Both revenue and profit significantly exceeded Wall Street expectations
Dell’s results were not only strong on a year-over-year basis but also significantly exceeded analysts’ expectations. Revenue of approximately $47 billion was higher than the analyst consensus compiled by LSEG of $44.92 billion, meaning Dell exceeded expectations by approximately $2.1 billion. The gap was even wider when it came to profitability. Adjusted earnings per share reached $7.04 compared to the expected $4.91, which is approximately 43% above the consensus. Total revenue rose 58% year-over-year, with Dell reporting a GAAP operating profit of $5.39 billion, up 204% year-over-year. Net income rose to $4.13 billion from $1.16 billion a year ago. This profit growth was significantly faster than revenue growth itself, demonstrating an improvement in the company’s profitability at a time when it is also sharply increasing the volume of server infrastructure shipments.
AI servers generated orders worth $60.9 billion
Artificial intelligence infrastructure remains the most important component of the results. In a single quarter, Dell received a record $60.9 billion in orders for AI servers and reported $16.4 billion in revenue from the sale of these servers, representing 100% year-over-year growth. The company also ended the quarter with a record backlog of AI server orders totaling approximately $95 billion, that is, orders it has already secured but has not yet converted into reported revenue. According to management, Dell has received orders for AI servers totaling more than $130 billion over the past twelve months, and the number of customers using its AI infrastructure has already exceeded 6,500. The entire Infrastructure Solutions Group division generated revenue of $31.78 billion, an 89% increase year-over-year. AI servers thus accounted for more than half of this division’s revenue and approximately one-third of Dell’s total quarterly revenue. At the same time, the volume of backlogged orders provides the company with high visibility into future revenue, although the timing of their recognition will depend on Dell’s ability to secure the necessary components and complete deliveries to customers. [2]
Growth extended to storage, traditional servers, and personal computers
The results show that growth was not limited to specialized AI servers. Revenue from traditional servers and networking solutions reached $10.53 billion, up 122% year-over-year, while the storage segment increased revenue by 26% to $4.85 billion. Operating profit for the entire Infrastructure Solutions Group division jumped 225% to $4.78 billion, and its operating margin rose from 8.8% a year ago to 15.0%. This is a significant figure for Dell’s profitability, as the infrastructure division now accounts for 81% of the operating profit reported by the company’s segments. The traditional PC business also saw growth. The Client Solutions Group increased revenue by 20% to $15.03 billion, with commercial PCs generating $13.19 billion and growing 22% year-over-year. The consumer segment reached $1.84 billion and grew by 7%. The computer division’s operating profit reached $1.14 billion, and its operating margin increased from 6.4% to 7.6%. Dell thus recorded double-digit growth in all major areas in a single quarter, except for consumer computers, which nevertheless also continued to grow.
Dell raised its full-year outlook by $25 billion, and its stock responded with a sharp rise
Strong order intake prompted Dell to significantly raise its expectations for the full fiscal year 2027. The company raised its full-year revenue outlook from $167 billion to $192 billion, $25 billion higher than its forecast from three months ago. Expected revenue from AI-optimized servers rose from $60 billion to $74 billion, which would represent roughly a threefold increase compared to the previous fiscal year. The outlook for adjusted earnings per share rose from $17.90 to $25.50, marking the second time this year that Dell has raised its expectations. Investors responded with a significant rise in the stock price. Following the release of the results, the stock rose by approximately 7% in after-hours trading and was up nearly 10% before the market opened on September 2. At a price of approximately $465, Dell was trading at 18.12 times expected earnings for the next twelve months, according to LSEG data, while Hewlett Packard Enterprise was trading at 12.56 times and Super Micro Computer at 8.06 times. Dell’s higher valuation indicates that investors are already anticipating continued rapid growth in AI infrastructure, though the future performance of the stock will largely depend on how quickly the company can convert its $95 billion backlog of orders into revenue and profit. [3]
Dell’s stock performance over the past five years*
[1,2,3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements do not guarantee future results. They involve risks and other uncertainties that are difficult to predict. Actual results may differ materially from those expressed or implied in any forward-looking statements.
* Past performance is no guarantee of future results.
Sources:
https://www.dell.com/en-us/blog/ai-ambition-is-common-secure-scale-is-rare/
