Weighing Execution Against Risks & Valuation... Peer Perform

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Weighing Execution Against Risks & Valuation... Peer Perform

shifts in memory and CPU pricing in recent quarters lead us to believe there’s

an element of pull-forwards impacting the Server, Storage, and PC markets. Further, the shares trade at 17x our CY’28

EPS estimate of $24.25. Even after factoring in a well-deserved valuation premium to historical averages (10x), some

of the upside appears to be already priced in. We’re maintaining our Peer Perform rating.

Pull Forward vs. Real Demand… We’re still concerned about supply/pricing distortions in Dell’s near term financials.

By Dell’s own admission, some of the demand they’re seeing is a result of pull forwards. However, there’s also some

real tailwinds for the Server market right now. It’s tough to distinguish. In Dell’s most recent quarter, both Server and

PC demand was led by Large Enterprises. We think this is an indication that pull forward could be a bigger factor than

investors expect. Large Enterprises are exactly the types of customers that are savvy enough to want to move quickly to

get ahead of price increases and – just as important – secure supply for their expected IT needs. If more of the demand

was related to these dynamics, we’d have slight concerns about the durability of the growth rates in traditional servers.

On the flip side, Dell has started to talk a bit more about how Agentic AI is impacting their business. The role of the CPU

in Agentic has been widely discussed by NVDA and CPU vendors like AMD and Intel – those companies have outlined

incremental TAMs for “agentic harnesses” that control and facilitate AI use cases. Those use cases would be incremental

to regular-way IT modernization trends that have driven Dell’s business historically. We understand this has been less