Dell Technologies Raises Revenue and Profit Forecasts

By Jaspreet Singh
(Reuters) – Dell Technologies raised its annual revenue and profit forecasts on Thursday, buoyed by demand for its AI-optimized servers powered by Nvidia’s powerful chips, sending its shares up about 3% in extended trading.

Dell’s infrastructure solutions group, which includes Nvidia-powered servers, surged 38% to a record revenue of $11.65 billion in the second quarter.

The company’s servers are engineered to handle AI systems’ intense computational demands, including training large language models.

“Enterprise remains a significant opportunity for us, as many are still in the early stages of AI adoption,” Chief Operating Officer Jeff Clarke said in a post-earnings call.

Clarke noted an emerging opportunity in “sovereign AI” by leveraging the company’s strong relationships with governments globally.

Nvidia recently stated that nations are turning to its chips for building AI models in their own languages, which would contribute low double-digit billions to its revenue in the fiscal year ending January 2025.

Nvidia CEO Jensen Huang highlighted the partnership with Dell, saying they are assisting businesses in creating their own “AI factories.”

Dell’s stock has risen 45% this year. The company now expects its annual revenue outlook to be between $95.5 billion and $98.5 billion, up from a previous forecast of $93.5 billion and $97.5 billion. Dell also raised its annual adjusted profit per share forecast to $7.80, plus or minus 25 cents.

Demand for its AI-optimized servers rose about 23% sequentially to $3.2 billion in the second quarter. The backlog for these AI servers stood at $3.8 billion.

“Our pipeline has grown to several multiples of our backlog,” Clarke stated.

Revenue for the second quarter ended Aug. 2 rose about 9% to $25.03 billion, beating analysts’ average estimate of $24.14 billion, as reported by LSEG data. The adjusted profit per share was $1.89 compared to estimates of $1.71 per share.

While demand for AI servers soared, Dell’s PC business struggled, losing market share to rivals. However, a strong refresh cycle for AI PCs is expected next year after Microsoft ends support for Windows 10.

Revenue for the client solutions group—home to PCs—fell about 4% to $12.41 billion. “Dell lost PC shipment shares in key markets in the second quarter. It is the top vendor in the U.S. business market, but its competitors have shown growth and gained more shares than last year,” said Mikako Kitagawa, director analyst at Gartner.

The company took a $328 million charge for workforce reductions in the second quarter.

Separately, Reuters reported that Dell is again exploring a possible sale of cybersecurity firm SecureWorks, following previous unsuccessful attempts to find a buyer.