving Dell's substantial share price gains in 2026.
Barclays: Revenue growth may be amplified by memory price hikes, with slowdown risk over the next two years
While acknowledging Dell's current operating performance, Barclays analyst Tim Long believes the market may be overestimating the sustainability of its revenue growth. Barclays noted that Dell's fiscal 2027 guidance implies enterprise server business revenue growth of more than 100%, with storage and PC businesses also expected to grow about 15%.
However, the firm believes that a significant portion of that growth comes from higher average selling prices (ASP) driven by rising memory prices. For server and PC makers, memory is an important hardware cost. As demand for memory chips increases due to the AI industry, higher memory prices typically push up the selling prices of complete machines, thereby boosting the revenue that manufacturers recognize.
Yet revenue growth does not necessarily mean shipments or profits are growing at the same pace. If costs rise in tandem and manufacturers cannot fully pass on the pressure through pricing, gross margins could still be squeezed. Barclays is particularly concerned that current high memory prices may be difficult to sustain over the long term. Once memory prices return to normal or even decline over the next two years, average selling prices for Dell's servers and PCs could fall accordingly, leading to a marked slowdown in revenue growth.
This means that even if AI server shipment demand remains strong, Dell may not be able to sustain its current rapid revenue growth.
Valuation under pressure after share price surge, market begins to reassess AI server profitability
Dell shares have risen 259% cumulatively since the start of 2026, reflecting investors' previously high optimism about AI infrastructure demand and the company's earnings growth. However, as valuations continue to climb, market focus is shifting from the scale of AI orders to the actual profit contribution of those orders.
Barclays believes Dell will need to prove that the rapid expansion of its AI server business can deliver sustained margin improvement, rather than just revenue growth driven by higher memory costs. Especially with the company's order backlog reaching $95 billion and full-year revenue guidance raised to $192 billion, investors' requirements for future performance have clearly risen.
Barclays cut its price target to $574 this time, which still implies about 13% upside from the October 14 closing price of $507.93. But the firm believes that given the current valuation level, cost pressures, and the risk of future growth deceleration, the case for maintaining an "Overweight" rating is no longer sufficient. This downgrade reflects a changing logic in AI hardware investment: the market is not only focused on server orders and the scale of revenue growth, but is also paying more attention to whether growth comes from actual demand expansion or component price increases, and how much of that revenue can ultimately be converted into profit.
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