By Jaspreet Singh
(Reuters) -Dell Technologies forecast annual revenue and profit above Wall Street estimates on Thursday, betting on demand for its artificial intelligence servers, sending the company’s shares up more than 16% in after-hours trading.
Dell is a beneficiary of rising demand for its AI servers that are equipped with chip designer Nvidia’s graphics processing units (GPUs), which helps to meet the demands of high-performance computing.
“Our strong AI-optimized server momentum continues, with orders increasing nearly 40% sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion,” Chief Operating Officer Jeff Clarke said in a statement.
The PC market is also showing signs of recovery following a slowdown in revenue that began in 2022 from the peaks touched during the pandemic, as the boom in work-from-home demand for PCs and electronics faded.
“We remain bullish on the coming PC refresh cycle and the longer-term impact of AI on the PC market,” CFO Yvonne McGill said on a post-earnings call.
Also in after-hours trading on Thursday, shares in rival server maker Hewlett Packard Enterprise dropped 3.7% after it forecast quarterly revenue below Wall Street estimates.
Another competitor, Lenovo Group last week reported strong quarterly earnings, with revenue returning to growth after five quarters of decline.
The global PC market returned to 3% growth in the fourth quarter of 2023 and is now poised for a stronger recovery in 2024, data research firm Canalys said in January.
Dell expects revenue between $91 billion to $95 billion for its current fiscal year, the mid-point of which is above analysts’ average estimate of $92.07 billion, according to LSEG data.
It expects annual adjusted earnings per share of $7.50 plus or minus $0.25, compared with estimate of $7.15.
The company posted an 11% drop in revenue to $22.32 billion for its fourth quarter ended Feb. 2, slightly higher than estimates of $22.16 billion. Excluding items, its profit per share came in at $2.20, compared with estimates of $1.73.
Revenue at the infrastructure solutions group, which includes its storage, software and server offerings, fell about 6% to $9.33 billion, while that of the client solutions group – home to PCs – fell nearly 12% to $11.72 billion.
(Reporting by Jaspreet Singh in Bengaluru; Additional reporting by Noel Randewich in Oakland, California; Editing by Shailesh Kuber and Jamie Freed)