TLDR;
- Dell stock jumped over 7% after issuing bullish Q2 guidance.
- AI server demand is driving future growth, despite a Q1 earnings miss.
- Infrastructure revenue rose 12%, led by a 16% surge in server sales.
- Consumer PC sales slumped 19%, highlighting market unevenness.
Dell Technologies (NASDAQ: DELL) surged in after-hours trading Thursday, gaining more than 7% despite reporting mixed results for its fiscal first quarter.
The company beat revenue expectations but fell short on earnings. However, investors looked past the near-term shortfall, focusing instead on Dell’s surprisingly upbeat guidance for the second quarter, driven largely by booming demand for AI infrastructure.
Notably, for Q1, Dell posted net revenue of $23.38 billion, slightly ahead of Wall Street’s forecast of $23.15 billion. Adjusted earnings per share (EPS) came in at $1.55, missing the expected $1.69. While the shortfall in earnings raised eyebrows, Dell’s management quickly turned the narrative around by revealing a bullish outlook for the next quarter and beyond.
AI Boom Powers Bullish Forecast
The standout driver behind Dell’s optimism is its accelerating AI server business. The company now expects Q2 revenue to range between $28.5 billion and $29.5 billion—far exceeding analysts’ consensus of $25.35 billion. EPS for the upcoming quarter is forecast at $2.25, topping the $2.18 street estimate.
Dell also revealed that its AI server backlog has swelled to $14.4 billion, nearly double market expectations. COO Jeff Clarke noted that Dell secured $12.1 billion in AI system orders in Q1 alone, more than all of fiscal 2025 combined. The company anticipates AI server sales to top $15 billion in fiscal 2026, up from $10 billion last year.
“Unprecedented demand is coming from second-tier cloud providers like CoreWeave,” Clarke said on the earnings call. However, he also cautioned that the AI infrastructure space remains “lumpy,” with deployments delayed by challenges in power supply, data center readiness, and cooling systems.
Infrastructure Shines While PC Sales Stumble
Dell’s Q1 performance varied widely across business segments. Its Infrastructure Solutions Group led the charge with $10.3 billion in revenue, up 12% year-over-year. Server and networking sales surged 16% to $6.3 billion, underscoring the company’s strategic pivot toward AI-powered solutions. Storage sales climbed 6%, reflecting stable, if less dramatic, growth.
On the flip side, Dell’s Client Solutions Group, the unit responsible for its PC business, generated $12.5 billion in sales. While commercial client revenue rose 9%, consumer PC sales plummeted 19%, dragged down by continued softness in the broader consumer tech market. Operating income for the segment declined 16%, with executives citing heavy pricing pressure from competitors.
Wall Street Cheers Guidance Amid Industry Slump
Dell’s upbeat forecast stands in stark contrast to some of its peers. Rival HP Inc. recently missed earnings expectations and slashed its outlook, blaming macroeconomic uncertainty and trade concerns. Similarly, NetApp issued soft guidance, spooking investors and sending its stock tumbling.
By comparison, Dell’s ability to navigate uneven demand and capitalize on AI tailwinds appears to be winning investor confidence. The company also announced it returned $2.4 billion to shareholders via buybacks and dividends last quarter, reinforcing its commitment to capital discipline.
Looking ahead, Dell reaffirmed its full-year revenue guidance of around $103 billion and raised its annual EPS projection to $9.40, ahead of analyst expectations.
With AI demand reshaping the tech landscape, Dell’s Q2 guidance signals a potential turning point. While challenges remain in the PC space, the company’s growing dominance in AI infrastructure is giving investors a reason to believe in a strong rebound.
