Key Takeaways:
Dell Technologies shares jumped nearly 10 percent in premarket trading on surging AI server demand.
"The AI momentum spoke for itself," analysts at J.P.Morgan said, noting Dell's record $60 billion of orders and $95 billion backlog in the quarter.
The Round Rock, Texas-based company raised its full-year revenue outlook by $25 billion to $192 billion and lifted adjusted earnings-per-share guidance to $25.50 from $17.90. Second-quarter revenue rose 58 percent to a record $47 billion, ahead of the $44.92 billion average analyst estimate compiled by LSEG, while adjusted earnings of $7.04 a share topped estimates of $4.91.
The company now expects fiscal 2027 AI-optimized server revenue of $74 billion, up from a prior $60 billion, and projects third-quarter revenue of $49 billion with adjusted EPS of $6.50, both above analyst estimates of $41.42 billion and $4.48.
Shares were set to add about $26 billion in market value at the current price of $465. The raise is Dell's second this year, reinforcing confidence that AI infrastructure spending remains durable.
Dell, along with smaller rival Super Micro Computer, is a key supplier of AI-optimized servers used by cloud providers such as Nscale and CoreWeave to build computing clusters for training and running models like OpenAI's ChatGPT. The servers run on Nvidia's chips.
"Demand is broadening across neoclouds, sovereigns, and enterprise customers, and our customer count has surpassed 6,500," Chief Operating Officer Jeff Clarke said on a post-earnings call. "Over the past 12 months, we have booked more than $130 billion in AI server orders."
"Storage strength is really playing a role and it seems sustainable as AI is driving fundamental growth in Dell's most profitable business," analysts at Melius Research said. The brokerage lifted its price target to $735, the highest among analysts tracked by LSEG.
Shares of peer AI server makers also rose, with Super Micro up 0.7 percent and Hewlett Packard Enterprise up 5.4 percent. Dell trades at 18.12 times expected earnings over the next 12 months, versus 12.56 for HPE and 8.06 for Super Micro.
S&P Global Ratings projects AI infrastructure spending will surpass $1.3 trillion by 2027, pointing to further demand for equipment makers. Dell's shares have more than tripled this year.
The guidance raise shows management expects AI demand to keep accelerating. Investors will watch Dell's third-quarter results for updated segment margins and any cooling in the AI server order book.
This article is for informational purposes only and does not constitute investment advice.
