Dell shares soar more than 30% on strong earnings

Dell’s shares surged 33% on Friday as the PC maker’s blockbuster results showed that ​its growing focus on AI servers was ​helping it capitalize on the data center boom, making the company one of ​the biggest beneficiaries of the new technology.

The company, whose AI servers are crucial components in the global AI infrastructure build-out, is set to add $68 billion to its market value of about $206 billion, if gains hold.

A household name in the ‌PC market, Dell ⁠has in ⁠recent years scaled up its AI hardware business. Dell’s AI server revenue of $16.1 billion surpassed its PC unit’s $14.6 billion in ​sales in the quarter.

The company’s infrastructure solutions segment, home to both traditional and AI-optimized servers as well as other storage, software ​and networking solutions, has consistently eclipsed PC business revenue in the past four quarters.

“We’ve been following Dell a long time and never seen anything like this. Not only do they get an “A” for ​execution, but you can make an argument that Dell is even ⁠the best ‌way to play AI out there,” Melius Research analysts said.

Dell’s outlook for “AI and ​traditional servers are ​still very conservative,” as the firm has stronger prospects for selling CPU racks to ⁠AI cloud providers like CoreWeave and Nscale, the brokerage said.
The blowout ​quarter lifted shares of server makers Super Micro Computer and Hewlett Packard ​Enterprise 16% and 12%, respectively, while Dell’s PC rival HP also rose 8%.Hewlett Packard Enterprise, which reports results on Monday, has also been prioritizing higher-margin product orders. But it has a smaller server business compared with Dell.

Dell Chief Operating Officer Jeff Clarke acknowledged the ongoing “supply constrained” environment, particularly concerning memory chips, but said that its customers were actively securing supply for extended periods.

The company has banked on balanced price ‌hikes as well as its scale and strong supplier relationships to wade through the memory crisis. Strong returns from its AI server business are also helping cushion the blow ​to margins ​from the soaring memory prices.

HP, which ⁠focuses mostly on PCs and printers, reported 13.2% growth in its personal systemsdivision, while sales in Dell’s PC business unit grew 17%, driven by a Windows 11 refresh cycle and growing focus on AI PCs.

At least 13 brokerages raised their price targets on Dell stock following the results, giving it a median price target of $255, according to data compiled by LSEG. That is up from $170 before the report.

Dell is on track to record its biggest one-day percentage gain if gains hold. It has a 12-month forward price-to-earnings ratio of 20.21, compared with HP’s 8.39 and HPE’s 14.70.