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Dell’s AI Server Demand Fuels Optimistic Fiscal 2025 Forecast

Dell surges in after-hours trading on upbeat forecast, fueled by AI server demand and a recovering PC market.

CALIFORNIA (AI Reporter/News): Dell Technologies surged in after-hours trading Thursday, exceeding Wall Street’s expectations for both revenue and profit in fiscal 2025. The positive outlook, fueled by strong demand for its artificial intelligence (AI) servers, sent the company’s shares up over 16%.

Dell Technologies, on Thursday, projected an annual revenue and profit surpassing Wall Street’s expectations. This optimistic forecast is primarily driven by the demand for its artificial intelligence (AI) servers, which led to a surge of over 16% in the company’s shares in after-hours trading.

Dell is capitalizing on the burgeoning demand for AI servers, equipped with Nvidia’s powerful GPUs to handle demanding high-performance computing tasks.

“Dell is a beneficiary of rising demand for its AI servers that are equipped with chip designer Nvidia’s graphics processing units (GPUs), which helps to meet the demands of high-performance computing,” said Chief Operating Officer Jeff Clarke. He further added, “Our strong AI-optimized server momentum continues, with orders increasing nearly 40% sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion.”

We remain bullish on the coming PC refresh cycle and the longer-term impact of AI on the PC market.

Yvonne McGill, CFO, Dell Technologies

Signs of Recovery in the PC Market

The PC market, which experienced a slowdown in revenue from the peaks touched during the pandemic, is showing signs of recovery. The boom in work-from-home demand for PCs and electronics has faded since 2022.

CFO Yvonne McGill expressed optimism about the future, stating, “We remain bullish on the coming PC refresh cycle and the longer-term impact of AI on the PC market.”

Dell Technologies
Dell Technologies

Competitive Landscape

In contrast to Dell’s positive outlook, shares in rival server maker Hewlett Packard Enterprise dropped 3.7% in after-hours trading on Thursday after it forecast quarterly revenue below Wall Street estimates. Lenovo Group, another competitor, reported strong quarterly earnings last week, with revenue returning to growth after five quarters of decline.

Global PC Market Outlook

According to data research firm Canalys, the global PC market returned to 3% growth in the fourth quarter of 2023 and is now poised for a stronger recovery in 2024.

Dell’s Fiscal Year Expectations

For its current fiscal year, Dell expects revenue between $91 billion to $95 billion. The mid-point of this range is above analysts’ average estimate of $92.07 billion. The company also expects annual adjusted earnings per share of $7.50 plus or minus $0.25, compared with an estimate of $7.15.

In its fourth quarter ended Feb. 2, the company posted an 11% drop in revenue to $22.32 billion, slightly higher than estimates of $22.16 billion. Excluding items, its profit per share came in at $2.20, compared with estimates of $1.73.

Revenue at the infrastructure solutions group, which includes its storage, software, and server offerings, fell about 6% to $9.33 billion. Meanwhile, the client solutions group, home to PCs, saw a nearly 12% fall to $11.72 billion.