Dell lifts forecasts on AI-server demand, price hikes

Dell Technologies raised its annual revenue and profit forecasts after reporting quarterly net income that more than tripled to $3.44 billion, up from $965 million a year earlier.

Management credited stronger sales of servers and storage designed for artificial intelligence workloads and recent price increases. The company raised its target for AI-server revenue to about $60 billion by fiscal 2027, up from a prior $50 billion estimate.

Revenue in the Infrastructure Solutions Group, which includes server and storage products and related services, rose 181% for the quarter. Consumer and business PC revenue increased about 17%.

Dell implemented price increases in January to offset higher input costs linked to a global memory chip shortage and other inflationary pressures. The company cited rising costs for components such as DRAM, NAND and central processing units.

Jeff Clarke, vice chairman and chief operating officer, told analysts on a conference call, ‘We’re repricing, it feels like, every day,’ and said the company expects inflationary pressures to continue.

Executives credited strategic price adjustments and supply-chain changes with helping Dell secure components needed for AI-focused systems and meet customer demand for machines optimized to train and run AI models.

In the same week as the earnings report, Dell won a five-year, $9.7 billion contract with the U.S. Department of Defense to act as prime contractor for Microsoft licensing. Under the agreement, Dell will manage Microsoft 365 licenses, cloud subscriptions and software licensing for Department of Defense and U.S. military users.

Following the quarter, Dell updated its full-year revenue and profit outlook, citing continued corporate spending on servers and storage configured for AI tasks as the main drivers of the revised forecast.