As Dell Technologies prepares to report its earnings, investors are eagerly awaiting updates on the company’s server and storage demand, as well as its robust AI pipeline. While sentiment remains bullish, there is a key debate surrounding the ability of demand to absorb significant average selling price increases needed to offset rising component costs.

UBS analyst David Vogt has raised estimates by roughly 4%, reflecting stronger unit demand for general-purpose servers despite substantial price increases, as well as improved conversion of Dell’s AI server backlog and pipeline into FY27 revenue. He has also increased FY28 estimates, expecting demand to remain robust through the first half of the year.

For FQ2, David now forecasts revenue of $46.0bn and EPS of $4.97, versus consensus estimates of $45.1 bn and $4.90, respectively. He expects gross margins of 17.1%, operating margins of 9.3%, and AI server revenue of $16 bn, up from his prior estimate of $15.6 bn.

However, investor expectations appear to be even higher, with market “bogeys” reportedly closer to $70 bn-$75 bn. While Dell’s valuation has rerated significantly over the past six months, elevating near-term expectations, limited scope for meaningful gross margin expansion may constrain further multiple expansion. As a result, David maintains a Neutral rating.