Dell expects AI server revenue to double in fiscal 2027 on data centre boom
Big tech firms are expected to spend at least US$630 billion to build AI infrastructure this year
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[BENGALURU] Dell said that it expects revenue from its key artificial intelligence (AI)-optimised servers business to double in fiscal year 2027 and promised to return more cash to shareholders, sending its shares surging 10 per cent in extended trading.
The company announced a 20 per cent hike in its cash dividend and an additional US$10 billion for its share repurchase programme. Big tech firms, such as Alphabet, Microsoft, Amazon, and Meta, are expected to spend at least US$630 billion to build AI infrastructure this year, which would boost demand for server and data centre equipment from vendors such as Dell and rival Super Micro Computer.
US trade regulations and surging memory chip costs due to the AI infrastructure buildout have forced companies such as Dell and HP to implement price increases, which are helping them offset cost pressures. Almost all servers have memory chips that hold data and instructions, keeping processors running at high speed, which is paramount for AI applications.
Initially, infrastructure clients experienced “sticker shock” but quickly grasped the supply constraints, shifting their focus to securing necessary components, which led large customers to aggressively acquire supply for their AI servers, traditional servers, and storage build-outs, Dell chief operating officer Jeff Clarke said on a post-earnings call.
The company raised server prices on Dec 10, while price changes for PCs occurred on Jan 6, Clarke said.
Dell expects AI server revenue to grow 103 per cent to about US$50 billion in fiscal 2027.
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The company said that it has more than 4,000 AI server customers, including Elon Musk’s AI startup xAI and CoreWeave.
Dell forecast annual revenue of US$138 billion to US$142 billion, above analysts’ average estimate of US$125.54 billion, according to data compiled by LSEG. The memory chip squeeze is expected to dampen global demand for consumer electronics, including PCs, smartphones, and gaming consoles.
HP said that it expected fiscal 2026 results to be at the low end of its prior forecasts, while China’s Lenovo warned about mounting pressures on PC shipments.
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“By proactively addressing rising memory costs, and demonstrating early success reflected in both its fiscal first quarter results and full-year guidance, the company showed it is getting ahead of a challenge that continues to pressure peers,” said Hendi Susanto, a portfolio manager and research analyst at Gabelli Funds, which holds Dell shares.
Dell expects annual adjusted earnings per share (EPS) of US$12.90, above estimates of US$11.59.
In the first quarter, Dell expects revenue between US$34.7 billion and US$35.7 billion, above estimates of US$29.13 billion.
The first-quarter adjusted EPS forecast of US$2.90 exceeded estimates of US$2.37.
It reported record revenue of US$33.4 billion in the fourth quarter, beating estimates of US$31.73 billion. Its adjusted EPS of US$3.89 also exceeded the US$3.53 estimate.
Dell’s revenue from its infrastructure solutions group, which includes its storage, software, and server offerings, jumped 73 per cent to US$19.60 billion, while sales from the client solutions group, home to PCs, rose 14 per cent to US$13.49 billion. REUTERS
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