Dell shares surge 33% after AI server demand drives blockbuster revenue forecast
Dell Technologies Inc. Its shares rose the most since the company returned to the public markets in December 2018; This was supported by a yearly sales outlook well above expectations for demand for servers that power AI efforts.
The Texas-based company said Thursday that revenue will be about $167 billion in the fiscal year ending January 2027, including $60 billion from the sale of artificial intelligence servers. That was higher than the previous revenue outlook of about $140 billion and above analysts’ average estimate of $142.1 billion, according to data compiled by Bloomberg.
Dell’s servers designed to run AI workloads are powered by CoreWeave Inc. and Nscale Global Holdings Ltd. It attracts the attention of companies that rent computing power such as , as well as corporate customers and customers from large artificial intelligence providers. The company received $24.4 billion in AI orders and $16.1 billion in AI server sales in the quarter ending May 1, Chief Operating Officer Jeff Clarke said in a statement. “The AI opportunity shows no signs of slowing down.”
Shares rose 33% to $420.91 at Friday’s close; It was the biggest single-day increase in more than seven years since the hardware maker returned to public markets after a five-year absence as a private firm. Dell’s server business was already seen as this year’s AI winner, sending shares soaring more than 150% through Thursday’s close.
Thursday’s results were “a pretty epic hit and run,” reminiscent of the way AI chip maker Nvidia Corp. beat expectations in early 2023, Jordan Klein, an analyst at Mizuho Securities, wrote in a note.
In the fiscal first quarter, sales rose 88% to $43.8 billion, compared to the average estimate of $35.5 billion. In addition to AI-focused products, demand for traditional servers with central processing units also drove results. This division’s revenue nearly doubled to $8.5 billion in the quarter compared to the same period a year ago.
Dell ended the quarter with $51.3 billion in AI server orders, Clarke said in a conference call with analysts after the results were released.
Customers’ shift in focus from training AI models to using them creates opportunities for Dell products beyond AI servers, CFO David Kennedy said in an interview with Bloomberg Television. “This provides more broad-based, resilient growth for us over the long term,” he said.
The company is working to keep costs low and improve margins as prices for memory chips are rising rapidly. Excluding certain items, earnings came to $4.86 per share for the quarter, compared with the average estimate of $2.99.
On Wednesday, the US military ordered Microsoft Corp. announced it would give Dell a $9.7 billion contract to help process licenses for its software. Evercore ISI analyst Amit Daryanani wrote that the deal “provides Dell with growth diversification beyond AI and enterprise.”
Dell’s business unit, which includes personal computers, saw revenue growth of 17% to $14.6 billion, driven by sales to businesses. Analysts on average expected sales of $12.9 billion.
