“I don’t think applying historical markets or historical views about the market and how it is going to act are appropriate today,” said Dell Vice Chairman and COO Jeff Clarke.
Dell Technologies blew away Wall Street AI-optimized server revenue expectations Thursday, raising its fiscal 2027 full year outlook for that segment by $10 billion to a whopping $60 billion.
The projected 2.4 times increase in AI-optimized server revenue for the fiscal year helped drive a 39 percent increase in Dell shares to $439.80 in after-hours trading. That translates into an $80 billion increase in Dell’s market capitalization to about $290 billion.
Dell booked $24.4 billion in AI-optimized server revenue in its first fiscal quarter ended May 1, delivering $16.1 billion in AI server revenue, up 757 percent from the year-ago period. Dell exited the quarter with a whopping $51.3 billion in AI backlog.
With continued momentum in AI infrastructure sales, Dell raised its Fiscal Year 2027 revenue target by $27 billion and its Fiscal Year 2027 earnings by $5 per share.
“Our pipeline indicates demand is not slow but accelerating and meaningfully outpacing supply as customers prioritize securing the infrastructure they need across AI, traditional compute, storage and PCs,” said Dell Vice Chairman and Chief Operating Officer Jeff Clarke.
Clarke said “historical” norms do not apply to the current AI demand environment with supply constraints, customers looking to upgrade aging infrastructure and new demand including agentic AI market growth.
“I don’t think applying historical markets or historical views about the market and how it is going to act are appropriate today,” said Clarke. “We’re finding new uses (for compute with the advent of agentic AI)…What is the value of adding intelligence into every workflow, every decision, every product, every customer interaction. I would assert the value is pretty darn high!”
Clarke said there is, in fact, “new demand” being driven by agentic AI. “There’s an AI drag,” he said. “There is inference. Agentic AI is driving a new marketplace for traditional servers that we haven’t seen before!”
Dell’s traditional server sales, in fact, were up 92 percent in the quarter. Traditional servers are increasingly taking on AI workloads, said Clarke.
“Those AI workloads we’re seeing with very dense servers making their way into neoclouds, into some of the more advanced enterprise users, semiconductor companies and big tech, that are using it to actually drive some of the inference workloads, agentic workloads in their environment,” he said.
Clarke said the agentic AI market has taken off since Dell laid out its financial forecast at last October’s securities analyst meeting. “The game changer since that October time (frame) is what has happened in agentic,” he said. “What you are seeing is new categories of TAM (Total Addressable Market) expanding.”
The agentic revolution is “a completely new marketplace that is being driven by putting intelligence into every workflow and every part of knowledge work on the planet today and we are just beginning,” said Clarke.
Clarke said Dell is taking share in all of its segments including AI servers, traditional servers, storage and PCs. “We are winning,” exclaimed Clarke.
“During these times of supply disruption and a lot of puts and takes in the marketplace, customers tend to come to Dell to look for a calming hand,” he said.
The “forward-looking pipeline” for Dell products has “never been healthier,” said Clarke. “They are actually growing at greater than historical rates, which gave us confidence to raise the guide by $27 billion in revenue for the year,” he said.
C.R. Howdyshell, CEO of Independence, Ohio-based Advizex, a Myriad360 company, said the combined Advizex-Myriad360 Dell sales pipeline has doubled over the course of this year in the midst of the memory shortage and supply chain crisis.
Howdyshell said he expects the combined Advizex-Myriad360 Dell sales to be up more than 50 percent this year. “We are seeing significant Dell AI server traction among enterprise customers,” he said.
Howdyshell credited Dell Senior Vice President of North America Channel Sales Gregg Ambulos, a 29-year Dell-EMC channel sales veteran, for driving a Dell channel renaissance in North America along with support from the Dell executive team including Dell Global Sales President Pete Trizzino.
“We are working on some significant deals where customers in years past may have gone direct but Dell is standing by us,” said Howdyshell. “Dell’s channel commitment has never been stronger. What Gregg Ambulos has done at Dell to support the channel is unprecedented. That is going to drive significant returns for both Dell and the channel in the current supply demand environment.”
Howdyshell said Advizex-Myriad360 is benefiting from its top-tier Titanium status with Dell in the midst of the current supply chain crisis.
“Dell is supporting the channel with AI go to market and server supply at a time when other OEMs are struggling with supply,” said Howdyshell. “Dell has made a commitment to go hand-in-hand with partners into the enterprise with AI servers. That has made a huge difference.”
Overall, Dell reported record non-GAAP diluted earnings per share of $4.86, up 214 percent from the year-ago period, on sales of $43.8 billion, up 88 percent from the year-ago period.
The Dell earnings per share results were 60 percent above the Zacks Investment consensus estimate of $3.04 per share, while Dell sales in the quarter were 23 percent above the Zacks revenue consensus of $35.46 billion.
“Demand was stronger than we anticipated across all lines of business and geographies with customers moving decisively to secure supply across a broad range of IT needs,” said Clarke.
Looking into the second half of the year, Clarke said Dell continues to be supply constrained, which is resulting in “longer-term” multiyear conversations of three, four and five years with customers on how they “secure supply to provide their growth and upgrade” their infrastructure.
“It really is access to supply because quite honestly I can’t tell them what the price is going to be,” he said. “But it is arrangements and agreements we are working with large customers to ensure they have what they need to grow their businesses.”
Clarke said the Dell sales pipeline indicates the supply constraints will continue, which is “breaking the historical norms of pipeline build within the quarter and the out quarters.”
The pipeline for traditional servers, for example, grew in the first quarter and also several quarters out, said Clarke.
“It is showing more customers looking to get access to the technology,” he said. “We are seeing budgets grow. We are seeing budgets shift…The demand that we see continues to be robust and we and the supply chain have to go find more parts for the businesses and for our customers to fulfill that demand.”
