Dell Technologies' (DELL) fiscal 2026 earnings per share could potentially exceed guidance driven by the accelerating momentum of its artificial intelligence server business with about $15 billion in revenue from a record backlog and strong order pipeline, Morgan Stanley said in a note on Friday.

The company said late Thursday it is projecting adjusted EPS of $9.30 for fiscal 2026 and Morgan Stanley analysts said they believe "there's a path" to EPS of over $10 for fiscal 2026.

Fiscal Q4 revenue missed expectations but stringent cost control measures allowed the company to beat EPS estimates, according to the note.

The company saw underperformance in fiscal year 2025 free cash flow generation due to higher inventory balances in graphics processing units, network interface cards and large-capacity enterprise solid-state drives, Morgan Stanley analysts said.

The analysts also said that Dell is modernizing its operations by internally adopting generative artificial intelligence technologies that will help simplify and standardize operations, reducing operating expenses even as gross margins come under pressure from competitive pricing and technology shifts.

Morgan Stanley has an overweight rating on the company's stock with a $128 price target.

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