Dell's stock, a player in the PC and AI server game, shot up 39% in after-hours trading on Thursday, May 28, after announcing its fastest revenue growth since 2018. The company's results blew past market expectations, especially with demand for AI servers skyrocketing over eight times. Dell upgraded its revenue forecast for the year, but warned of supply constraints in the second half due to a memory chip shortage.
Details
Dell Technologies' revenue in the first quarter of the 2027 fiscal year, ending May 1, grew nearly 88% year-over-year, reaching $43.84 billion. Analysts surveyed by LSEG were expecting $35.43 billion, CNBC reports. Since the company's return to the stock market in 2018, five years after delisting, Dell's annual revenue growth has never exceeded 39%, notes the channel.
Adjusted earnings per share tripled to $4.86 against expectations of $2.94. The gap between the actual result and analysts' forecasts was the largest in at least five years, according to FactSet data reported by MarketWatch. The company's net profit also tripled.
Such results were driven by demand for AI servers, the company stated. They are building them on Nvidia graphics processors. Revenue from AI servers skyrocketed in the reporting quarter by 757% — reaching $16.1 billion. For the year, Dell expects it to reach $60 billion. In their February forecast, they only mentioned $50 billion.
The revenue of the entire division, which includes AI servers and other data center equipment, increased by 181% — to $29 billion. The consensus forecast from StreetAccount was $22.4 billion, CNBC reports. Growth also accelerated in the traditional server and networking equipment segments.
Dell has raised its forecast for the entire 2027 fiscal year: it now expects adjusted earnings per share to be $17.9, and revenue to be between $165 billion and $169 billion. This is also significantly higher than Wall Street estimates, according to CNBC.
What's up with the stocks
Main trading on Thursday saw Dell shares close up 3.8%, hitting a new record — the fourth consecutive increase, according to MarketWatch. After the earnings report was published, the stock surged by 39%. Since the beginning of the year, the company's market capitalization has increased by over 150%, while the S&P 500 has risen about 10%.
One of the major beneficiaries of the rally in Dell stocks has been U.S. President Donald Trump, who became a shareholder in the company during the first quarter, according to documents from the U.S. Office of Government Ethics. At an event in the White House earlier this month, Trump said, 'Go out and buy Dell.'
For Wall Street, this stock surge came as a surprise: the consensus price among 29 analysts tracking these shares is $228.3, according to MarketWatch. This is 28% lower than the closing level of the main trading session on May 28. Dell shares have 18 buy recommendations, nine hold ratings, and two sell ratings.
What are the company's prospects
Dell servers, designed for handling AI workloads, are attracting clients among companies renting out computing power, such as CoreWeave and Nscale Global Holdings, as well as corporate buyers and major AI suppliers. By the end of the quarter, Dell's backlog for AI servers stood at $51.3 billion, stated COO Jeff Clarke during a conference call with analysts following the earnings report.
However, as clients shift their focus from training AI models to utilizing them, this creates opportunities for Dell's products not only in the AI server segment, stated CFO David Kennedy in an interview with Bloomberg Television. 'This makes long-term growth broader and more sustainable,' he said.
On Wednesday, the Pentagon announced a five-year contract with Dell worth $9.7 billion: the company will become the sole supplier for the Department of Defense and will manage procurement, licensing, and IT support for Microsoft services for the U.S. military. The deal 'will provide Dell with diversification of growth beyond AI and the corporate segment,' wrote Evercore ISI analyst Amit Daryanani in a note cited by Bloomberg.
In January, the company raised prices to reflect the rising costs of components due to the global memory shortage. Dell is facing 'notable constraints on raw material components, especially DRAM and NAND memory chips,' warned Clarke. According to him, the company expects supply limitations in the second half of the 2027 fiscal year.