Dell Technologies shares surged more than 10% — the company beat forecasts on increased demand for AI servers

Dell Technologies significantly exceeded analysts' expectations with its quarterly results. The company's profit and revenue came in above forecasts, driven primarily by growing demand for artificial intelligence (AI) servers. The company also raised its fiscal year 2027 guidance for both revenue and profit.

On Wednesday, following the opening of the US market, Dell's shares rose by more than 10%.

Dell Technologies is considered one of the biggest beneficiaries of the AI boom that began in late 2022. The company partners with chipmakers such as Nvidia and has established itself as one of the world's largest manufacturers of the powerful rack-scale servers and infrastructure used to process AI workloads.

Orders received for AI servers have already reached tens of billions of dollars for Dell, resulting in a significant backlog of orders for the company.

According to Dell's Chief Operating Officer, Jeff Clarke, the AI server business received a record $60.9 billion in orders during the quarter. Revenue from this segment amounted to $16.4 billion, while the company's accumulated order backlog reached a record $95 billion by the end of the quarter.

Revenue from Dell's Infrastructure Solutions Group (ISG), which includes the AI server business, is now roughly twice that of the company's traditional hardware segment — the Client Solutions Group (CSG). CSG includes personal computers, laptops, tablets, and similar products.

During the quarter, ISG revenue grew 89% year-over-year to reach $31.78 billion, while CSG revenue grew 20% to $15.03 billion.

The company, headquartered in Round Rock, Texas, reported adjusted earnings per share of $7.04 for the second quarter of fiscal year 2027, with revenue of $46.97 billion. Analysts had expected adjusted earnings per share of $4.87 and revenue of $44.84 billion.

For the third quarter of fiscal year 2027, Dell forecasts adjusted earnings per share of $6.50 and revenue of $49 billion. This significantly exceeds the $41.91 billion in revenue projected by analysts.

Dell also raised its annual guidance

For fiscal year 2027, the company now expects adjusted earnings per share of $25.50 and revenue of $192 billion. The company's previous guidance had projected earnings per share of $17.90 and revenue of $167 billion. Analysts' consensus forecast for annual revenue stood at $173.8 billion.

Following the release of the results, Raymond James analyst Simon Leopold reiterated an "Outperform" rating on Dell's stock and raised his price target from $500 to $617.

Leopold noted that Dell "delivered strong results in the second fiscal quarter," while significantly raising its guidance for both the third quarter and fiscal year 2027 as a whole.

In his assessment, while the results may have been somewhat influenced by price increases and order pull-forward, the updated guidance suggests that AI development is also driving demand for traditional computing systems and data storage infrastructure.

According to Leopold, the margin improvement recorded during the quarter also demonstrates Dell's ability to fulfill orders efficiently despite ongoing supply chain constraints.