Dell raises forecasts as AI servers lift revenue

Dell raised its annual revenue and profit forecasts after reporting quarterly net income of $3.44 billion, up from $965 million in the same quarter a year earlier. The company attributed the gain to stronger-than-expected orders for AI-optimized servers and price increases amid a global memory shortage.

Dell projected revenue from AI servers could reach about $60 billion in fiscal 2027, up from a prior expectation of $50 billion. The Infrastructure Solutions Group, which includes storage and servers, posted revenue growth of 181% year over year for the quarter. PC revenue rose 17%.

Executives pointed to pricing actions taken in January to offset higher component costs, including DRAM, NAND and CPUs. Management also made supply-chain adjustments that helped secure memory and meet demand for high-performance infrastructure.

Jeff Clarke, Dell’s vice chairman and chief operating officer, told analysts on a conference call that the company has been raising prices to respond to inflation across inputs. “We’re repricing, it feels like, every day, and I’m sure our customers feel that pain,” he added, listing fuel, raw materials and chips among the pressures.

This week Dell secured a five-year, $9.7 billion contract with the U.S. Department of Defense to act as prime contractor for Microsoft 365, cloud subscriptions and other Microsoft licensing for defense and military customers.

Analysts are watching how server makers respond to the memory shortage intensified by rapid AI adoption. Dell prioritized supply for higher-margin AI systems and passed some input-cost increases to customers through price adjustments.

Dell’s revised forecast assumes continued enterprise spending on AI infrastructure and a memory market that remains tight enough to support higher pricing. Management noted that inflationary pressures on components and logistics are expected to continue in the near term.