Dell Technologies recently provided its earnings guidance for the first quarter, shedding light on the challenges faced in the waning personal computer market and the impacts of an industry-wide shift towards graphics processing units. According to UBS Securities, the company anticipates adjusted earnings per share (EPS) of $1.65, with a variance of plus or minus $0.10.
This projection was shared after the announcement of its fourth-quarter results. Notably, the midpoint of Dell's guidance fell short of the consensus estimate set by UBS at $1.78. Furthermore, its expected revenue is forecast to be between $22.5 billion and $23.5 billion, which also does not meet the market's estimated figure of $23.68 billion, as reported by the brokerage. The EPS outlook aligns with UBS's forecasts but remains below overarching consensus perspectives, a situation attributed to a softened near-term backdrop within the PC sector and challenges related to revenue recognition influenced by the transition towards GPUs.
UBS analysts David Vogt and Andrew Spinola articulated these challenges clearly. Looking ahead to fiscal 2026, Dell is anticipating adjusted EPS of $9.30, with projected revenue ranging from $101 billion to $105 billion. The consensus among analysts is slightly lower, at an anticipated EPS of $9.28 and revenue expectations of approximately $103.81 billion. Amid these projections, Dell's Chief Financial Officer Yvonne McGill indicated during a Thursday conference call that the company's gross margins are expected to decline by approximately 100 basis points this year.
This decline is linked to a higher ratio of artificial intelligence-optimized server sales and the prevailing competitive landscape in which Dell operates. In terms of market response, Dell shares experienced a significant drop of 5.5% during Friday's trading session. In relation to these developments, UBS has also adjusted its price target for Dell's stock, reducing it from $158 to $150. Interestingly, UBS analysts suggest that this moment of weakness might be an opportune time for investment, noting that Dell's initial guidance has historically been rather conservative.
Moreover, they project that Dell's EPS for 2026 could reach around $9.85, reflecting a positive outlook despite current challenges. In light of the ongoing developments, UBS has increased its fiscal 2026 EPS estimate for Dell from $9.04 to $9.31, along with a revenue forecast adjustment from $102.3 billion to $103.9 billion.
This adjustment comes on the heels of indications of stronger AI orders and robust cost management practices. "The prospects for AI are strong, and we are very well positioned," Dell's Chief Operating Officer Jeff Clarke remarked during the call. Furthermore, McGill highlighted that Dell anticipates $15 billion worth of AI server shipments in fiscal 2026, surpassing UBS's estimate of $13 billion. In the company’s fourth-quarter results, while they reported stronger-than-expected earnings, it was noted that their revenue fell short of Wall Street's anticipations..