Barclays Upgrades This Leading AI Server Stock to 'Overweight,' Calling It 'Best in Class'

Barclays Upgrades Dell Technologies Amid AI Server Surge

Barclays has raised its rating on Dell Technologies (DELL) to “Overweight,” highlighting the company’s leading role in the AI server infrastructure market. The investment firm praised Dell’s operational excellence, describing it as unmatched, as the company responds to the growing demand for artificial intelligence hardware.

Analyst Tim Long reaffirmed his $148 price target for Dell, expressing increased optimism about the company’s ability to drive rapid AI-related revenue growth while maintaining healthy profit margins. This upgrade comes as Dell anticipates shipping about $9.4 billion in AI servers in the fourth quarter alone, bringing its annual AI server revenue to an estimated $25 billion. Long expects this momentum to continue, forecasting a 155% surge in AI orders for fiscal 2026 and an additional 60% increase the following year, extending through fiscal 2027.

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Long noted that the market is already aware of concerns regarding lower gross margins for AI servers, which typically deliver high single-digit margins—less than Dell’s traditional higher-margin segments. However, he pointed out that Dell has managed to keep operating margins in the AI server business at mid-single digits, demonstrating both pricing strength and operational effectiveness.

Barclays also pointed to Dell’s strengthening presence in the recovering enterprise server and storage sectors. The company is increasing the proportion of its own intellectual property in its storage solutions and stands to benefit from a large base of customers using older servers, which could drive significant upgrade activity.

Additionally, Long commended Dell’s expertise in supply chain management, which has helped the company navigate rising memory costs in an inflationary environment.

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Dell’s Q3 2025 Performance Highlights

For the third quarter of 2025, Dell achieved record revenue of $27 billion and reported adjusted earnings per share of $2.59. The company’s strong performance was largely fueled by its AI server infrastructure business, which continues to gain momentum in the AI hardware market.

AI server orders hit a new peak at $12.3 billion in Q3, bringing total bookings for the year to $30 billion and increasing the backlog to $18.4 billion. Dell shipped $5.6 billion in AI servers during the quarter and expects to deliver around $9.4 billion in the fourth quarter, which would result in approximately $25 billion in AI server revenue for the year. This marks a dramatic rise from just $1.5 billion in shipments two years ago and $10 billion last year.

Operational and Segment Insights

Dell’s management reported that its five-quarter pipeline is expanding across all customer types, including cloud providers, government agencies, and enterprise clients. The company’s competitive edge comes from engineering teams that collaborate directly with large-scale customers to optimize server architectures for efficiency and performance.

The Infrastructure Solutions Group posted a 24% increase in revenue, with operating margins in the segment improving by 360 basis points to reach 12.4%. Demand for traditional servers also grew at a double-digit pace as organizations upgraded outdated systems and consolidated workloads. While overall storage revenue dipped by 1%, Dell’s proprietary offerings, such as PowerStore, achieved their seventh straight quarter of growth, including six quarters of double-digit gains.

Despite facing higher memory component costs, Dell remains confident in its ability to pass on price increases due to tight supply and robust demand. The company returned $1.6 billion to shareholders through buybacks and dividends and maintained a core leverage ratio of 1.6 times.

Is Dell Stock Attractively Priced?

Analysts expect Dell’s revenue to climb from $95.6 billion in 2025 to $149 billion by 2029. During this period, adjusted earnings per share are projected to rise from $8.14 to $17.50. Dell’s shares currently trade at 10.3 times forward free cash flow, in line with its five-year average. At this valuation, the stock could appreciate by 50% over the next three years.

Among the 23 analysts covering Dell, 15 rate it as a “Strong Buy,” two as a “Moderate Buy,” five as “Hold,” and one as “Strong Sell.” The consensus price target stands at $164.43, well above the current price of $120.

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