TLDR
- Dell reports Q4 earnings after market close on Thursday, February 26
- Analysts expect EPS of $3.53 and revenue of $31.7 billion, up 32% year-over-year
- Server and networking revenue estimated at $14 billion, more than double last year’s $6.63 billion
- Rising memory costs are squeezing margins; Q4 gross margins expected to fall to 20.3% from 24.3%
- HP already warned rising memory costs will pressure earnings through fiscal 2027
Dell Technologies heads into its Q4 earnings report with strong AI tailwinds — but a margin headache is brewing.
The company is set to release fourth-quarter results after the bell on Thursday. Wall Street is looking for adjusted EPS of $3.53 on revenue of $31.7 billion.
That compares to EPS of $2.68 and revenue of $23.9 billion in the same quarter last year — a jump of around 32% on the top line.
The growth story here is simple: companies are spending heavily on AI infrastructure, and Dell makes the servers and networking gear that powers it.
Server and networking revenue is expected to hit $14 billion this quarter. That’s more than double the $6.63 billion Dell posted in Q4 last year.
Evercore ISI analyst Amit Daryanani rates Dell as Outperform with a $160 price target. He wrote on Monday that he expects results to come in above consensus, citing strong near-term demand across both AI compute and traditional hardware.
Dell closed Wednesday at $123.50, well below that target.
Dell has a solid track record heading in. The company has beaten EPS estimates 75% of the time over the past two years, according to GuruFocus.
Analyst consensus sits at a “Buy,” with an average price target of $155.12.
Margins Under Pressure
The concern isn’t demand — it’s cost. Memory prices are rising fast, driven by AI-related demand outpacing supply. That’s squeezing margins across the hardware sector.
Dell’s Q4 gross margins are projected to come in at 20.3%, down from 24.3% in the same period last year.
For context, Dell’s Q3 gross margins of 21.1% actually beat estimates — so the company has managed these pressures reasonably well so far.
But the trend is moving in the wrong direction.
HP Inc. flagged this issue directly on Tuesday, saying it expects fiscal year earnings to land at the lower end of its forecast range. HP added that elevated memory costs will continue through fiscal 2026 and into fiscal 2027.
Daryanani noted that while Dell will try to absorb some of these costs internally, some will inevitably be passed on to customers.
He added that once Q4 results are out, attention will shift quickly to whether Dell can maintain margin durability and double-digit EPS growth going forward.
What Analysts Are Watching
Analysts also flagged that PC and traditional server demand may have been pulled forward in Q4. The idea is that buyers placed orders early to get ahead of anticipated price increases from rising memory costs.
If true, that could create a tougher comparison in the quarters ahead.
On the valuation side, Dell trades at a forward P/E of 10.3, which looks modest relative to its earnings growth rate. The GF Value estimate from GuruFocus puts fair value at $138.33, labeling the stock as modestly undervalued at current prices.
The stock carries a beta of 1.11, meaning it tends to move slightly more than the broader market.
Dell’s Q4 results are due after the close on Thursday, February 26.
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