Dell Boosts Estimates for Next Four Years on Strong AI Demand

Dell Technologies Inc. roughly doubled its growth estimates for sales and profit for the next two years, and said demand for artificial intelligence products will extend those higher projections at least through the 2030 fiscal year. Shares rose.

The company unveiled a “long-term financial framework” that calls for sales to rise at a rate of 7% to 9% annually for the next four years, while earnings per share, excluding some items, will increase 15% or more. The company in 2023 had estimated revenue growth of 3% to 4% and adjusted EPS of 8% or better. Dell is announcing the updated numbers, which apply through fiscal year 2030, at an investor event Tuesday in New York, Chief Operating Officer Jeff Clarke said in an interview ahead of the event.

“We were all wrong how big we thought the AI market was two years ago, and it’s nothing but bigger,” Clarke said.

Dell’s shares rose 5.2% to $153.34 at 9:30 a.m. in New York. Shares of Super Micro Computer Inc. and Hewlett Packard Enterprise Co., which each sell AI servers to a similar pool of customers, also jumped on the news.

The company’s infrastructure unit has benefited from demand for AI servers from customers such as CoreWeave Inc. and Elon Musk’s x.AI, and has secured deals with government entities including the US Energy Department and Abu Dhabi AI firm G42. Dell’s core business, traditional servers and PCs, will see growth in the “low- to mid-single digits,” he said.

Bloomberg's Ed Ludlow reports.

While investors have cheered the sales growth in AI servers, the cost of rapidly rolling out the equipment based on the latest chips is eating into profit margins. Clarke said he will “reinforce” the fact that the AI server business is facing “mid-single-digit operating margins,” adding that the “rate is acceptable” and the business is adding to earnings. There are also opportunities to possibly boost the margin by selling to more large business customers and getting AI clients to purchase other more profitable products from Dell like storage and networking.

The operating margin in Dell’s infrastructure unit, which includes server and networking sales, was 8.8% in the second quarter, the company said in August, worse than analysts expected.

Dell booked $5.6 billion of AI server orders in the fiscal second quarter, which ended Aug. 1, down from $12.1 billion in the previous period. It shipped $8.2 billion worth of the servers and ended the quarter with backlog worth $11.7 billion.

The strength of the server business has helped spark the shares to a 26% rally this year through Monday’s close.

Clarke, who took over running the PC unit in July, will also address steps the company is taking to stem the loss of market share since the end of the pandemic to rivals HP Inc. and Lenovo Group Ltd. While Dell has done well in high-end machines for consumers and corporate customers — roughly a quarter of the market — it has failed to correctly tailor products and pricing to buyers of low-end and midrange devices, he said.

The company plans to release new products and focus on restoring growth and profitability to the consumer PC business, Clarke said. In the commercial space, Dell needs to be more successful in the educational market and in fast-growing countries.

“We are not happy with the performance,” he said. “The PC business is a scale business, and you can’t be in the PC business and not be in the consumer business. And for the consumer business, you need to play to win.”

In a statement, the company extended a pledge to boost its quarterly dividend 10% or more annually through fiscal 2030. Dell also reiterated its previous financial forecasts for the current quarter and fiscal year through January 2026.(Updates with Tuesday trading in the fourth paragraph.)To contact the reporter on this story:

Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editors responsible for this story:

Jillian Ward at jward56@bloomberg.net

Andrew Pollack, Nick Turner

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