Dell Technologies Inc. (DELL.US) delivered first-quarter results that far exceeded market expectations, driven by explosive demand for artificial intelligence (AI) infrastructure. The company also significantly raised its full-year performance guidance. Following the announcement, Dell's stock surged nearly 40% in after-hours trading on Thursday, surpassing $440 to reach a new all-time high. Year-to-date through Thursday's close, Dell's stock has soared over 150%, compared to a roughly 10% gain for the S&P 500 index.
For the quarter ended May 1, Dell's total revenue skyrocketed 88% year-over-year to $43.84 billion, significantly outpacing the analyst consensus estimate of $35.43 billion. This marks the fastest quarterly revenue growth rate since Dell returned to the public markets in 2018, surpassing the previous high of 39%. Profit performance was even more remarkable. First-quarter net income more than tripled to $3.44 billion, or $5.24 per share, compared to $965 million, or $1.37 per share, in the same period last year. Adjusted earnings per share reached $4.86, well above the market expectation of $2.94.
Chief Financial Officer David Kennedy noted that the gross margin was diluted to 18.1% due to a structural shift towards AI servers. However, the gross profit amount still increased 57% year-over-year to $7.9 billion, and operating profit surged 154% to $4.2 billion.
The primary driver of this quarter's performance was undoubtedly AI servers. Revenue from AI servers, powered by GPUs from companies like Nvidia Corp. (NVDA.US), soared 757% year-over-year to $16.1 billion. Chief Operating Officer Jeff Clarke stated in a release, "The AI opportunity shows no signs of slowing down." Demand is exceptionally strong and diverse, spanning large cloud service providers, sovereign entities, and traditional enterprises. Dell's AI order bookings for the quarter reached $24.4 billion, with the customer base exceeding 5,000. By the end of the quarter, the company's backlog for AI servers hit a record $51.3 billion, with a pipeline several times that size.
In response to surging demand, Dell raised its full fiscal year 2027 revenue forecast for AI servers from the $50 billion projected in February to $60 billion, implying approximately 144% year-over-year growth. The company also raised its full-year total revenue guidance from the previous range of $138 billion to $142 billion to a new range of $165 billion to $169 billion. The adjusted EPS forecast was raised from $12.90 to $17.90, both well above Wall Street expectations. For the second fiscal quarter, Dell expects revenue between $44 billion and $45 billion, representing approximately 50% year-over-year growth at the midpoint. Non-GAAP diluted EPS is projected to be $4.80, plus or minus $0.10.
A notable signal is that alongside the AI server boom, traditional server and storage businesses also performed robustly. Total revenue for the Infrastructure Solutions Group (ISG), which includes servers, networking, and storage, surged 181% to a record $29 billion. Within this, revenue from traditional servers and networking grew 92% year-over-year to $8.5 billion. Clarke explained that beyond large-scale equipment refresh cycles, enterprises deploying AI inference and agent workloads require more CPUs to handle input/output and memory management alongside GPUs, creating incremental demand for traditional computing. Storage revenue grew 8% to $4.3 billion.
The Client Solutions Group (CSG), encompassing commercial and consumer PCs, also performed strongly, with revenue rising 17% year-over-year to $14.6 billion. Commercial PC revenue for enterprises grew 18%, marking the seventh consecutive quarter of growth. Clarke estimates that about one-third of global PCs are now over four years old, which will continue to support enterprise refresh demand, while consumer demand is bolstered by a strong gaming business.
Despite surging demand, supply constraints show no signs of easing. Clarke stated on the analyst call that the company is essentially "repricing every day" and acknowledged, "I'm sure our customers feel that pressure." He pointed out that the current inflationary environment is driving up costs for everything from fuel and raw materials to key components like DRAM, NAND memory, and CPUs at unprecedented rates, a trend expected to persist. He clarified that the constraint on performance in the second half of the year is "not a demand problem, but a supply problem." Beyond memory chips, shortages are also affecting standard computer processors and hard drives. The company is working with partners to increase supply but expects to face significant supply constraints throughout the second half, potentially ending the fiscal year with a substantial order backlog.
Beyond AI, Dell's growth drivers are becoming more diversified. Ahead of the earnings release, the U.S. Department of Defense awarded Dell a five-year contract valued at $9.7 billion to provide Microsoft Corp. (MSFT.US) software license management services. Analysts view this deal as providing Dell with diversified growth beyond AI and enterprise business. Market attention was also captured by a notable detail: according to U.S. government ethics filings, former President Donald Trump purchased Dell stock during the first quarter. At a White House event earlier this month, Trump even remarked, "Go buy a Dell." Months prior, Dell CEO Michael Dell and his wife had donated $6.25 billion to a children's fund associated with Trump. This information, coupled with Dell's stellar performance, further fueled market discussion.
