Dell Shares Experience Significant Surge Following Robust Revenue Projections.

Dell Technologies Inc. Shares Soar as AI Server Demand Surpasses Expectations

Dell Technologies Inc. shares surged 33% to $420.91 at the close on Friday in New York, marking the biggest single-day increase since the company returned to the public markets in December 2018. The Texas-based company's outlook for annual sales far surpassed expectations, driven by strong demand for servers that power artificial intelligence work.

Revenue in the fiscal year ending in January 2027 is expected to be approximately $167 billion, including $60 billion from the sale of AI servers. This is up from a prior revenue outlook of about $140 billion and tops 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.

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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 noted that AI opportunity shows no signs of slowing. Sales jumped 88% to $43.8 billion for the fiscal first quarter, compared with an average estimate of $35.5 billion.

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 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, according to Jordan Klein, an analyst at Mizuho Securities.

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. Additionally, Dell ended the quarter with a backlog on AI server orders of $51.3 billion, according to Clarke.

Chief Financial Officer David Kennedy noted that as customers move their focus from training AI models to using them, it creates opportunities for Dell products beyond AI servers. This, he said, makes it a more broad-based durable growth over the long term for the company.

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