Editor's Note: Dell's stock price surged in after-hours trading, not simply because of better-than-expected earnings, but because the market is revaluing the value of the AI infrastructure chain.

Driven by demand for AI data center construction, Dell's first-quarter revenue increased by 88% year-over-year to $43.84 billion, and the company raised its fiscal 2027 AI server revenue forecast from $50 billion to approximately $60 billion. Following the earnings release, the company's stock price rose by approximately 39% in after-hours trading.

This indicates that the AI boom is spreading from models and chips to servers, memory, storage, and data center equipment. As tech giants like Alphabet and Amazon continue to increase their investment in AI infrastructure, hardware manufacturers like Dell, with their supply chain, customer relationships, and delivery capabilities, are becoming direct beneficiaries of this new round of AI capital expenditure.

Meanwhile, Dell's $9.7 billion contract with the U.S. Department of Defense further strengthened market expectations for its order growth and revenue certainty. For investors, Dell's rise signifies that AI deals are entering a more downstream, more tangible phase: whoever can turn chips into deliverable data center infrastructure is likely to receive the next round of valuation reassessment.

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TL;DR

Dell raises its full-year AI server revenue forecast to $60 billion.

The company's second-quarter earnings guidance exceeded market expectations.

First-quarter revenue increased by 88% year-over-year to $43.84 billion.

In after-hours trading, the company's stock price rose by approximately 39%.

Dell division wins $9.7 billion contract from U.S. Department of Defense

Dell on Thursday raised its full-year revenue and profit forecasts, citing increased demand for its AI-optimized servers, powered by advanced Nvidia chips, as customer data center expansion drives growth.

Dell's customers include CoreWeave, Honeywell International, and Samsung Electronics. Following the earnings release, the company's stock price rose approximately 39% in after-hours trading.

U.S. tech giants, including Alphabet and Amazon, plan to invest more than $700 billion in AI infrastructure this year, which will drive up demand for servers and data center equipment, with suppliers including companies such as Dell and Supermicro.

Dell's strong performance demonstrates that it has become one of the biggest beneficiaries of the generative AI boom. The company effectively addressed the memory chip shortage crisis by raising prices and adjusting its supply chain.

Dell Chief Operating Officer Jeff Clarke stated on the earnings call, "We feel like we're repricing almost daily. I believe our customers feel that pressure too. Unfortunately, given the inflationary environment we're in right now, I don't think that's going to change."

Dell says it now expects AI server revenue to be around $60 billion in fiscal year 2027, up from its previous forecast of $50 billion.

The company also raised its full-year revenue forecast to $165 billion to $169 billion, a significant increase from its previous forecast of $138 billion to $142 billion.

At the same time, Dell raised its full-year adjusted earnings per share forecast to $17.90 from $12.90.

In the first quarter, Dell's revenue increased by 88% year-over-year to $43.84 billion, significantly exceeding the average analyst estimate of $35.43 billion compiled by LSEG. Adjusted earnings per share were $4.86, also higher than the market expectation of $2.94.

Melissa Otto, research director at S&P Global Visible Alpha, said, "Dell was better positioned than its competitors due to its scale, supplier relationships, and ability to prioritize demand, which helped it gain market share during the memory shortage."

Dell's Infrastructure Solutions Group saw quarterly revenue grow by 181%. This division includes storage, software, and server businesses. Meanwhile, the Customer Solutions Group, which includes the PC business, saw sales grow by 17%.

The company also provided second-quarter revenue and adjusted earnings per share guidance that exceeded market expectations.

On Wednesday, the U.S. Department of Defense awarded a five-year, $9.7 billion contract to a Dell division to help manage Microsoft software licenses.