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Dell Tops First-Quarter Views as AI-Optimized Server Sales Skyrocket; Shares Rally After Hours

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Dell Tops First-Quarter Views as AI-Optimized Server Sales Skyrocket; Shares Rally After Hours

Dell Technologies (DELL) late Thursday reported record fiscal first-quarter results that surpassed Wall Street's estimates amid a surge in demand for artificial intelligence-optimized servers.

Adjusted earnings rose to $4.86 a share for the quarter ended May 1 from $1.55 a year earlier, above the FactSet-polled consensus estimate of $2.96. Revenue soared 88% year-on-year to $43.84 billion, higher than the Street's $35.74 billion view.

Revenue in the infrastructure solutions group climbed 181% to $29.01 billion as AI-optimized server sales skyrocketed by 757%, Dell said. Traditional server and networking revenue increased 92%.

The company secured $24.4 billion in AI orders and reported $16.1 billion of AI server revenue, Chief Operating Officer Jeff Clarke said in a statement.

Dell's shares were up 19% in after-hours trade. The stock surged 152% so far this year through Thursday's close.

Sales for the client solutions group, which includes personal computers, climbed 17% year-on-year to $14.61 billion in the fiscal first quarter.

Morgan Stanley expected "a blowout" quarter, projecting management to raise its full-year EPS guidance amid server demand strength and large enterprises pulling forward their spending in compute markets. Dell is also gaining market share in PCs, the brokerage said in a note last week.

The company raised its fiscal 2027 outlook.

Dell now expects full-year non-GAAP EPS to grow 74% year over year at the midpoint of its range, to $17.90, compared with its previous guidance of $12.90. Revenue is now pegged at between $165 billion and $169 billion, reflecting a 47% year-over-year jump at the midpoint, up from the prior $138 billion and $142 billion range. The consensus is for full-year adjusted EPS of $13.12 and sales of $143.19 billion.

"We're increasing our AI server revenue expectations for (fiscal 2027) to $60 billion, which only goes to show the AI opportunity shows no signs of slowing," Clarke said.

For the current quarter, Dell forecasts adjusted EPS of $4.80 at the midpoint on revenue of $44 billion to $45 billion. Analysts are looking for $2.99 and $35.10 billion, respectively.

"We remain cautious on (second-half) profitability given memory inflation/supply shortages have materially intensified over the last 90 days, and (first-half) demand pull-forward elevates the risk of demand destruction and margin pressure in (the second half)," Morgan Stanley said.

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