Dell's stock gets a boost as earnings show huge growth in AI servers

By Emily Bary

Demand for Dell's AI servers was up 23% sequentially in the latest quarter

Dell Technologies Inc. beat expectations with its latest results on Thursday while continuing to show fast growth in its server business.

The infrastructure solutions group, which includes servers, saw revenue grow 38% to $11.64 billion in the fiscal second quarter, while analysts tracked by FactSet were modeling $10.79 billion. Within that segment, servers and networking revenue was up 80% to $7.67 billion, a company record.

Second-quarter demand for artificial-intelligence servers amounted to $3.2 billion, up 23% on a sequential basis. Dell (DELL) said that its backlog was $3.8 billion, with the company's pipeline now "several multiples" of that. A quarter earlier, Dell had said its pipeline was "a multiple" of its backlog.

"Our AI momentum accelerated in Q2, and we've seen an increase in the number of enterprise customers buying AI solutions each quarter," Vice Chairman Jeff Clarke said in a release.

Dell's stock rose about 3% in after-hours action Thursday.

Read: Buy Nvidia's stock on the dip, these analysts say

The company saw $1.28 billion in non-GAAP operating income for its infrastructure solutions group, while analysts had been looking for $1.12 billion.

Overall revenue came in at $25.0 billion, up 9% from a year prior, while analysts were expecting $24.1 billion.

Dell posted net income of $841 million, or $1.17 a share, compared with $455 million, or 63 cents a share, in the year-earlier period.

On an adjusted basis, Dell posted $1.89 in earnings per share, whereas the FactSet consensus was for $1.70.

Dell's client solutions group, which includes personal computers, hauled in revenue of $12.4 billion, down 4% from a year before. Dell is more levered to the corporate market than some peers. Analysts had called for $12.6 billion.

Non-GAAP operating income in client solutions was $767 million, down from $969 million a year before, while analysts had been modeling $793 billion.

See also: Why Apple's stock is now Citi's top AI pick - above Nvidia

Dell's outlook calls for $2.00 in adjusted earnings per share in the fiscal third quarter, plus or minus 10 cents. Analysts were looking for $2.19. The company also expects $24.5 billion in revenue at the midpoint, while analysts were calling for $24.6 billion.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

08-29-24 2050ET

Copyright (c) 2024 Dow Jones & Company, Inc.