After Thursday's trading hours Eastern Time, Dell Technologies released a stronger than expected financial report, indicating strong demand for server devices used to handle artificial intelligence work. Under the stimulus of this financial report, the company's stock price surged by over 18% in post market trading.
The financial report shows that although Dell's PC business revenue performance is still poor against the backdrop of the continuous downturn in the PC market, in the past year, under the AI boom, the market's interest in Dell's high-performance servers has surged, becoming the main driving force for boosting the company's fourth quarter financial performance.
AI servers bring growth momentum
The financial report shows that in the fourth quarter ending February 2, the company's Infrastructure Solutions Division (ISG), including servers, had revenue of $9.33 billion. Although it decreased by 6% year-on-year, it increased by 10% month on month, still exceeding analyst expectations.
Dell stated that the continuous growth of the department is "mainly driven by AI optimized servers.".
Dell Chief Operating Officer Jeff Clarke stated in a statement:
"We have just begun to explore the artificial intelligence opportunities before us, and we believe that with our extensive product portfolio, Dell is in a unique position to help customers build generative AI solutions that meet performance, cost, and security requirements."
In his speech prepared for the performance conference call, Clark stated that Dell's shipment of AI optimized servers in the fourth quarter was $800 million, with a backlog of orders of $2.9 billion.
Clark added that, like many companies in the industry, the shortage of high-end computer chips has hindered the development of the industry, and demand continues to exceed supply. He specifically mentioned Nvidia's chips, "However, we see that the delivery time for H100 is improving."
In the fourth fiscal quarter, the growth momentum brought by the company's AI servers also boosted the stock price. Last year, the company's stock price rose by over 98% in total. Since the beginning of this year, the company's stock price has risen by over 24%.
Senior industry analyst Woo Jin Ho stated:
"Dell's strong storage business has helped alleviate the drag on its PC business. The company stated that strong demand for artificial intelligence servers has led to continuous revenue growth, offsetting the continued weakness in general server demand. The momentum for artificial intelligence servers remains strong, with orders growing by 40% and backlog orders almost doubling to $2.9 billion, compared to $1.6 billion in the third quarter."
The company announces a strong outlook
After the financial report was released, Dell CFO Yvonne McGill stated in a conference call that for the fiscal year ending in February 2025, Dell expects its revenue to reach $91 billion to $95 billion, while the market average is expected to be $92.1 billion; Excluding some items, the earnings per share will be $7.50, with a fluctuation of 25 cents, better than the analyst's average expectation of $7.11.
McGill stated that the revenue of the computer department is expected to grow at a "low single digit" rate, while the infrastructure department will achieve a growth of around 15% "driven by artificial intelligence.".
Dell also increased its annual dividend by 20% to $1.78 per share. Recently, other technology companies including Salesforce Inc. and Meta have announced dividend increases.
PC business still sluggish
Despite the booming AI server business, overall data shows that Dell's performance in the fourth quarter was not very impressive: revenue decreased by 11% year-on-year to $22.3 billion, slightly higher than analysts' expectations of $22.2 billion; Excluding some projects, the profit was $2.20 per share, which is better than the average analyst expectation of $1.72.
The computer (PC) business is clearly a key drag on the company's revenue: the fourth quarter sales of the department decreased by 12% year-on-year to $11.7 billion, more than the 10% decline expected by analysts, reflecting the continued downturn in the computer market. Specifically, the sales of corporate computer business decreased by 11% year-on-year to $9.56 billion; Consumer computer revenue decreased by 19% to $2.15 billion.
&Amp; Quota; In the short term, the PC market remains weak, and we expect the recovery to continue into the second half of the year as businesses and major clients remain cautious about spending; Quota; CEO Clark stated that with the aging of current inventory and the release of computers related to Microsoft Windows 11 software and hardware for artificial intelligence, a new purchasing cycle for personal computers should begin.
On Wednesday, Dell's main competitor HP also released lower PC sales than analysts expected, stating that demand will take longer to recover. Research firm IDC wrote in a report last month that although the PC market has experienced an "unprecedented" downturn in industry history, the market is expected to see a turnaround later in 2024.