Dell Technologies raised its annual revenue and profit forecasts on Thursday, driven by a surge in demand for its AI-optimized servers powered by Nvidia’s advanced chips. Dell’s shares saw a boost of about 3% in extended trading following the announcement.
The company’s infrastructure solutions group, which includes servers equipped with Nvidia technology, reported record revenue of $11.65 billion for the second quarter, marking a 38% increase. This growth reflects the rising demand for servers designed to handle the computational intensity of AI systems, including training large language models.
Dell’s Chief Operating Officer Jeff Clarke highlighted the significant opportunity within the enterprise sector, noting that many organizations are still in the early stages of AI adoption. He also pointed to potential growth in “sovereign AI,” leveraging Dell’s strong global government relationships.
Nvidia CEO Jensen Huang acknowledged the partnership with Dell, emphasizing their role in helping businesses develop their own “AI factories.” Nvidia’s recent statement revealed that countries building AI models in their native languages are contributing to a substantial increase in its revenue, expected to be in the low double-digit billions by January 2025.
As a result of this growing demand, Dell has revised its annual revenue outlook to a range of $95.5 billion to $98.5 billion, up from the previous forecast of $93.5 billion to $97.5 billion. The company also raised its adjusted profit per share forecast to $7.80, plus or minus 25 cents.
Dell’s AI server revenue surged by 23% sequentially to $3.2 billion in the second quarter, with a backlog of $3.8 billion. Clarke noted that the company’s pipeline has expanded significantly beyond the current backlog.
Despite the strong performance in its AI server segment, Dell’s PC business faced challenges. Revenue for the client solutions group, which includes PCs, fell by about 4% to $12.41 billion. The decline was attributed to Dell losing market share to competitors. However, a strong refresh cycle for AI PCs is anticipated next year following the end of Windows 10 support.
Dell also recorded a $328 million charge for workforce reductions during the quarter. Additionally, Dell is reportedly revisiting the potential sale of cybersecurity firm SecureWorks, after previous attempts to find a buyer.
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