Evercore ISI Names Top Pick, Lifts Target to $575 on AI Growth

Evercore ISI has named Dell Technologies as its top pick, raising its price target to $575 ahead of a potential growth surge in the AI sector. The investment firm removed Dell from its Tactical Outperform (TAP) list after the company reported impressive July-quarter earnings, surpassing estimates with $47 billion in sales and $7.04 in earnings per share (EPS).

Dell's revenue grew by 58% year-over-year, with growth spread across various segments. Traditional Server/Networking saw a significant rise of 122%, while AI servers increased by 100%, storage rose by 26%, and the PC segment grew by 20%. AI server revenue reached $16.4 billion, with $61 billion in orders, making the AI backlog approximately $95 billion.

The company's growth is driven by demand for both traditional servers and AI deployments, with the latter contributing to a backlog of around $95 billion. Traditional server growth was fueled by next-generation x86 server migrations, storage infrastructure upgrades, and demand for on-premises inferencing and token generation infrastructure. Storage segment growth of 26% also helped boost margin expansion, pushing ISG margins to 15%, up 630 basis points year-over-year.

Dell has raised its FY27 revenue guidance to approximately $192 billion, indicating a 70% year-over-year growth. This growth is expected to come from various segments, including ISG (up 120%), AI (up 300%), and CSG (mid-teens growth). The company anticipates non-GAAP EPS of about $25.50, up from the previous estimate of $17.90.

Despite the strong results, Dell remains supply constrained, a factor the investment firm views as supportive of continued revenue growth into FY28 and beyond. Evercore ISI views this July 1 earnings report as the catalyst for its tactical list change, while maintaining its "outperform" rating and $575 target, given Dell's exposure to attractive infrastructure verticals.