Dell Technologies (DELL) is expected to log mixed fiscal fourth-quarter results, with artificial intelligence server revenue seen dropping by a double-digit percentage sequentially amid "shipment challenges" with Nvidia's (NVDA) Blackwell generative AI system, BofA Securities said in a note.

The computer manufacturer is scheduled to report results Feb. 27. BofA expects adjusted earnings of $2.50 a share on revenue of $24.67 billion. Wall Street is looking for $2.52 and $24.57 billion, respectively. AI server revenue is projected to decline 14% from the previous quarter to $2.5 billion, according to BofA.

The brokerage reduced its price objective on the Dell stock to $150 from $155, while reiterating its buy rating.

The infrastructure solutions group division's fourth-quarter revenue is expected to jump 26% year over year, while client solutions group is seen rising 2.6%, according to BofA. The brokerage sees Dell's AI server backlog exiting the quarter at $5.6 billion.

"Other server vendors have guided (quarter-on-quarter revenue) down during their update calls, but reaffirmed strength in AI orders/backlog," BofA analyst Wamsi Mohan said in the note e-mailed Tuesday. "Dell will likely see the same scenario where (the first quarter) will have the lowest AI (revenue) in (2026) and then deliver solid (revenue) once Blackwell starts to ship in higher volume."

Dell shares were up 5% in Tuesday late-afternoon trade.

For the ongoing quarter, BofA projects adjusted EPS at $1.84 on revenue of $23.15 billion, compared with the Street's views for $1.82 and $23.83 billion, respectively.

"While the near-term set-up could be challenged on AI server (revenue)/margins, we believe this to be transitory," Mohan wrote. "As Dell begins to deliver on the demand for AI servers and customers shift more enterprise/sovereign, (revenue)/margins should shift higher overtime."

For fiscal 2026, BofA expects Dell to guide adjusted EPS in a range of $8.75 to $9, which the brokerage said would be below the Street's current estimates of $9.39. BofA, which is projecting $8.91, said the company's outlook would likely end up proving to be conservative. "We believe (the Street's) numbers do not accurately reflect the margin-dilutive impact of AI server (revenue), Mohan said.

Late last week, Bloomberg News reported that Dell is in "advanced stages" of reaching an agreement worth more than $5 billion to provide Elon Musk's xAI with AI-optimized servers.

"This potential deal shows there could be upside to AI server (revenue) over time," Mohan wrote.