Dell Technologies' (DELL) first-quarter earnings guidance reflects a weak personal computer market and an expected impact of an industry transition toward graphics processing units, UBS Securities said in a Friday note.

Dell expects adjusted earnings per share of $1.65, plus or minus $0.10, in the first quarter, the company said late Thursday as it announced fourth-quarter results. The midpoint of the guidance fell short of the consensus that UBS put at $1.78. Revenue is forecast between $22.5 billion and $23.5 billion, compared with the market view of $23.68 billion, according to the brokerage's report.

The EPS outlook was in line with the brokerage's forecast but below consensus views due to a softer near-term PC backdrop and revenue recognition headwinds from a GPU transition, UBS analysts David Vogt and Andrew Spinola said.

For fiscal 2026, Dell expects adjusted EPS of $9.30 and revenue between $101 billion and $105 billion. The consensus is for EPS of $9.28 and revenue of $103.81 billion, according to UBS.

Dell projects its gross margin to fall by roughly 100 basis points this year amid a higher mix of its artificial intelligence-optimized servers and the current competitive environment, Chief Financial Officer Yvonne McGill said during a Thursday conference call, according to a FactSet transcript.

Dell shares were down 5.5% in Friday trading. The brokerage cut its price target on the stock to $150 from $158.

"We believe any weakness should be bought as the company's initial guide has historically been conservative," Vogt and Spinola said. Dell's 2026 EPS could end up around $9.85, they said.

UBS increased its fiscal 2026 EPS estimate for Dell to $9.31 from $9.04 and its revenue forecast to $103.9 billion from $102.3 billion, citing "better" AI orders and strong cost discipline.

"The prospects for AI are strong, and we are very well positioned," Chief Operating Officer Jeff Clarke said on the call. Dell expects $15 billion of AI server shipments in fiscal 2026, McGill said on the call, compared with UBS' $13 billion estimate.

Dell late Thursday reported stronger-than-expected fiscal fourth-quarter earnings, while the computer maker's revenue fell short of Wall Street's estimates.