Dell Technologies on Thursday increased both its annual revenue and profit guidance, attributing the lift to robust client investment in data center capacity and rising demand for AI-optimized servers built around Nvidia processors. Shares of the company climbed more than 10% in after-hours trading following the update.
The company said U.S. technology firms, including Alphabet and Amazon, plan to invest in AI infrastructure at a scale exceeding $700 billion this year, a demand tailwind for server and data center equipment suppliers such as Dell and Super Micro Computer. Dell noted that AI servers play a central role in supporting services like ChatGPT by combining substantial computing power with advanced memory to store data and instructions.
On its outlook, Dell now forecasts AI server revenue of roughly $60 billion for fiscal 2027, up from a prior expectation of $50 billion. For the full year, management raised its revenue guidance to a range of $165 billion to $169 billion, a significant increase from the previous target of $138 billion to $142 billion. The company also boosted its annual adjusted earnings-per-share forecast to $17.90 from the earlier $12.90 estimate.
Performance in the first quarter provided the backdrop for the upgraded outlook. Dell reported revenue of $43.84 billion, an increase of 88% year-over-year, which exceeded the LSEG-compiled analysts' average estimate of $35.43 billion. Adjusted earnings per share were $4.86, also ahead of the $2.94 consensus.
Breakdowns by business unit showed particularly strong growth in infrastructure-related offerings. Revenue from Dell's infrastructure solutions group - which encompasses storage, software and servers - rose 181% to $29 billion. Sales from the client solutions group, which includes personal computers, increased 17% to $14.61 billion.
In addition to full-year guidance, Dell provided second-quarter revenue and adjusted profit-per-share forecasts that the company said sit above market estimates, reinforcing management's message that demand remains elevated.
Management described steps taken to navigate a strained memory chip environment, noting implementation of price increases and adjustments to the company supply chain as measures that have helped Dell manage input cost pressures and competitive dynamics. The company said these actions contributed to the stronger-than-expected quarterly results and the more bullish forward view.
The results and updated outlook underline a pronounced shift in demand patterns for server and data center equipment as large cloud and technology customers accelerate spend on AI infrastructure. Dell's revised forecasts and strong quarterly performance were received positively by investors, as reflected in the stock's move in extended trading.
Summary of key figures cited by the company:
- First-quarter revenue: $43.84 billion, up 88% year-over-year.
- First-quarter adjusted EPS: $4.86.
- Infrastructure solutions group revenue: $29 billion, up 181%.
- Client solutions group revenue: $14.61 billion, up 17%.
- Full-year revenue guidance: $165 billion to $169 billion (previously $138 billion to $142 billion).
- Full-year adjusted EPS guidance: $17.90 (previously $12.90).
- AI server revenue projection for fiscal 2027: roughly $60 billion (previously $50 billion).