Dell’s big quarter, fueled by surge in AI-server demand, sends stock soaring 15%

Dell Technologies Inc. has seen the future of computing, and it increasingly is AI instead of PC.

Dell’s stock

jumped 15% in extended trading Thursday after the company put up quarterly results that eclipsed Wall Street’s expectations. It also announced a 20% increase in its annual cash dividend, to $1.78 per share

The personal-computer company, fueled by a surge in demand for AI servers, reported fiscal fourth-quarter net income of $1.16 billion, or $1.59 a share, compared with net income of $606 million, or 84 cents a share, in the same quarter a year ago. Adjusted earnings were $2.20 a share.

Net revenue slumped 11% to $22.3 billion from $25 billion in the year-ago quarter. Dell Chief Operating Officer Jeff Clarke noted $800 million in AI-server shipments during a conference call with analysts, but warned of a “soft” PC market that could extend into the second half of 2024.

“The demand is in excess of supply,” Clarke said, explaining the popularity of AI servers and related services.

AI-server demand and a rebound in PC sales in late 2024 should lead to growth of 3% to 5% in fiscal 2025, Dell executives said. They forecast fiscal 2025 annual sales of $91 billion to $95 billion. FactSet analysts are modeling for $92.2 billion.

Earlier this week, Dell announced a lineup of new laptops and PCs featuring neural-processing units designed to run AI workloads.

Analysts surveyed by FactSet had expected on average net income of $1.73 a share on revenue of $22.17 billion for Dell’s fourth quarter.

Shares of Dell have skyrocketed 136% over the past year, while the broader S&P 500 index
has increased 28%.

Dell’s boffo quarter and guidance highlights a wave of AI sales from enterprise customers as the technology takes hold, according to industry executives.

“Dell’s AI momentum stood out with a 40% jump in its order book. With Nvidia

H100 availability on the rise and AMD’s

MI300 showing strong early demand, Dell excited investors that it can be part of the fast-rising AI names,” Daniel Newman, principal analyst at Futurum Group, said in an email.

Nutanix Inc.

Chief Executive Rajiv Ramaswami, whose company announced strong results on Wednesday, pointed to increasing demand for generative AI for such tasks as customer support, documentation, assisted technology and fraud detection.

“We are early in the journey,” Ramaswami said in an interview. “Companies want to spend and they are experimenting” in making the best use of AI.

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