It is expected that AI server revenue will double this year! Dell's performance and guidance both exceeded expectations, rising over 12% in after-hours trading | Earnings Report Insights

Dell Technologies announced its earnings report after the market closed on Thursday, showing that the company's sales outlook for artificial intelligence (AI) servers exceeded market expectations, indicating that the demand for equipment providing computing power for AI data center construction remains strong, which stimulated the company's stock price to surge over 12% in after-hours trading.

Here are the key points from Dell's fourth-quarter earnings report:

Key Financial Data:

Revenue: Fourth-quarter revenue reached a record $33.4 billion, a year-on-year increase of 39%, surpassing analysts' expectations of $31.7 billion.

Earnings per Share: Fourth-quarter diluted earnings per share reached a new high of $3.37, a year-on-year increase of 57%; non-GAAP diluted earnings per share reached $3.89, a year-on-year increase of 45%, exceeding analysts' expectations of $3.52.

Cash Flow: Operating cash flow for the quarter reached $4.7 billion, also setting a record.

Segment Data:

Infrastructure Solutions Group (ISG):

• Annual Revenue: ISG's annual revenue reached $60.8 billion, a year-on-year increase of 40%, setting a record.
• Annual Operating Profit: Annual operating profit reached $7.1 billion, a year-on-year increase of 27%, also setting a record.
• Q4 Revenue: Fourth-quarter revenue reached $19.6 billion, a year-on-year increase of 73%, reaching an all-time high.
  • Quarterly revenue from AI-optimized servers reached $9 billion, a year-on-year increase of 342%;
  • Quarterly revenue from traditional servers and networking business reached $5.9 billion, a year-on-year increase of 27%.
  • Fourth-quarter storage business revenue was $4.8 billion, a year-on-year increase of 2%.
• Q4 Operating Profit: Fourth-quarter operating profit reached $2.9 billion, a year-on-year increase of 41%, setting a quarterly record.

Client Solutions Group (CSG):

• Annual Revenue: CSG's annual revenue was $51 billion, a year-on-year increase of 5%.
• Annual Operating Profit: Annual operating profit was $2.8 billion, a year-on-year decrease of 5%.
• Q4 Revenue: Fourth-quarter revenue was $13.5 billion, a year-on-year increase of 14%.
  • Commercial client revenue for the fourth quarter was $11.6 billion, a year-on-year increase of 16%;
  • Consumer business revenue was $1.9 billion, year-on-year flat. Fourth-quarter operating profit was $629 million, year-on-year flat.

2025 Full-Year Performance:

Revenue: The company's full-year revenue reached a historic high of $113.5 billion, a year-on-year increase of 19%.

Earnings per Share: Full-year diluted earnings per share (EPS) reached a new record of $8.68, a year-on-year increase of 36%; non-GAAP diluted earnings per share reached $10.30, a year-on-year increase of 27%.

Cash Flow: Full-year operating cash flow reached $11.2 billion, also setting a historic high.

Performance Guidance:

Fiscal Year 2027 Full-Year Revenue: The company expects full-year revenue for fiscal year 2027 to be between $138 billion and $142 billion, with a midpoint of $140 billion, representing a year-on-year increase of 23%, higher than analysts' expectations of $126.3 billion

AI Server Revenue: Annual revenue from AI-optimized servers is expected to be approximately $50 billion, a year-on-year increase of 103%.

Fiscal Year 2027 Earnings Per Share: The expected median range for GAAP diluted earnings per share for the full fiscal year 2027 is $11.52, a year-on-year increase of 33%; the expected median range for non-GAAP diluted earnings per share is $12.90, a year-on-year increase of 25%, exceeding the average analyst expectation of $11.56.

Q1 Revenue: Expected to be between $34.7 billion and $35.7 billion, with a median of $35.2 billion, a year-on-year increase of 51%.

Q1 Earnings Per Share: The expected median range for GAAP diluted earnings per share in the first quarter is $2.55, a year-on-year increase of 86%; the expected median range for non-GAAP diluted earnings per share is $2.90, a year-on-year increase of 87%.

At the same time, the company announced a 20% increase in cash dividends and a $10 billion increase in the stock repurchase authorization. In the fourth quarter, the company returned $2.2 billion to shareholders through stock buybacks and dividends. For the entire year, the company returned a record $7.5 billion to shareholders and repurchased approximately 54 million shares.

Dell Technologies Vice Chairman and Chief Operating Officer Jeff Clarke stated:

“We signed over $64 billion in AI-optimized server orders for the year, with shipments exceeding $25 billion, and entered fiscal year 2027 with a record backlog of $43 billion. This fully demonstrates that our engineering technology leadership and differentiated AI solutions are winning in the market.”

Strong performance and guidance spurred Dell's stock price to rise over 12% in after-hours trading on Thursday. Over the past 12 months, the stock has increased by 5%.

Expected Doubling of AI Server Revenue This Year

Media reports indicate that Dell's servers, designed specifically for running AI workloads, are attracting customers from companies leasing computing power, such as CoreWeave Inc. and Nscale Global Holdings Ltd., as well as enterprise customers and large AI service providers.

In the fourth quarter of the fiscal year, Dell's server and networking business had an operating profit margin of 14.8%, exceeding the average analyst expectation of 12.9%. In the personal computer business segment, the operating profit margin was 4.7%, while the average analyst expectation was 6.18%.

Dell expects AI server revenue to grow by 103% in fiscal year 2027, reaching approximately $50 billion. The Chief Operating Officer of Dell stated that the company signed over $64 billion in AI-optimized server orders for the entire fiscal year 2026.

Fiscal year 2026 was a milestone year in the company's history. We achieved a record high revenue of $113.5 billion for the year, with record earnings per share and record cash generation capability. The AI opportunity is transforming our company. The company stated that it has over 4,000 AI server customers, including Elon Musk's AI startup xAI and CoreWeave.

Storage Chip Price Increases Can Still Control Costs

Analysts predict that major tech companies, including Alphabet, Microsoft, Amazon, and Meta, will invest at least $630 billion this year to build AI infrastructure, which will boost demand for suppliers like Dell and its competitors such as AMD. As AI infrastructure construction progresses, U.S. trade regulatory policies and significant increases in storage chip prices have forced companies like Dell and HP to raise product prices, thereby alleviating cost pressures.

Almost all servers are equipped with storage chips to store data and instructions to keep processors running at high speeds, which is crucial for AI applications. Dell's financial report shows that the company is still working to control costs and improve profit margins despite the rapid rise in storage chip prices. Clarke commented on the storage chip price issue:

"The overall industry environment remains highly dynamic, with unprecedented AI demand leading to sustained supply tightness and frequent price resets."

The tight supply of storage chips is expected to suppress global demand for consumer electronics, including personal computers, smartphones, and gaming consoles. HP stated that it expects its performance in fiscal year 2026 to be at the lower end of the previously forecasted range