Dell Technologies has raised its annual revenue and profit forecasts, driven by a surge in demand for its AI-optimized servers, which are powered by Nvidia’s advanced chips. This announcement pushed Dell’s shares up by approximately 3% in extended trading. The company’s infrastructure solutions group, encompassing these Nvidia-powered servers, recorded a 38% increase in revenue, reaching a record $11.65 billion in the second quarter. These servers are designed to meet the high computational demands of artificial intelligence systems, such as training large language models.
Chief Operating Officer Jeff Clarke emphasized the significant opportunity in enterprise markets, noting that many companies are still in the early phases of adopting AI. Clarke highlighted Dell’s emerging potential in “sovereign AI,” leveraging strong governmental relationships worldwide. Nvidia, which partners with Dell on these AI initiatives, mentioned that countries developing AI models in their own languages are increasingly turning to its chips, projecting this could contribute low double-digit billions to Nvidia’s revenue for the financial year ending in January 2025.
Earlier this year, Nvidia CEO Jensen Huang pointed out the collaboration with Dell, describing it as instrumental in helping businesses build their own “AI factories.” Reflecting this momentum, Dell’s stock has risen by 45% this year. Dell has now adjusted its annual revenue outlook to range between $95.5 billion and $98.5 billion, up 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 plus or minus 25 cents.
In the second quarter, demand for Dell’s AI-optimized servers increased by about 23% sequentially, reaching $3.2 billion. The backlog for these servers stood at $3.8 billion, with Clarke noting that the pipeline for future orders has expanded significantly. Dell’s revenue for the quarter ended August 2 rose by approximately 9% to $25.03 billion, surpassing analysts’ average estimate of $24.14 billion. The company reported an adjusted profit of $1.89 per share, exceeding expectations of $1.71 per share.
While Dell’s AI server demand flourished, its PC business faced challenges, losing market share to competitors. Despite being the leading vendor in the U.S. business market, Dell saw a 4% decline in revenue for its client solutions group, which includes PCs, falling to $12.41 billion. Analyst Mikako Kitagawa from Gartner noted that Dell lost PC shipment share in key markets during the second quarter. A refresh cycle for AI PCs is anticipated next year, following the end of support for Windows 10 by Microsoft.
Additionally, Dell incurred a $328 million charge related to workforce reductions in the second quarter. Separately, Reuters reported that Dell is once again considering the sale of its cybersecurity subsidiary, SecureWorks, following previous unsuccessful attempts to find a buyer.
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