Dell raises forecasts as AI data center expansion drives demand, shares surge
Original author: Jaspreet Singh, Reuters
Peggy
Editor’s Note: Dell’s stock surged after hours, not merely due to better-than-expected earnings, but because the market is revaluing the AI infrastructure supply chain.
Driven by demand for AI data center construction, Dell's first-quarter revenue increased 88% year-over-year to $43.84 billion, and the company raised its fiscal 2027 AI server revenue forecast from $50 billion to approximately $60 billion. After the earnings report, the company's stock rose by about 39% in after-hours trading.
This indicates that the AI boom is further spreading from models and chips to servers, memory, storage, and data center equipment. As tech giants like Alphabet and Amazon continue to increase their investments in AI infrastructure, hardware manufacturers such as Dell—possessing supply chain capabilities, customer relationships, and delivery capacity—are becoming direct beneficiaries of this new cycle of AI capital spending.
Meanwhile, Dell’s division securing a $9.7 billion contract from the U.S. Department of Defense further strengthens market expectations for its order growth and revenue certainty. For investors, Dell’s rise signals that the AI trade is moving into more downstream, physical stages: those who can turn chips into deliverable data center infrastructure are likely to be next in line for a valuation re-rating.
The following is the original text:
TL;DR
Dell raises its full-year AI server revenue forecast to $60 billion.
The company's second-quarter guidance exceeds market expectations.
Revenue for the first quarter increased by 88% year-over-year to $43.84 billion.
After hours trading, the company's stock price rose by approximately 39%.
A division of Dell has been awarded a $9.7 billion contract by the U.S. Department of Defense.
Dell raised its full-year revenue and profit outlook on Thursday, indicating that customer expansion of data centers is driving demand for its AI-optimized servers, which feature NVIDIA's advanced chips.
Dell’s customers include CoreWeave, Honeywell International, and Samsung Electronics. After the earnings report, the company’s stock rose approximately 39% in after-hours trading.
U.S. tech giants including Alphabet and Amazon plan to invest over $700 billion in AI infrastructure this year, which will increase demand for servers and data center equipment from suppliers such as Dell and Supermicro.
Strong performance shows that Dell has become one of the biggest beneficiaries of the generative AI boom. The company effectively navigated the memory chip shortage crisis through price increases and supply chain adjustments.
Dell's Chief Operating Officer, Jeff Clarke, said on the earnings call: "We feel like we're repricing almost every day. I believe our customers are feeling this pressure as well. Unfortunately, given the inflationary environment we're in, I don't see this changing."
Dell stated that AI server revenue for fiscal year 2027 is now expected to be approximately $60 billion, up from the previous estimate of $50 billion.
The company also raised its full-year revenue forecast to $165 billion to $169 billion, a significant increase from the previous estimate of $138 billion to $142 billion.
Meanwhile, Dell raised its full-year adjusted earnings per share guidance from $12.90 to $17.90.
In the first quarter, Dell's revenue increased 88% year-over-year to $43.84 billion, significantly exceeding the analyst consensus of $35.43 billion according to LSEG. Adjusted earnings per share came in at $4.86, also surpassing the market expectation of $2.94.
Melissa Otto, Head of Research at S&P Global Visible Alpha, said: “Due to economies of scale, supplier relationships, and the ability to prioritize demand allocation, Dell is in a stronger position than its competitors, which helped it gain market share during the memory shortage.”
Dell Infrastructure Solutions Group reported a 181% quarterly revenue increase. This segment includes storage, software, and server businesses. Meanwhile, the Customer Solutions Group, which includes PC operations, saw sales growth of 17%.
The company also provided guidance for second-quarter revenue and adjusted earnings per share that exceeded market expectations.
On Wednesday, the U.S. Department of Defense awarded a five-year, $9.7 billion contract to a division of Dell to assist in managing Microsoft software licenses.
