Editor's Note: Dell's stock price surged after hours, not just due to an earnings beat, but because the market is reevaluating the value of the AI infrastructure chain.
Driven by AI data center construction demand, Dell's first-quarter revenue surged 88% year-over-year to $43.84 billion, and the company raised its 2027 fiscal year AI server revenue outlook from $500 billion to around $600 billion. Following the earnings release, the company's stock price soared approximately 39% in after-hours trading.
This indicates that the AI frenzy is shifting beyond models and chips to servers, memory, storage, and data center equipment. As tech giants like Alphabet, Amazon, and others continue to ramp up their AI infrastructure investments, hardware manufacturers like Dell, with supply chain, customer relationships, and delivery capabilities, are emerging as direct beneficiaries of the new AI capital expenditure cycle.
Additionally, a Dell subsidiary secured a $9.7 billion contract from the US Department of Defense, further reinforcing market expectations for its order growth and revenue certainty. For investors, Dell's surge signifies that AI trades are entering a more downstream, tangible phase: whoever can turn chips into deliverable data center infrastructure may undergo the next round of valuation reassessment.
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TL;DR
Dell raises full-year AI server revenue outlook to $600 billion
Company gives Q2 performance guidance above market expectations
Q1 revenue jumps 88% year-over-year to $43.84 billion
Stock surges about 39% in after-hours trading
Dell subsidiary secures $9.7 billion contract from US Department of Defense
Dell raised its full-year revenue and profit forecast on Thursday, showing that customer data center expansion is driving growth in its AI-optimized servers. These servers are powered by NVIDIA's advanced chips.
Dell's customers include CoreWeave, Honeywell International, and Samsung Electronics. The company's stock price surged approximately 39% in after-hours trading following the earnings release.
U.S. tech giants, including Alphabet and Amazon, plan to invest over $700 billion in AI infrastructure this year, driving up demand for servers and data center equipment. Suppliers include companies like Dell and Supermicro.
Strong performance indicates that Dell has emerged as one of the biggest beneficiaries in the generative AI boom. The company has effectively navigated the memory chip shortage crisis through price increases and supply chain adjustments.
Dell's Chief Operating Officer, Jeff Clarke, stated during an earnings call, "We feel like we're repricing almost every day. I think that customers are feeling that pressure as well. Unfortunately, given the inflationary environment we are in, I don't see that changing."
Dell has indicated that it now expects AI server revenue for the fiscal year 2027 to be around $600 billion, higher than the previous estimate of $500 billion.
The company has also raised its full-year revenue outlook to $165 billion to $169 billion, significantly up from the previous forecast of $138 billion to $142 billion.
Additionally, Dell has raised its full-year adjusted earnings per share outlook from the previous $12.90 to $17.90.
In the first quarter, Dell reported an 88% year-over-year revenue growth, reaching $43.84 billion, well above analysts' average expectation of $35.43 billion. Adjusted earnings per share were $4.86, also higher than the market expectation of $2.94.
Melissa Otto, Research Director at S&P Global Visible Alpha, said, "Due to its scale advantage, supplier relationships, and ability to prioritize allocation, Dell is in a more favorable position compared to its competitors, helping it gain market share during the memory shortage period."
Dell's Infrastructure Solutions Group saw a 181% quarterly revenue growth, encompassing storage, software, and server businesses. Meanwhile, the Client Solutions Group, which includes the PC business, saw a 17% increase in sales.
The company also provided second-quarter revenue and adjusted earnings per share guidance that exceeded market expectations.
On Wednesday, the U.S. Department of Defense awarded a five-year, $9.7 billion contract to a Dell subsidiary to assist in managing Microsoft software licenses.
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