Dell gets an AI upgrade

A few months ago, President Trump told Americans to “go out and buy a Dell computer” while ringing the NYSE opening bell from the White House for the very first time. Shares of the tech giant have climbed 110% since then, including a 15.8% pop today after Dell revealed a blowout quarter.

Dell reported record quarterly revenue of $47 billion, up 58% from a year ago and above Wall Street’s $44.9 billion estimate. Adjusted earnings more than tripled to $7.04 per share, blowing past expectations of $4.91.

The strong quarter was helped by growth across Dell’s more traditional businesses: Revenue at its PC division grew 20%, its fastest pace in five years, while traditional server and networking sales jumped 122%, and storage revenue climbed 26%.

Beyond the desktop

You might be wondering how the company behind your very average corporate laptop is suddenly putting up numbers like these.

Well, Dell isn’t just a PC company anymore: It has become one of the biggest beneficiaries of the AI infrastructure boom. Nvidia GPUs may get most of the attention, but companies also need servers, networking, and storage to put those chips to work, and Dell supplies much of that infrastructure.

Take a look at just how big that business has become:

• Dell’s Infrastructure Solutions Group (aka servers) generated a record $31.8 billion in revenue, up 89% from a year ago and now accounting for roughly two-thirds of the company’s total sales. Operating income from the division surged 225% to $4.8 billion.
• Dell recorded $16.4 billion in revenue from AI-optimized servers during the quarter, double last year’s level.
• But customers ordered $60.9 billion worth of AI servers, giving Dell a book-to-bill ratio of roughly 3.7x. In other words, for every $1 of AI servers Dell shipped, customers ordered almost $4 more.

Dell doubles down

Looking ahead, Dell raised its full-year revenue forecast by a whopping $25 billion, which would put annual growth at nearly 70%. It also lifted its forecast for AI server sales to $74 billion, up 200% from last year.

Morgan Stanley, Goldman Sachs, and Citi raised their price targets after the report, citing stronger demand for both AI-optimized and traditional servers, and better-than-expected margins given soaring memory costs.

That said, Dell isn’t necessarily cheap: Shares are already up 291% this year, and before earnings, the stock traded at about 20 times forward earnings, nearly double its five-year historical average.

But with numbers like these and a presidential endorsement to boot, buying Dell sure sounds a lot less boring than it once did.—SY