Dell shares soar as annual forecast gets a boost from AI adoption

(Reuters) – Dell Technologies shares surged more than 20% on Friday after the tech equipment maker provided an annual forecast that was largely ahead of Wall Street expectations and reinforced rising demand for AI-related gear.

At $116.6, more than $15 billion was set to be added to the company’s market capitalization if the current level holds, and would be the second straight gains of about 20% for the stock a day after quarterly results.

Orders for the company’s AI-optimized servers jumped 40% sequentially in the fourth quarter, COO Jeff Clarke said on Thursday, with the backlog nearly doubling.

The performance provides further evidence that AI adoption is driving material gains across enterprise technology vendors, and comes as investor interest in AI has spiked following Nvidia’s stunning rally.

Servers and networking revenue was $4.9 billion in the fourth quarter, and the sequential growth driven primarily by AI-optimized servers, according to Dell.

At least six brokerages raised their price targets after the results. Currently, over three-fourths of the analysts have a “buy” or higher rating with a median target price of $105.

“Dell’s AI business showed strong progress on key metrics… commentary on the PC market was similar to HP’s: that a rebound is coming, but it is being pushed out to the second half of the year,” said analysts at Bernstein.

PC and enterprise technology vendor HP’s sales declined for a seventh straight quarter in the most recent three-month period.

Dell’s revenue fell less-than-expected to $22.32 billion in its fourth quarter, while adjusted per share profit of $2.20 topped expectations of $1.73, according to LSEG data.

The company forecast revenue between $91 billion and $95 billion for its current fiscal year ending January 2025, largely above analysts’ average estimate of $92.07 billion.

The forecast reflects “better AI trends (we think $5B+ of sales) coupled with improved performance in servers, storage and PCs,” said analysts at Evercore ISI.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Sriraj Kalluvila)