Dell Earnings: Sky-High AI Sales Drive Revenue Beat; Raising Our Fair Value Estimate

No-moat Dell Technologies reported robust fiscal second-quarter earnings, with AI-server sales dramatically exceeding our expectations, $3.1 billion versus $2.4 billion expected. The firm continues to ride the AI wave and exceeded our revenue expectations by 5%, driven by AI server sales. We were also impressed with the firm’s improving margin profile, as Dell seems to be winning business while also maintaining better margins than peers. We have lifted our revenue and profitability estimates to reflect our more optimistic outlook given current results. As a result, we are raising our fair value estimate to $112 from $92. Shares rose 4% during after-hours trading (likely driven by the AI server-driven top-line guidance beat) and screen as fairly valued compared with our raised valuation.