\n<\/p>\n
By Jaspreet Singh<\/p>\n
Feb 26 (Reuters) – Dell (DELL) said it expects revenue from its key artificial intelligence-optimized servers business to double in fiscal year 2027 and promised to return more cash to shareholders, sending its shares \u200csurging 10% in extended trading.<\/p>\n
Dell stock jumped 12% during premarket trading on Friday.<\/p>\n
The company announced a 20% hike in its cash dividend and an additional $10 \u200cbillion for its share repurchase program.<\/p>\n
Big tech firms, such as Alphabet (GOOG, GOOGL), Microsoft (MSFT), Amazon (AMZN), and Meta (META), are expected to spend at least $630 billion to \u200bbuild AI infrastructure this year, which would boost demand for server and data center equipment from vendors such as Dell and rival Super Micro Computer.<\/p>\n
U.S. trade regulations and surging memory chip costs due to the AI infrastructure buildout have forced companies like Dell and HP Inc to implement price increases, which are helping them offset cost pressures.<\/p>\n
Almost all servers have memory chips that \u200chold data and instructions, keeping processors running \u2060at high speed, which is paramount for AI applications.<\/p>\n
Initially, infrastructure clients experienced “sticker shock” but quickly grasped the supply constraints, shifting their focus to securing necessary components, which led large customers to \u2060aggressively acquire supply for their AI servers, traditional servers, and storage build-outs, Dell Chief Operating Officer Jeff Clarke said on a post-earnings call.<\/p>\n
The company raised server prices on December 10, while price changes for PCs occurred on January 6, Clarke said.<\/p>\n
Dell expects \u200bAI server \u200brevenue to grow 103% to about $50 billion in fiscal 2027.<\/p>\n
The \u200bcompany said it has more than 4,000 AI \u200cserver customers, including Elon Musk’s AI startup xAI and CoreWeave.<\/p>\n
Dell forecast annual revenue of $138 billion to $142 billion, above analysts’ average estimate of $125.54 billion, according to data compiled by LSEG.<\/p>\n
The memory chip squeeze is expected to dampen global demand for consumer electronics, including PCs, smartphones, and gaming consoles. HP Inc (HPQ) said it expected fiscal 2026 results to be at the low end of its prior forecasts, while China’s Lenovo warned about mounting pressures on PC shipments.<\/p>\n
“By proactively addressing rising \u200cmemory costs, and demonstrating early success reflected in both its fiscal \u200bfirst quarter results and full-year guidance, the company showed it is getting \u200bahead of a challenge that continues to pressure \u200bpeers,” said Hendi Susanto, a portfolio manager and research analyst at Gabelli Funds, which holds \u200cDell shares.<\/p>\n<\/p><\/div>\n
Dell expects annual adjusted earnings per share \u200bof $12.90, above estimates of $11.59.<\/p>\n
In the first \u200bquarter, Dell expects revenue between $34.7 billion and $35.7 billion, above estimates of $29.13 billion.<\/p>\n\n
The first-quarter adjusted EPS forecast of $2.90 exceeded estimates of $2.37.<\/p>\n
It reported record revenue of $33.4 billion in the fourth quarter, beating estimates of $31.73 billion. Its adjusted EPS \u200bof $3.89 also exceeded the $3.53 estimate.<\/p>\n
Dell’s revenue \u200cfrom its infrastructure solutions group, which includes its storage, software, and server offerings, jumped 73% to $19.60 billion, \u200bwhile sales from the client solutions group – home to PCs – rose 14% to $13.49 billion.<\/p>\n
(Reporting by Jaspreet \u200bSingh in Bengaluru; Editing by Shinjini Ganguli and Rashmi Aich)<\/p>\n<\/p><\/div>\n