Robust data-center hardware sales helped Dell Technologies beat expectations for its fiscal second quarter. The news drove Dell stock higher on Friday.
Late Thursday, Dell reported adjusted earnings of $1.89 a share on sales of $25.03 billion in its fiscal Q2 ended Aug. 2. Analysts polled by FactSet had expected earnings of $1.70 a share on sales of $24.14 billion. On a year-over-year basis, Dell's sales and earnings both rose 9%.
"Our AI momentum accelerated in Q2, and we've seen an increase in the number of enterprise customers buying AI solutions each quarter," Dell Chief Operating Officer Jeff Clarke said in a news release.
He added, "AI-optimized server demand was $3.2 billion, up 23% sequentially, and $5.8 billion year to date. Backlog was $3.8 billion, and our pipeline has grown to several multiples of our backlog."
Dell Stock Rises After Report
On the stock market today, Dell stock rose 4.3% to close at 115.54.
Dell's Infrastructure Solutions Group posted record revenue of $11.65 billion, up 38% year over year. Sales of servers and networking gear surged 80% to $7.67 billion. Meanwhile, sales of storage gear declined 5% to $3.97 billion.
Dell's Client Solutions Group, which sells PCs, reported revenue of $12.41 billion, down 4% year over year.
AI Server Shipments Face Delays
Dell is "very well positioned" for long-term market share gains in commercial information technology spending, Loop Capital analyst Ananda Baruah said in a client note Friday.
"Dell continues to become more broadly capable in key areas across infrastructure product, services and financing," he said. Baruah rates Dell stock as buy with a price target of 185.
JPMorgan analyst Samik Chatterjee noted that Dell's revenue recognition for AI server sales is limited by when customers are ready to take delivery of the hardware.
"Despite a robust AI server backlog and a pipeline that is multiples of the backlog, the revenue recognition in the coming quarters can be gated by customer readiness to take shipments when getting their data centers ready in relation to infrastructure and power," he said in a client note late Thursday.
Chatterjee rates Dell stock as overweight with a price target of 160.
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