Dell Technologies Inc. shares surged the most since the company returned to the public markets in December 2018, lifted by an outlook for annual sales that far surpassed expectations on demand for servers that power artificial intelligence work.
Revenue in the fiscal year ending in January 2027 will be about $167 billion, including $60 billion from the sale of AI servers, the Texas-based company said Thursday in a statement. That’s up from a prior revenue outlook of about $140 billion and topped analysts’ average estimate of $142.1 billion, according to data compiled by Bloomberg.
Dell’s servers designed to run AI workloads are attracting customers from companies that rent computing power like CoreWeave Inc. and Nscale Global Holdings Ltd., as well as corporate clients and major AI providers. The company booked $24.4 billion in AI orders and generated $16.1 billion in AI server sales in the quarter ended May 1, Chief Operating Officer Jeff Clarke said in the statement. “The AI opportunity shows no signs of slowing.”
The shares surged 33% to $420.91 at the close Friday in New York, the biggest single-day increase in the more than seven years since the hardware maker returned to the public markets after a five-year hiatus as a private firm. Dell’s server business had already been viewed as an AI winner this year, sparking the stock more than 150% higher through Thursday’s close.
The results on Thursday were a “pretty epic beat and raise” that was reminiscent of the way AI chipmaker Nvidia Corp. topped expectations in early 2023, Jordan Klein, an analyst at Mizuho Securities, wrote in a note.
For the fiscal first quarter, sales jumped 88% to $43.8 billion, compared with an average estimate of $35.5 billion. In addition to AI-focused products, the results were boosted by demand for traditional servers containing central processing units. That division’s revenue nearly doubled to $8.5 billion in the quarter compared with the same period a year earlier.
Dell ended the quarter with a backlog on AI server orders of $51.3 billion, Clarke said on a conference call with analysts after the results were released.
As customers move their focus from training AI models to using them, it creates opportunities for Dell products beyond AI servers, Chief Financial Officer David Kennedy said in an interview on Bloomberg Television. “That makes it a more broad-based durable growth over the long term for us,” he said.
The company has been working to hold down costs and improve margins as prices for memory chips rise rapidly. Profit, excluding some items, was $4.86 a share in the quarter compared to an average estimate of $2.99.
On Wednesday, the US military announced it would award a $9.7 billion contract to Dell for help handling licenses for Microsoft Corp. software. The deal “provides Dell with diversity of growth beyond AI and enterprise,” wrote Amit Daryanani, an analyst at Evercore ISI.
Dell’s business unit containing personal computers posted a 17% gain in revenue to $14.6 billion, led by sales to businesses. Analysts, on average, anticipated $12.9 billion in sales.
