(Bloomberg) – Dell Technologies Inc. rose about 14% in late trading after reporting better-than-expected sales and profits, buoyed by demand for information technology equipment that handles artificial intelligence tasks.
Most Read Articles on Bloomberg
Dell, known for its PC business, has been on the radar of investors over the past year as interest in high-performance servers needed to run AI workloads has surged. The company’s infrastructure division, which includes servers, reported fourth-quarter sales of $9.33 billion, beating expectations. Dell said Thursday that the sequential revenue increase from the previous quarter was “primarily driven by AI-optimized servers,” but the division’s total revenue was down 6% year-over-year. .
“We are just beginning to address the AI opportunities before us, and we believe Dell is uniquely positioned with our broad portfolio to help customers build GenAI solutions that meet their performance, cost, and security requirements. ” said Chief Operating Officer Jeff Clarke. A statement referring to generative AI. He said the company’s backlog for AI servers was $2.9 billion at the end of the fiscal year ending Feb. 2.
Dell shipped $800 million of AI-optimized servers in the quarter, Clark said in prepared remarks for an earnings conference call. But, like many companies in the industry, the business is having trouble getting advanced computer chips for him, Clark added. “While lead times for the H100 are improving, demand continues to outstrip supply,” he said of market-leading Nvidia chips.
Read more: Dell PC struggles with risks overshadowing AI benefits
The stock closed at $94.66 on the New York market, before hitting a high of $113.34 in extended trading. The stock has more than doubled in the past 12 months as investors get excited about the role of servers in AI-driven buying cycles.
Bloomberg intelligence statement
Strong performance in Dell’s storage division helped offset some of the impact on PC results, leading to a slight improvement in sales. The company noted strong demand for AI servers that led to subsequent growth, which may have offset continued weakness in general server demand. AI server momentum remains strong, with orders expanding 40% and backlog at $2.9 billion compared to $1.6 billion in Q3.
— Woo Jinho, Senior Industry Analyst
Dell had projected sales of $91 billion to $95 billion for the fiscal year ending February 2025, compared with an average forecast of $92.1 billion. Excluding certain items, earnings, excluding certain items, were expected to be $7.50 plus or minus 25 cents per share, Chief Financial Officer Yvonne McGill said on a post-earnings conference call. The average analyst estimate was $7.11.
McGill said computer segment revenues will grow in the “low single digits” while infrastructure will grow “in the mid-teens driven by AI.”
Dell also increased its annual dividend by 20% to $1.78 per share. Investors as of April 23rd will receive a quarterly dividend of 44.5 cents per share, to be paid on May 3rd. Other tech companies, including Salesforce and Metaplatforms, have recently announced new dividends.
The Round Rock, Texas-based company said in a statement that revenue for the quarter fell 11% to $22.3 billion. This was slightly higher than the $22.2 billion expected by analysts. Earnings, excluding certain items, were $2.20 per share. Analysts had expected an average of $1.72, according to data compiled by Bloomberg.
Personal computer sales fell 12% to $11.7 billion, reflecting the continued weakness in the PC market and exceeding analysts’ expectations for a 10% decline. Commercial sales fell 11% to $9.56 billion, and consumer sales fell 19% to $2.15 billion.
Read more: Dell and Micron support group raising alarm over rivals’ ties to China
“In the near term, we expect the PC market to remain weak and see a recovery in the second half of the year as businesses and large customers remain cautious with their spending,” Clark said. He added that a new PC buying cycle should begin as current inventory ages and computers become available with Microsoft’s Windows 11 software and AI-oriented hardware.
On Wednesday, PC rival HP Inc. also said demand would take longer to recover, with computer sales falling below analysts’ expectations. The market is experiencing a downturn that is “unprecedented in the history of the industry,” but the market is poised for an upturn in the second half of 2024, research firm IDC said in a report last month.
Dell announced in January that it had ended its reseller agreement with VMware, which is now owned by Broadcom. Dell does not resell most VMware products, except for built-in tools such as VxRail and Carbon Black, the spokesperson said.
(Updates with prediction in 6th paragraph.)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
