Companies around the world are pouring money into computers that power artificial intelligence, and few have profited as much as Dell Technologies. The US company’s shares have gained more than 250 percent this year, outperforming even chip and memory hardware manufacturers. The reason is simple. Businesses and major cloud operators are racing to buy servers designed for AI, and Dell is supplying them.
Interestingly, the growth looks far from exhausted. The company is sitting on a record backlog of unfilled orders, demand exceeds its production capacity, and its shares are still trading at prices that do not appear excessive given how quickly profits are growing.
A quarter unlike any Dell has seen in a long time
The latest quarter was one of the strongest in the company’s history. Revenue climbed to $43.8 billion, an 88 percent year-over-year jump. Adjusted net income rose by as much as 194 percent.
The main growth driver was the Infrastructure Solutions Group, which is responsible for server equipment. Its revenue surged 181 percent year over year to $29 billion. AI server sales alone generated $16.1 billion, a staggering 757 percent increase from the previous year. New orders for AI infrastructure reached $24.4 billion in a single quarter.
However, the record pile of orders still awaiting fulfillment is the most telling figure. At the end of the quarter, Dell had accumulated $51.3 billion worth of them. And demand continues to outpace production capacity. Moreover, the pipeline of potential contracts under negotiation is several times larger than the volume of orders already placed. That gives a fairly good indication of where revenue is heading in the coming quarters.
The customer base is growing
Dell now serves more than five thousand customers purchasing its products for artificial intelligence applications. They are not limited to giant data center operators. Traditional businesses, smaller specialized cloud providers, and government-funded projects are also joining their ranks. The broader the customer base, the lower the risk that the loss of a single major client will drag the company down.
The traditional part of the business is not lagging behind either. Revenue from conventional servers jumped 92 percent year over year, helped by companies upgrading their hardware and growing demand for computing power. It is also becoming clear that as AI moves into production, it drives demand for conventional servers as well. One fuels the other.
Positive outlook for share price growth
Dell’s management has sharply raised its forecasts. For fiscal year 2027, it expects revenue of between $165 billion and $169 billion. Until recently, it had projected a range of $138 billion to $142 billion. AI server sales alone are expected to generate around $60 billion, while adjusted earnings per share are projected to rise 74 percent to $17.90.
Wall Street analysts expect similarly rapid growth. They estimate that earnings per share will soar by nearly 92 percent this year and post another double-digit increase next year.
Despite the shares’ steep rally, their valuation still does not look stretched. Dell trades at roughly 23.5 times expected earnings, which is a fairly modest figure given its growth rate. Experts maintain a Moderate Buy rating on the stock.
The single-vendor trap
Dell and Nvidia are building on an idea they call choice without compromise. Put simply, it means not forcing customers to commit to a single model or a single cloud.
The best model for summarizing text today may not be the best one for writing code tomorrow. And the economics that made sense for a cloud-based pilot project can become extremely expensive once operations ramp up fully and consume millions of tokens per day. According to Dell, companies that keep pace have one thing in common. They have assembled their computing infrastructure so that a new model or tool can be added easily, rather than having to redesign the entire solution for every innovation.
Openness alone, however, does not solve the problem. If you leave a company to connect all the components itself, you have merely traded the single-vendor trap for an endless integration project. Dell is therefore betting on validated choice, where the individual components have been proven to work together. It recently launched a program around its Dell AI Factory platform that validates partner solutions so companies can deploy them without a lengthy integration process.
Sources: forbes.com and finance.yahoo.com
