Dell Shares Experience 40% Surge Following Better-Than-Expected Earnings Outlook Amid AI Market Boom

Dell Sees Surge in AI-Related Sales, Shares Rise

Dell's servers designed to run AI workloads have been attracting a significant number of customers from companies that rent computing power, as well as corporate clients and major AI providers. The company's AI-related sales have been a major contributor to its revenue growth. In the quarter ended May 1, Dell booked $24.4 billion in AI orders and generated $16.1 billion in AI server sales, according to Chief Operating Officer Jeff Clarke.

The company's shares rose to a high of $443.86 in late trading after closing at $317.05. Dell's server business has been viewed as an AI winner this year, sparking the stock more than 150% higher through Thursday's close. The company's 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.

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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. 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.

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, according to Amit Daryanani, an analyst at Evercore ISI. 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.