Dell Technologies rides AI servers in Q2, ups annual revenue outlook

Dell Technologies reported revenue growth of 58% in the second quarter compared to a year ago and projected fiscal 2027 revenue of $192 billion, up 69% for the year.

The company is one of the main beneficiaries of the AI infrastructure boom.

Dell Technologies reported second quarter earnings of $6.34 a share on revenue of $47 billion. Non-GAAP earnings were $7.04 a share. Wall Street was looking for non-GAAP earnings of $4.92 a share on revenue of $44.5 billion.

As for the outlook, Dell projected third quarter revenue of $49 billion, up 81% from a year ago, with non-GAAP earnings of $6.50 a share.

Dell projected fiscal 2027 earnings of $24.37 a share on revenue of $192 billion. Non-GAAP earnings for the fiscal year are expected to be $25.50 a share. Dell said AI-optimized server revenue for the year will be $74 billion.

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Jeff Clarke, chief operating officer at Dell Technologies, said AI servers are booming and exited the quarter with a $95 billion revenue backlog. "We’re seeing broader revenue growth as well, with traditional servers and networking up 122%, storage up 26% and our client solutions up 20% year over year," said Clarke.

The upshot is AI servers are driving demand for traditional data center gear.

On a conference call, Clarke said:

• "Our results and guidance demonstrate the strength of our position as customers enter a new era of infrastructure modernization. Customers are modernizing their data centers for both AI and non-AI workloads, and the benefits are meaningful. AI is an important catalyst, but the opportunity extends well beyond AI-optimized infrastructure. AI requires modern, disaggregated architectures that keep data accessible and in motion across compute, storage, and networking."
• "On-prem and edge infrastructure offers attractive token economics for the right workloads, while giving customers greater control over their data and intellectual property."
• "AI infrastructure requires much more than assembling and delivering components. These opportunities demand significant engineering, design, and deployment expertise, with some engagements requiring to upwards of 50 unique designs as customers optimize for workload performance, power, cooling, and the data center environment."

By the numbers for the second quarter:

• Infrastructure solutions group revenue was $31.8 billion, up 89% from a year ago, with operating income of $4.8 billion.
• AI-optimized server revenue was $16.4 billion, up 100% from a year ago.
• Traditional servers and networking revenue was $10.5 billion, up 122% from a year ago.
• Storage revenue was $4.9 billion, up 26% from a year ago.
• Client solutions group revenue was $15 billion, up 20% from a year ago, with operating income of $1.1 billion. Commercial revenue drove results with growth of 22% in the second quarter.