By Jaspreet Singh
Feb 26 (Reuters) – Dell said it expects revenue from its key artificial intelligence-optimized servers business to double in fiscal year 2027 and promised to return more cash to shareholders, sending its shares surging 10% in extended trading.
The company announced a 20% hike in its cash dividend and an additional $10 billion for its share repurchase program.
Big tech firms, such as Alphabet, Microsoft, Amazon, and Meta, are expected to spend at least $630 billion to build AI infrastructure this year, which would boost demand for server and data center equipment from vendors such as Dell and rival Super Micro Computer.
U.S. trade regulations and surging memory chip costs due to the AI infrastructure buildout have forced companies like Dell and HP Inc to implement price increases, which are helping them offset cost pressures.
Almost all servers have memory chips that hold data and instructions, keeping processors running at high speed, which is paramount for AI applications.
Initially, infrastructure clients experienced “sticker shock” but quickly grasped the supply constraints, shifting their focus to securing necessary components, which led large customers to aggressively acquire supply for their AI servers, traditional servers, and storage build-outs, Dell Chief Operating Officer Jeff Clarke said on a post-earnings call.
The company raised server prices on December 10, while price changes for PCs occurred on January 6, Clarke said.
Dell expects AI server revenue to grow 103% to about $50 billion in fiscal 2027.
The company said it has more than 4,000 AI server customers, including Elon Musk’s AI startup xAI and CoreWeave.
Dell forecast annual revenue of $138 billion to $142 billion, above analysts’ average estimate of $125.54 billion, according to data compiled by LSEG.
The memory chip squeeze is expected to dampen global demand for consumer electronics, including PCs, smartphones, and gaming consoles. HP Inc said it expected fiscal 2026 results to be at the low end of its prior forecasts, while China’s Lenovo warned about mounting pressures on PC shipments.
“By proactively addressing rising memory costs, and demonstrating early success reflected in both its fiscal first quarter results and full-year guidance, the company showed it is getting ahead of a challenge that continues to pressure peers,” said Hendi Susanto, a portfolio manager and research analyst at Gabelli Funds, which holds Dell shares.
Dell expects annual adjusted earnings per share of $12.90, above estimates of $11.59.
In the first quarter, Dell expects revenue between $34.7 billion and $35.7 billion, above estimates of $29.13 billion.
The first-quarter adjusted EPS forecast of $2.90 exceeded estimates of $2.37.
It reported record revenue of $33.4 billion in the fourth quarter, beating estimates of $31.73 billion. Its adjusted EPS of $3.89 also exceeded the $3.53 estimate.
Dell’s revenue from its infrastructure solutions group, which includes its storage, software, and server offerings, jumped 73% to $19.60 billion, while sales from the client solutions group – home to PCs – rose 14% to $13.49 billion.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shinjini Ganguli and Rashmi Aich)
Comments