Dell shares rise as AI server demand boosts results, forecasts

Shares of Dell Technologies rose 4 per cent on Friday, after robust demand for its artificial intelligence-powered servers prompted the company to raise its full-year earnings and revenue forecasts.

Dell, which supplies servers and related infrastructure to enterprises, bolstered its AI push through a partnership with chip giant Nvidia earlier this year. With Nvidia's tech stack, Dell is attracting mid-sized customers to upgrade their servers with AI capabilities.

"Dell's beat was entirely due to AI servers, with storage and PC revenues both coming in below consensus," Bernstein analysts wrote in a note.

They said 80 per cent to 90 per cent of the company's server customers appear to be tier 2 cloud services providers and new deal opportunities appear to be competitive bids against Super Micro Computer.

Revenue from Dell's infrastructure solution group, which includes sale of servers, rose 38 per cent over the year earlier in the second quarter. Demand for AI-optimized servers, including the flagship PowerEdge XE9680, rose 23 per cent sequentially to $3.2 billion, the company said on Thursday.

Its AI pipeline now appears to be $11 billion to $13 billion, up from an estimated $8 billion to $10 billion in the first quarter, according to Bernstein.

Overall, Dell earned $1.89 per share on an adjusted basis and posted revenue of $25.03 billion, both exceeding LSEG estimates.

At least three brokerages raised their price targets after the results. The stock has a median target price of $155, with 19 of the 22 analysts rating it "buy" or higher, according to LSEG data.

At $115, Dell shares are down 36 per cent since their all-time high in May.