Dell soared 20% and its stock price reached a new high, as the PC giant also jumped on the AI bandwagon.

Dell's second-quarter performance and next-quarter guidance have both greatly exceeded expectations, and the impressive results have allowed the market to truly "experience" the madness of the PC giant riding the AI wave.

On Friday, September 1st, Dell's stock price skyrocketed by over 21% to $68.19, reaching a new all-time high. Dell's stock price has already risen by over 67% this year. Analysts believe that the outstanding earnings report released overnight undoubtedly played a certain role in boosting confidence. However, what deserves more attention is that Dell's deployment in AI-related businesses over the past few months has gradually been reflected in the financial reports, indicating that the PC market may begin to recover with the support of AI.

The financial report shows that Dell's second-quarter revenue decreased by 13% to $22.9 billion, which is higher than the market's expected $20.8 billion. The adjusted earnings per share were $1.74, higher than the market's expected $1.14.

Looking at the individual business segments, Dell's computer business revenue in the second quarter decreased by 16% YoY to $12.9 billion, exceeding market expectations. The sales performance of this segment in both the consumer and enterprise markets also exceeded expectations. Server and networking business revenue decreased by 3% to $4.27 billion, still surpassing analysts' predictions.

Dell expects third-quarter revenue to be between $22.5 billion and $23.5 billion, higher than the market's forecast of $21.67 billion. For the fiscal year 2024, Dell has raised its annual revenue guidance to $89.5 billion to $91.5 billion.

Jeff Clarke, Vice Chairman and Chief Operating Officer of Dell Technologies, said, "AI has already demonstrated long-term driving force and will help sustain the growing demand for our product portfolio."

Analysts generally believe that the impact of AI on Dell's performance has already begun to show in the server and networking business. With more AI features integrated into PCs, it is expected that AI business will continue to have a positive impact on PCs next year.

Tianfeng International analyst Ming-Chi Kuo even exclaimed that the long-tail effect and edge cloud computing will be the two key factors driving explosive growth in AI computing power, and in this regard, Dell will become an underestimated beneficiary.

AI may become a long-term driving force for Dell's performance

Dell is continuously exploring the field of AI, hoping to provide faster infrastructure hardware and solutions for companies that are experimenting with AI.

Dell's two main businesses are the Infrastructure Solutions Group (ISG) and the Client Solutions Group (CSG). ISG focuses on enterprise-level infrastructure solutions, while CSG focuses on computing devices for consumers and enterprise customers. In the second quarter, ISG achieved revenue of nearly $8.5 billion, a YoY decrease of 11%, but a MoM increase of 11%. Among them, storage revenue was $4.2 billion, with continuous growth in demand for mid-range storage array product PowerStore, and software-defined storage product PowerFlex has also achieved demand growth for eight consecutive quarters, with a YoY doubling in demand in the second quarter.

Server and networking revenue was $4.3 billion, with continued growth in demand for AI-optimized servers. Operating profit was $1 billion, accounting for approximately 12.4% of ISG's revenue.

On the other hand, CSG achieved revenue of $12.9 billion, a YoY decrease of 16% but a MoM increase of 8%. Commercial client revenue was $10.6 billion, with continued growth in demand for workstations to help organizations run complex AI workloads locally. Consumer revenue was $2.4 billion. Operating profit was $969 million, accounting for approximately 7.5% of CSG's revenue.

Jeff Clarke stated that AI has become a "long-term growth driver" with a continuous increase in demand for AI in Dell's product portfolio. The company continues to focus on the most profitable areas of the market and maintain its leading position in these areas.

In May of this year, Dell collaborated with NVIDIA to launch Project Helix, developing integrated AI services known as Dell Gen AI Solutions. This project involves deep integration with NVIDIA and covers IT infrastructure, PCs, and professional services. It adopts a full-stack GenAI with a large language model (LLM) to meet all the needs of GenAI development.

Just a month ago, Dell announced a collaboration with NVIDIA to further develop generative AI as an extension of Project Helix. The company launched a new Dell Gen AI Solution in partnership with NVIDIA, providing tools to help businesses build generative AI models locally.

This service has now been implemented, and according to supply chain sources, Dell's AI server shipments this year could reach up to 20,000 units, with further growth expected next year.

Guo Mingchi believes that the collaboration between NVIDIA and Dell to meet the demand for long-tail effects and edge computing has another benefit, which is to allocate more AI chips to major PC manufacturers and require them to help sell PC and laptop graphics cards. This close cooperation can create a win-win situation when there is a shortage of AI chips and an excess inventory of PC/laptop graphics cards.

Clarke pointed out that edge AI applications on the PC side are very important and can be called "killer" applications that will drive productivity improvement. Whenever the market sees new applications that can drive productivity on the PC side, the market will rebound.

This year, we will be launching a new version of Windows with CoPilot by the end of the year, and everyone is hoping to have a PC that supports artificial intelligence.

If you want your PC to do more tasks, it usually means that it needs a more powerful CPU, more memory, more storage space, a better display, and so on. This is also another way to increase the average selling price (ASP).