Dell Rated 'Underperform' As Growth Set to Subside In 'The Second Half:' HP Deemed More Compelling By Analyst

Despite dodging some tariff impact from not having manufacturing operations in China, Dell Technologies Inc.‘s DELL growth is projected to subside in the second half of the fiscal year, explains this Gimme Credit analyst, as he prefers HP Inc. HPQ.

What Happened: Even though the company has an artificial intelligence server backlog of $14 billion after the first quarter, Dave Novosel, senior investment analyst at Gimme Credit, highlighted that “lumpiness” of AI-enabled server sales was a “major issue.”

However, he said that “the torrid AI growth does not appear to be hurting traditional server growth, as traditional server revenue was up double digits in the quarter.”

According to management, a significant improvement is expected in servers and networking in the second quarter, given the aforementioned non-linear nature of orders.

However, Novosel said, “We expect growth to subside in the second half of the year, yet the overall gain for fiscal 2026 should be roughly 8%.”

The analyst also said that “Unlike HP, Dell has not suffered materially from tariffs and does not expect to over the next few quarters, attributable to the fact that it does not have manufacturing operations in China. The company indicated that the cost environment is deflationary within the PC business.

Talking about the debt issuances by both companies, Novosel said that “We find the HP spread compelling compared to other technology sector credits trading substantially tighter. We think Dell should trade considerably tighter than HP Inc. based on our near-term outlook for revenue and margins.”

The analyst maintained his “underperform” rating on the stock.

“However, the 55 basis point difference seems extravagant. So we prefer HP at these levels and are keeping our underperform recommendation on Dell,” he added.

Why It Matters: Looking ahead, Dell anticipates shipping approximately $7 billion of that backlog in the second quarter.

Vice Chairman and COO Jeff Clarke also emphasized the company's focus on actively converting its extensive "five-quarter pipeline" into new orders throughout the second quarter and the latter half of the year.

He projected a strong performance, stating that their "best outlook" suggests they will be in the "$15 billion plus" range for shipped AI server revenue for the full fiscal year.

Dell shares fell 0.76% on Thursday and declined 0.61% in after-hours. The stock was down 4.04% in 2025 and 16.53% over the whole year.

Benzinga Edge Stock Rankings show that Dell had a stronger price trend over the short and medium terms but a weaker trend over the long term. Its momentum ranking was poor, and its value ranking was moderate at the 38.61th percentile. The details of other metrics are available here.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell on Thursday. The SPY was down 0.48% at $593.05, while the QQQ declined 0.75% to $524.79, according to Benzinga Pro data.

On Friday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.

Read Next: