Dell Technologies Inc. reported financial results after Thursday's market close, revealing that its sales outlook for artificial intelligence (AI) servers surpassed market expectations. This indicates sustained strong demand for equipment supporting AI data center construction, propelling the company's stock to surge over 12% in after-hours trading.

Key highlights from Dell's fourth-quarter earnings report include:

**Primary Financial Data:**

* Revenue: Fourth-quarter revenue reached a new record of $33.4 billion, a 39% increase year-over-year, exceeding analyst expectations of $31.7 billion. * Earnings Per Share (EPS): Diluted EPS for the quarter hit a new high of $3.37, up 57% compared to the prior year. Non-GAAP diluted EPS reached a record $3.89, a 45% increase, surpassing the analyst consensus of $3.52. * Cash Flow: Operating cash flow for the quarter was $4.7 billion, also setting a new record.

**Segment Data:**

* Infrastructure Solutions Group (ISG): * Full-Year Revenue: ISG annual revenue reached $60.8 billion, a 40% increase, achieving a record. * Full-Year Operating Income: Annual operating profit was $7.1 billion, up 27%, also a record. * Q4 Revenue: Fourth-quarter revenue was $19.6 billion, a significant 73% increase, marking a historical high. * AI-optimized server quarterly revenue reached $9.0 billion, surging 342%. * Traditional server and networking business quarterly revenue was $5.9 billion, up 27%. * Storage revenue for the quarter was $4.8 billion, a 2% increase. * Q4 Operating Income: Fourth-quarter operating profit was $2.9 billion, a 41% increase, setting a new quarterly record.

* Client Solutions Group (CSG): * Full-Year Revenue: CSG annual revenue was $51.0 billion, a 5% increase. * Full-Year Operating Income: Annual operating profit was $2.8 billion, down 5%. * Q4 Revenue: Fourth-quarter revenue was $13.5 billion, up 14%. * Commercial client revenue was $11.6 billion, a 16% increase. * Consumer business revenue was $1.9 billion, flat compared to the prior year. * Q4 Operating Income: Operating profit for the quarter was $629 million, remaining unchanged year-over-year.

**Fiscal Year 2025 Performance:**

* Revenue: Full-year company revenue achieved a historical high of $113.5 billion, a 19% increase. * Earnings Per Share (EPS): Full-year diluted EPS set a new record of $8.68, up 36%. Non-GAAP diluted EPS reached a record $10.30, a 27% increase. * Cash Flow: Full-year operating cash flow was $11.2 billion, also a record high.

**Financial Guidance:**

* Fiscal Year 2027 Revenue: The company projects full-year revenue for fiscal 2027 to be between $138 billion and $142 billion, with a midpoint of $140 billion, representing 23% growth, significantly above analyst expectations of $126.3 billion. * AI Server Revenue: Full-year AI-optimized server revenue is projected to be approximately $50 billion, a 103% increase. * Fiscal Year 2027 EPS: The projected midpoint for full-year GAAP diluted EPS is $11.52, up 33%. The projected midpoint for non-GAAP diluted EPS is $12.90, a 25% increase, exceeding the analyst average estimate of $11.56. * Q1 Revenue: Expected to be between $34.7 billion and $35.7 billion, with a midpoint of $35.2 billion, representing 51% growth. * Q1 EPS: The projected midpoint for first-quarter GAAP diluted EPS is $2.55, up 86%. The projected midpoint for non-GAAP diluted EPS is $2.90, an 87% increase.

Concurrently, the company announced a 20% increase in its cash dividend and a $10 billion expansion of its share repurchase authorization. In the fourth quarter, Dell returned $2.2 billion to shareholders through buybacks and dividends. For the full year, a record $7.5 billion was returned to shareholders, with approximately 54 million shares repurchased.

Jeff Clarke, Vice Chairman and Chief Operating Officer of Dell Technologies Inc., stated, "We secured over $64 billion in AI-optimized server orders for the full year, shipped over $25 billion worth, and entered fiscal 2027 with a record $43 billion backlog. This strongly validates our engineering leadership and differentiated AI solutions are gaining market traction."

The robust performance and outlook spurred Dell's stock to jump over 12% in after-hours trading Thursday. Over the past 12 months, the stock has accumulated a 5% gain.

**AI Server Revenue Expected to Double This Year**

Reports indicate that Dell's servers specifically designed for running AI workloads are attracting customers ranging from companies leasing computing power, such as CoreWeave Inc. and Nscale Global Holdings Ltd., to enterprise clients and major AI service providers.

In the fiscal fourth quarter, the operating margin for Dell's server and networking business was 14.8%, higher than the analyst average estimate of 12.9%. The operating margin for the PC business unit was 4.7%, compared to an analyst average expectation of 6.18%.

Dell anticipates its AI server revenue will grow 103% in fiscal 2027, reaching approximately $50 billion. The Chief Operating Officer noted that Dell secured over $64 billion in AI-optimized server orders throughout fiscal 2026, calling it a "landmark year in the company's history" with record revenue, EPS, and cash generation, emphasizing that the AI opportunity is transforming the company.

The company stated it now serves over 4,000 AI server customers, including Elon Musk's AI startup xAI and CoreWeave.

**Cost Control Amid Rising Memory Chip Prices**

Analysis suggests that major tech companies, including Alphabet, Microsoft, Amazon, and Meta, are projected to invest at least $630 billion in AI infrastructure this year, boosting demand for suppliers like Dell and its competitor Super Micro Computer. As AI infrastructure development accelerates, US trade policies and significant price increases for memory chips are compelling companies like Dell and HP to raise product prices, thereby mitigating cost pressures.

Nearly all servers are equipped with memory chips, essential for storing data and instructions to keep processors running at high speed, which is critical for AI applications. Dell's financial report shows the company is managing to control costs and improve margins despite rapid memory chip price inflation. Clarke commented on the memory chip situation, stating, "The overall industry environment remains highly dynamic, with unprecedented AI demand leading to continued supply constraints and frequent price resets."

Tight memory chip supply is expected to dampen global demand for consumer electronics, including PCs, smartphones, and gaming consoles. HP has indicated it expects fiscal 2026 performance to be at the low end of its previously forecasted range.