Bernstein: Dell FQ1'27 Firing on All Cylinders — Estimates and Target Price Raised to $500, Outperform Reiterated
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Bernstein highlights Dell's FQ1'27 results as comprehensively beating expectations across every business segment. The firm raised its earnings estimates and lifted the target price to $500 while reiterating an Outperform rating. First-quarter revenue grew 15% year-over-year, exceeding market estimates by roughly 3%, driven by robust demand for both AI servers and traditional infrastructure.
AI server orders surged 30% sequentially, with backlog reaching record levels, underscoring an accelerating AI investment cycle. Meanwhile, traditional server and storage revenue climbed 8% year-over-year, ending a prior streak of declines and reflecting an enterprise refresh cycle. The PC business posted 5% growth, supported by recovering commercial demand.
Gross margin expanded 1.2 percentage points to 22.5%, while operating margin improved 0.8 percentage points to 6.5%. Free cash flow reached $1.2 billion, up 40% year-over-year. Management's FQ2'27 guidance midpoint implies 12% revenue growth, roughly 2% above consensus.
Bernstein increased its FY2027 and FY2028 EPS estimates to $8.50 and $10.00, respectively, up from $7.80 and $9.20. The new $500 target is based on approximately 50 times FY2028 EPS, reflecting an AI business valuation premium. Risks include potential AI demand deceleration, heightened competition, and macroeconomic uncertainty, though the current risk-reward profile remains favorable.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Exhibit 6
Exhibit 7
Exhibit 8
