Dell Technologies rides AI boom as revenue surges 88% in Q1

Dell Technologies delivered a blowout first quarter with revenue growth of 88% amid sales of AI systems.

The company reported first quarter earnings of $5.24 billion on revenue of $43.8 billion, up 88% from a year ago. Non-GAAP earnings were $4.86 a share.

Wall Street was looking for Dell first quarter non-GAAP earnings of $2.90 a share on revenue of $35.38 billion.

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Jeff Clarke, vice chairman and chief operating officer of Dell Technologies, said the company booked $24.4 billion in AI orders and recognized $16.1 billion in AI server revenue.

"We’re increasing our AI server revenue expectations for FY27 to $60 billion, which only goes to show the AI opportunity shows no signs of slowing," said Clarke.

Indeed, Dell is racking up AI sales to hyperscalers and enterprises. The AI demand is also raising the rest of Dell's business. In addition, Dell appears to be managing a volatile supply chain well.

As for the outlook, Dell said its fiscal 2027 revenue will be about $167 billion, up 50% for the year, with earnings of $17.31 a share.

By the numbers for the first quarter:

• Dell's Infrastructure Solutions (ISG) group reported revenue of $29 billion, up 181% from a year ago. AI optimized server revenue was $16.1 billion, up 757% from a year ago.
• Traditional servers and networking revenue was $8.5 billion in the first quarter, up 92% from a year ago.
• ISG operating income was $3.1 billion.
• The PC division delivered first quarter sales of $14.6 billion, up 17% from a year ago. Commercial revenue was $13 billion, up 18% from a year ago. Operating income was $1.2 billion, up 79%.
• The company said it had more than 5,000 AI server customers with strong growth across neocloud, sovereign and enterprise customers.

Dell said second quarter revenue will be $44 billion to $45 billion, up 49% at the midpoint, with non-GAAP earnings of $4.80 a share. AI-optimized server revenue in the second quarter will be $60 billion.

On a conference call with Wall Street analysts, Clarke said "demand continues to exceed supply with memory as the primary constraint, and we expect to exit the year with meaningful backlog."

He added that customers are looking for integrated systems so they can scale infrastructure quickly. Clarke said customers are pulling demand ahead in some cases, but deals are multiyear. Indeed, just 90 days into Dell's fiscal year, the company raised its annual revenue guidance by $10 billion.

"There is a pull-in component, there's a buy ahead. Customers want to ensure they have access to supply. They're concerned about raising prices and they're acting. There's also a component of we have large installed bases," he said.

In addition, modernization for AI workloads is boosting traditional servers and networking. Clarke said:

"We saw AI inference workloads driving incremental demand for traditional compute. The majority of the installed base remains on 14th generation or older servers, reflecting the continued refresh opportunity going forward. The memory uncertainty is driving customers to proactively secure access to infrastructure across both traditional and AI workloads over longer periods of time."

According to Clarke, traditional compute is taking on more AI inference tasks. "We're seeing pockets of fundamental new demand. There's new demand driven by AI. There's inference. And the Agentic AI is driving a new marketplace for traditional servers that we haven't seen before," said Clarke, who said some neocloud customers are using dense traditional servers for inference and agentic AI workloads.

Is this demand sustainable? Clarke was asked about infrastructure budgets going forward. He said:

"The longer-term conversations we're having with customers are multiyear in nature of how they secure supply to provide their growth and upgrade their infrastructure and the discussions are multiyear in nature, I think 3, 4, 5 years. Those discussions are underway. And it really is about access to supply because quite honestly, I can't tell them what the price is going to be. But it's arrangements and agreements that we're working with large customers to ensure they have what they need to grow their businesses. And we saw that occur across some of the largest enterprises around the world. And our pipelines indicate that's going to continue."

"We're seeing budgets grow. We're seeing budget shift. Obviously, we're 1 quarter into the year. We'll see how the second half plays out. I think that's part of the prudence that we're trying to convey of where is the demand signal, but the demand that we see continues to be robust."