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Dell Technologies has raised its yearly revenue and profit predictions following strong demand for its AI-optimized servers.
Dell Technologies has updated its annual revenue and profit forecasts following robust demand for its AI-optimized servers powered by Nvidia’s advanced chips. After the announcement, the company’s shares rose approximately 3% in extended trading.
Dell’s infrastructure solutions group, which includes Nvidia-powered servers, reported a record revenue of $11.65 billion for the second quarter, a 38% increase. The company’s AI servers are designed to handle the intensive computational needs of training large language models and other AI systems.
“Enterprise remains a significant opportunity for us, as many are still in the early stages of AI adoption,” said Jeff Clarke, Dell’s Chief Operating Officer, during the post-earnings call. Clarke highlighted the potential of “sovereign AI,” leveraging Dell’s strong global government relationships.
Dell raised its annual revenue forecast to between $95.5 billion and $98.5 billion from the previous range of $93.5 billion to $97.5 billion. The company also increased its annual adjusted profit per share forecast to $7.80, with a margin of ±$0.25.
Demand for AI-optimized servers surged about 23% sequentially to $3.2 billion in the second quarter, with a backlog of $3.8 billion. Clarke noted that the pipeline for these servers has grown significantly compared to the backlog.
For the second quarter, which ended August 2, Dell’s revenue increased by about 9% to $25.03 billion, surpassing analysts’ average estimate of $24.14 billion. The company reported an adjusted profit per share of $1.89, exceeding estimates of $1.71.
Despite the surge in AI server demand, Dell’s PC business faced challenges. The client solutions group’s revenue, including PCs, fell about 4% to $12.41 billion. Dell lost market share to competitors, though a strong refresh cycle for AI PCs is anticipated next year following Microsoft’s end of support for Windows 10.
Dell took a $328 million charge for workforce reductions in the second quarter. Additionally, Dell is reportedly exploring a potential sale of its cybersecurity firm SecureWorks following previous unsuccessful attempts to find a buyer.
Nvidia CEO Jensen Huang praised Dell’s partnership with Dell, highlighting their joint efforts to help businesses create “AI factories.” Nvidia’s involvement in AI model development in various languages is expected to contribute low double-digit billions to its revenue for the financial year ending in January 2025.
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