Dell surges 12% on record earnings, AI server demand drives FY27 guidance
Company forecasts $50B in AI-optimized server revenue for fiscal 2027, doubling from $25B shipped in FY26, as backlog hits record $43B
Dell Technologies shares surged as much as 12% in premarket trading Friday after the company reported record quarterly earnings that far exceeded Wall Street expectations, driven by explosive demand for artificial intelligence infrastructure.
The Round Rock, Texas-based technology company posted revenue of $33.4 billion for its fiscal fourth quarter ended January 30, marking a 39% increase from the same period a year ago and comfortably surpassing analysts' estimates of $31.73 billion. Non-GAAP earnings per share reached $3.89, up 45% year-over-year and beating the consensus forecast of $3.53 by more than 10%. GAAP diluted EPS of $3.37 reflected a 57% increase from the prior year.
For the full fiscal year 2026, Dell achieved record revenue of $113.5 billion, up 19% from fiscal 2025, with diluted EPS of $8.68, a 36% increase.
The standout performance came from Dell's AI-optimized server business, which has emerged as the company's primary growth engine. The company secured more than $64 billion in AI server orders during fiscal 2026 and shipped over $25 billion worth of the systems. Perhaps more significantly, Dell entered fiscal 2027 with a record backlog of $43 billion in AI server orders, providing visibility into near-term revenue.
"We are accelerating our enterprise AI momentum and our demand is outpacing our supply," said Jeff Clarke, Dell's vice chairman and chief operating officer, in the earnings call. The company now projects fiscal 2027 revenue of between $138 billion and $142 billion, representing approximately 23% year-over-year growth and well above the consensus estimate of $125.54 billion.
Within that guidance, Dell specifically forecasts AI-optimized server revenue of approximately $50 billion, which would represent a 103% increase from fiscal 2026 levels. The midpoint of full-year guidance projects non-GAAP EPS of $12.90, up 25% year-over-year and above analyst estimates of $11.59.
The company also returned additional capital to shareholders, announcing a 20% increase to its quarterly dividend and authorizing an additional $10 billion for share repurchases. Dell's total shareholder returns for fiscal 2026, including dividends and buybacks, exceeded $13 billion.
Dell's AI server momentum has positioned it as a key beneficiary of the global AI infrastructure boom, competing head-to-head with Hewlett Packard Enterprise in the rapidly expanding market. While HPE has focused on integrated AI-native networking solutions for service providers, Dell has leveraged its scale as the world's largest server maker to capture a larger share of immediate AI server demand, particularly from large enterprises and hyperscale cloud providers.
The company's AI server customer base now exceeds 4,000 clients, including high-profile accounts such as Elon Musk's xAI and CoreWeave. Dell's product offerings, including its PowerEdge XE9785 and XE9785L servers purpose-built for AI workloads, combined with its global distribution network, have provided a competitive advantage in fulfilling the massive demand for GPU-intensive systems.
"Dell appears to be capturing a larger share of the immediate AI server market due to its scale and established relationships," according to market analysis. The company's strategy centers on broad enterprise deployments and hyperscaler orders, emphasizing standardized AI servers with high GPU density and leveraging its extensive global distribution network.
Analysts have responded positively to the results. Dell currently holds an average "Buy" rating with a price target of $157.20, suggesting approximately 17% upside from recent levels. The stock has gained more than 12% over the past 12 months and is trading near its 52-week high of $168.08.
Some Wall Street firms have tempered expectations despite the strong quarter. Morgan Stanley maintained an "Underweight" rating and lowered its target price to $101 on February 18, while Citigroup kept a "Buy" rating but reduced its target to $160 from $165 on February 17.
The company acknowledged potential headwinds, including rising memory chip costs and trade regulations that could influence server pricing. However, the record backlog and robust guidance suggest these factors have been incorporated into management's expectations.
Dell's transformation from a traditional personal computer and enterprise hardware manufacturer into a leading AI infrastructure provider marks a significant strategic pivot. The company's Dell AI Factory with NVIDIA, designed to accelerate enterprise AI adoption, and its expanded automation platform, have positioned it to capitalize on what analysts expect to be a multi-year cycle of AI infrastructure investment.
With fiscal 2027 revenue growth projected at 23%—driven primarily by a forecast doubling of AI server sales—Dell appears to have successfully aligned its product portfolio with one of the most significant technology trends in decades. The $43 billion AI server backlog provides visibility into revenue, though execution challenges around supply chain constraints and component availability remain key risks to monitor.