Barclays downgraded Dell Technologies (NYSE: DELL), Hewlett Packard Enterprise, and NetApp to Equal Weight from Overweight, citing stretched valuations and no meaningful enterprise AI inflection yet.

Analyst Tim Long noted that the seven enterprise-exposed stocks in his coverage have risen an average of approximately 140% this year, compared to a 14% gain for the S&P 500.

The group now trades at around 21 times estimated 2027 earnings, well above its five-year historical average of approximately 15 times, raising concern about sustainability.

Dell shares alone have climbed well over 300% this year, a rally Long attributes largely to the company’s success in offsetting memory cost inflation through aggressive price increases.

Guidance for Dell calls for just over 100% revenue growth in enterprise servers, alongside mid-teens growth in both storage and consumer devices, reflecting strong near-term execution.

However, Long struck a cautious tone on the outlook, writing, “As a result, we expect a meaningful deceleration in growth over the next two years as memory prices normalize and potentially decline.”

AI servers have proven a successful business line for Dell, with operating margins stabilizing at approximately 5% and the segment generating significant top-line momentum throughout the year.

Long’s model projects AI server revenue tripling to $75 billion in the current fiscal year, and he acknowledged he would not be surprised to see upside to his $100 billion estimate for fiscal 2028.

Despite that optimism on revenue, Long cautioned that growth should decelerate materially, and that upside surprises to earnings estimates will likely shrink in magnitude going forward.

Dell has also demonstrated strong cost discipline, cutting operating expenses as a share of revenue from 15.6% in fiscal 2024 to an estimated 8% in fiscal 2027, a notable structural improvement.

Long acknowledged he still sees some upside to earnings estimates, but warned that “the scale of the beats should become much smaller,” which may limit further stock price appreciation from current levels.

Barclays trimmed its price target on Dell to $574 from $603, reflecting the more tempered growth outlook while still leaving room for modest gains from recent trading levels.