How Dell's AI Server Boom is Driving Hockey-Stick Growth

Dell Blows Away Wall Street Expectations

Tuesday night, Zacks Rank #1 (Strong Buy) stock Dell Technologies (DELL) delivered arguably the most impressive earnings report this quarter. Dell reported earnings per share of $7.04, trouncing the Zacks Consensus Estimate $4.97 by 41.65%. Meanwhile, positive earnings surprises are nothing new to Dell investors. The AI leader has beaten Zacks Consensus Estimates in 18 of the past 20 quarters.

Why Dell’s Earnings Were So Strong

Dell Technologies is a leading global IT infrastructure and enterprise hardware provider. Although Dell is best-known as a legacy PC manufacturer, the company has benefited dramatically from the artificial intelligence buildout. In fact, in the second-quarter, Dell notched several records including, record revenue, record AI server revenue, record traditional server/networking revenue, record storage revenue, and record operating income. Overall revenue jumped 89% year over year. Meanwhile traditional server and networking revenue exploded 122%, while AI-optimized server revenue doubled year over year.

Why Dell’s Earnings Will Continue to Be Strong

Although Dell’s Q2 growth was staggering, it’s likely just beginning. On the earnings call, management raised the company’s outlook and said: “Inference is past training and is pure demand in our industry. We think the tokens that inference drives is going to grow 87 times to 3600 quadrillion tokens by 2030. Training demand grows five x to 850 Z flops by 2030. Enterprise Agentic is expected to be the single largest workload by 2028. We’re expecting AI to be 75% of all data center demand by 2030.”

Meanwhile, Wall Street analysts echo management’s bullish sentiment. Zacks Consensus Analyst Estimates suggest that revenue and earnings per share will again double by 2028, continuing the company’s hockey-stick like growth trajectory.

Dell Technical View: Relative Strength Vs. AI Peers

While most AI leaders fell below their 50-day moving averages in July and August, Dell shares held the level. In fact, DELL has held the 50-day moving average since February and is once again testing it here.

Bottom Line

Dell’s latest earnings results prove that its transformation from a legacy PC manufacturer to a core AI infrastructure provider. For long-term growth investors looking to capitalize on the next era of data center expansion, Dell continues to prove why it stands out as a market leader.

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This article originally published on Zacks Investment Research (zacks.com).

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