Citigroup: AI investment shows "volatility" before the IT hardware financial report season, but infrastructure demand has already seen a broad recovery.

Several IT hardware companies will announce their quarterly performance this week. Citigroup stated that despite some "volatility" brought by AI-related expenses, there has been a broader recovery in infrastructure demand. Citigroup analyst Asiya Merchant wrote in a report to clients: "From a fundamental perspective, overall infrastructure demand indicators (excluding AI) still look positive. Feedback from supply chain related companies, such as TD SYNNEX Corporation (SNX.US) and CDW Corp (CDW.US), indicates that infrastructure demand is recovering comprehensively (with suppressed demand being released as mainstream workloads continue)." Merchant added: "In terms of AI, while the future outlook is optimistic, there is volatility in short-term investments, and profit margins are under pressure, especially during periods of chip technology transition. With Windows 10 approaching end of service, it is expected that there will be a rebound in personal computer demand by 2025. However, demand is currently subdued in the short term, and due to potential tariff impacts, there may be early orders in the first quarter." Dell Technologies, Inc. Class C Dell Technologies, Inc. Class C (DELL.US) will announce its performance on February 27th. Due to concerns about profit margins for AI servers, mainly due to supply restrictions caused by processor technology transitions, Merchant has "moderately" lowered expectations for it. Merchant wrote: "Although profit margins in the Infrastructure Solutions Group may come under pressure in the short term, we believe that as the scope of AI server applications continues to expand, customization increases, and economies of scale bring operational cost advantages, profit margins will improve in the future." Merchant reaffirmed a buy rating for Dell Technologies, Inc. Class C and stated that they expect the company's performance guidance for the 2026 fiscal year to be conservative. Analysts generally expect Dell Technologies, Inc. Class C to have an EPS of $2.51 and revenue of $24.59 billion for the next quarter. HP Inc. HP Inc. (HPQ.US) will also announce its performance on February 27th. Merchant reiterated a neutral rating for HP Inc., stating that while the company's market share in the printer business has increased and profit margins have improved, there is "limited" growth potential in the personal computer business. Analysts generally expect HP Inc. to have an EPS of $0.74 and revenue of $13.35 billion. Pure Storage Pure Storage (PSTG.US) will announce its performance on February 26th. Merchant reaffirmed a buy rating for them, as this storage company is benefiting from the development momentum of flash and storage as a service in an environment of moderate improvement in spending. Merchant wrote: "We continue to be bullish on this company, as we believe that their recent orders from large-scale data center customers are likely to lead to breakthroughs in other large-scale data centers. Based on this, we have raised our target price from $75 to $80, and the valuation multiple has also slightly increased." Analysts generally expect Pure Storage to have an EPS of $0.42 and revenue of $868.94 million. NetApp NetApp (NTAP.US) will also announce its performance on February 27th. Merchant stated that the company remains in a "favorable position" in the long-term trend toward modernizing storage and is expected to benefit from it. However, it faces intense competition from companies like Dell Technologies, Inc. Class C and other suppliers. "Significant" growth is unlikely to occur until enterprise storage spending fully recovers. Merchant maintains a neutral rating for the company. Analysts generally expect the company to have an EPS of $1.91 and revenue of $16.9 billion.