Dell Server Sales Surge 58% Amid Continued AI Demand

Michael Dell, the chairman and CEO of Dell Technologies, recently shared insights during the Dell Technologies World conference in Las Vegas, Nevada, highlighting the company's impressive financial results driven by the increasing demand for artificial intelligence (AI) systems.

On Tuesday, the company announced its quarterly earnings, which exceeded analyst expectations for earnings per share, although overall revenue fell slightly short. Following the announcement, Dell's shares dipped by 5% in after-hours trading.

Financial Overview

For the fiscal third quarter ending November 1, Dell reported the following figures compared to estimates:

• Earnings per share: $2.15 adjusted versus $2.06 anticipated
• Revenue: $24.4 billion as opposed to the expected $24.67 billion

Net income for the quarter rose by 12%, totaling $1.12 billion or $1.58 per share, compared to approximately $1 billion or $1.36 per share from the same period last year. Overall, revenue experienced a boost of about 10%, increasing from $22.25 billion a year ago.

Dell is expected to provide forecasts for the current quarter during earnings calls, as analysts eagerly await further insights.

AI as a Growth Driver

The stock price of Dell has soared by 86% in 2024, with investors recognizing its pivotal role as a leading supplier of essential tools and systems for AI development. The company is a prominent vendor for computer clusters necessary for building and deploying AI solutions, particularly those using Nvidia chips.

Demand for AI accelerators from Nvidia remains strong across various sectors, including cloud services, enterprises, and government organizations, which often order systems equipped with tens of thousands of AI chips. Dell specializes in selling these fully integrated systems.

This year, Nvidia's CEO, Jensen Huang, publicly endorsed Dell, stating that the company is the go-to for placing orders for Nvidia's innovative Blackwell AI chips.

Jeff Clarke, Dell’s chief operating officer, expressed optimism about the AI market, stating, "AI is a robust opportunity for us with no signs of slowing down."

Infrastructure Solutions Group Performance

Dell's AI server sales are included in its Infrastructure Solutions Group (ISG), which encompasses AI servers, storage, network components, and traditional servers. This group saw an impressive revenue increase of 34%, largely thanks to AI sales, amounting to $11.4 billion.

A standout segment was the Servers and Networking division, which focuses on AI-based systems. Revenue in this area surged by 58%, reaching $7.4 billion. During the quarter, Dell reported shipments of $2.9 billion in AI servers and revealed that future orders for AI servers amounted to $3.6 billion.

This spike in AI server orders has also driven a significant uptick in demand—by double digits—for Dell’s traditional servers, which are less power-intensive and use CPU chips from Intel or AMD. These systems help optimize space and power in data centers, which are crucial for companies heavily investing in AI-related infrastructure.

Client Solutions Group Trends

In contrast, Dell's Client Solutions Group, which deals with PCs and laptops for both consumers and enterprises, saw a slight decline of 1% year-over-year to $12.1 billion. While sales of PCs to commercial clients increased by 3% annually to $10.1 billion, consumer PC sales fell sharply by 18% year-over-year to $2 billion.

Dell, AI, Nvidia