Dell Technologies shares soar more than 15% during extended trading on Thursday after the company released it Q4 earning results that beat analysts’ estimates and showed strong demand for its AI servers. It’s not a good time to be selling PCs and Dell has been grappling with sinking demand for the past few years. But its stock still shot up 20% in after-hours trading after the company excited investors about the tech industry’s favorite buzzwords: artificial intelligence.
Dell Q4 earnings report
Dell’s earnings per share: $2.20 adjusted vs. $1.73 expected by LSEG, formerly known as Refinitiv
Dell’s revenue: $22.32 billion vs. $22.16 billion expected by LSEG
Dell’s revenue for the fiscal 2024 fourth quarter fell 11% from $25.04 billion in the year-ago quarter.
Dell’s net income: was $1.16 billion, up 89% from the $614 million it posted in the same period last year.
Dell’s annual dividend
Chief Financial Officer Yvonne McGill said in a release that the company is increasing its annual dividend by 20% to $1.78 per share, which she called a “testament to our confidence in the business.”
Dell’s revenue breakdown
- Dell’s Infrastructure Solutions Group (ISG): Reported $9.3 billion in revenue for the quarter, down 6% year over year but up 10% from the third quarter. Servers and networking revenue made up the bulk of that, with $4.9 billion in revenue driven by “AI-optimized servers.” Storage revenue came in at $4.5 billion.
- The company’s Client Solutions Group (CSG): Reported $11.7 billion for the quarter, down 12% year over year. That includes $9.6 billion in commercial client revenue, which fell 11% since the fourth quarter of last year, and $2.2 billion in consumer revenue, down 19% year over year.
“Our strong AI-optimized server momentum continues, with orders increasing nearly 40% sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion,” Chief Operating Officer Jeff Clarke said in the release.
For its first quarter, Dell said during its quarterly call with investors that it expects to report revenue between $21 billion and $22 billion.
What makes Dell shares soar?
Despite a decline in PC demand, the company said it is encouraged by momentum around AI, and that it expects to return to growth for fiscal 2025. However, the company noted that the macroeconomic environment is causing some customers to be cautious about infrastructure costs.
AI run Dell servers
Dell revenue declined 11% in the Q4. Although that was better than forecast, Dell’s PC business is lagging. Still, Dell noted demand for powerful servers to run AI workloads surged in the last three months. Its infrastructure unit pulled in $9.3 billion in revenue, with its 10% growth from the previous quarter “driven primarily by AI-optimized servers”.
“We’ve just started to touch the AI opportunities ahead of us, and we believe Dell is uniquely positioned with our broad portfolio to help customers build GenAI solutions that meet performance, cost and security requirements,” Jeff Clarke, the company’s CEO, said in a statement Thursday.
Less competition
The demand for hardware to make AI a reality is higher than Nvidia the the AI chip leader is able to produce. That means there’s an opportunity for companies like Dell to fill the gap.
That’s good news for Dell, because its primary business has struggled since the Covid-era PC boom.
However, PC shipments did increase in the fourth quarter of 2022, the first time it has increased after eight straight quarters of decline.
Optimism for Dell’s PC
“PCs will become even more essential as most day-to-day work with AI will be done on the PC,” Clarke said in prepared remarks for the company’s earnings call Thursday.
Dell’s computer revenue fell 12% to $11.7 billion, “largely driven by a decline in units,” the company said in Thursday’s earnings release.
Dell Technologies shares, which reached a record high close to cap Thursday’s trading session, rose almost 20% in after-hours trading.
