Dell’s Stock Surges 22% on AI Server Boom and Strong Financial Outlook
Shares of Dell Technologies rocketed 22% on Friday, February 7th, following a robust fiscal fourth-quarter report that exceeded Wall Street estimates and included a strikingly optimistic forecast for its artificial intelligence server business. The rally underscores investor enthusiasm for Dell’s positioning in the red-hot AI infrastructure market, even as the broader PC sector grapples with a severe shortage of memory chips that is driving up costs.
Earnings Beat and Record Guidance
Dell reported adjusted earnings of $3.89 per share for the quarter, surpassing the $3.53 consensus estimate from analysts surveyed by LSEG (formerly Refinitiv). Revenue reached $33.38 billion, also topping forecasts of $31.73 billion. The standout element, however, was the company’s guidance for fiscal year 2027. Dell projects total revenue between $138 billion and $142 billion, a range that substantially exceeds the $124.7 billion expected by FactSet analysts.
Central to this bullish outlook is the company’s AI server segment. Dell forecasts revenue from these systems will hit $50 billion in 2027, more than double its projected figure for the prior year. This growth trajectory is fueled by enterprise demand for the powerful computing systems required to train and run large AI models.
The Memory Crunch: A Double-Edged Sword
Dell’s strong performance contrasts with significant industry-wide headwinds. A historic shortage of high-bandwidth memory (HBM) chips, the specialized memory critical for advanced AI accelerators from companies like Nvidia, AMD, and Google, has diverted supply away from traditional PC and laptop manufacturers. This scarcity has caused memory prices to skyrocket.
Dell’s Chief Operating Officer, Jeff Clarke, acknowledged the challenge on the earnings call, stating the company is working with its memory partners “to be as flexible and as agile as possible.” To manage soaring input costs, Dell began increasing prices for its PCs last year. Chief Financial Officer David Kennedy confirmed the company has implemented pricing actions designed to “offset” the cost pressure, noting that customers are evaluating priorities in an environment of tight component supply, elevated costs, and longer lead times.
Analyst Caution Amid Price Hikes
While the near-term results and AI-driven outlook are impressive, some analysts warn that sustained price increases could eventually dampen demand for Dell’s core PC business. In a research note, Bank of America analyst Wamsi Mohan expressed uncertainty about the “demand elasticity” resulting from Dell’s “swift and significant price actions.” Despite this concern, Bank of America maintained its ‘Buy’ rating on Dell stock and raised its price target from $135 to $155.
This dynamic is already visible at competitor HP Inc., whose shares hit a 52-week low after its earnings report. HP CFO Karen Parkhill stated that memory costs have risen approximately 100% on a sequential basis and are expected to keep increasing. She highlighted the severity of the issue, revealing that memory now constitutes about 35% of a PC’s bill of materials—a figure that has doubled from a year ago.
— CNBC’s Kristina Partsinevelos contributed to this report.
Dell one-day stock chart.
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