Dell Technologies Reports Strong Revenue Growth
Dell Technologies Inc. saw its stock increase the most since its return to public trading in December 2018, buoyed by a revenue forecast that significantly surpasses expectations related to demand for AI-powered servers.
On Thursday, the Texas-based firm announced that it anticipates roughly $167 billion in revenue for the fiscal year ending January 2027, including about $60 billion from AI server sales. This estimate is a notable increase from previous guidance of $140 billion and is well above analysts’ average projection of $142.1 billion, as per Bloomberg data.
Dell’s servers, crafted to handle AI workloads, are drawing interest not only from enterprise clients and major AI companies but also from firms that lease computing resources, like CoreWeave Inc. and Nscale Global Holdings Ltd. Chief Operating Officer Jeff Clark mentioned that the company secured $24.4 billion in AI orders and generated $16.1 billion in AI server revenue for the quarter ending May 1. He noted, “The opportunities for AI show no signs of slowing down.”
By Friday’s close in New York, shares surged by 33% to $420.91. This marked the largest single-day rise in more than seven years since the company transitioned back to public trading after a five-year stretch as a private entity. Dell’s server sector is being recognized as a key player in the AI market, with the stock appreciating over 150% by Thursday’s end.
Jordan Klein, an analyst at Mizuho Securities, referred to Thursday’s performance as a “pretty epic beat-and-raise,” drawing parallels to AI chipmaker Nvidia’s favorable results earlier in 2023.
In the fiscal first quarter, revenue climbed 88% to $43.8 billion, exceeding average expectations of $35.5 billion. Beyond AI-focused offerings, traditional servers with central processing units also boosted results. This segment nearly doubled its revenue year-over-year, hitting $8.5 billion.
During an earnings conference call, Clark revealed that Dell concluded the quarter with a backlog of $51.3 billion in AI server orders.
As customers shift their focus from just training AI models to utilizing them, there’s potential for Dell’s offerings to expand beyond AI servers. Chief Financial Officer David Kennedy noted in an interview on Bloomberg TV that this transition could lead to broader and more sustainable growth for the company in the long run.
Dell has been actively working to manage costs and enhance profit margins amid rising memory chip prices. For the quarter, earnings, excluding certain items, were reported at $4.86 per share, compared to an average estimate of $2.99 per share.
Additionally, on Wednesday, the U.S. military revealed a $9.7 billion contract with Dell to assist in licensing Microsoft software. Evercore ISI analyst Amit Daryanani commented that this deal allows Dell to achieve diversified growth beyond just AI and enterprise solutions.
In Dell’s personal computer business segment, sales increased by 17% to $14.6 billion, driven primarily by business sales, surpassing analysts’ average estimates of $12.9 billion.
