Dell Becomes One Of The Early Generative AI Winners

Last week, Dell Technologies Inc DELL had its best stock market day since its 2018 return to the public market after it reported its fiscal second quarter results. Despite a revenue decline, Morgan Stanley named the computer maker as its top hardware pick, dethroning Apple Inc AAPL as Dell emerged as an early winner of the Generative AI momentum. While HP Inc HPQ lost its ground on soft guidance with its shares falling 6.6% upon the report on Tuesday, Dell shares surged 21.3% on Friday. Salesforce (NYSE: CRM) also provided some much-needed good news for the tech sector with its shares rising 3% on Thursday after the software giant lifted the annual guidance and topped Q2 estimates, guiding for improved demand for the second half of the year.

Second Quarter Highlights

The maker of IT hardware and infrastructure technology reported a 13% YoY revenue drop to $22.9 billion, but still exceeding $20.9 billion that was Refinitiv’s consensus estimate.

The servers and networking brought in $4.27 billion, as they rose 11% from the previous quarter on the back of rising demand for AI-optimized servers that Dell effectively capitalized on. Adjusted earnings per share amounted to $1.74 and also exceeded the $1.14 consensus estimate.

An AI-Fueled Outlook

Dell raised its full-year forecasts for both revenue and profit, providing hope of a potential end of the tech spending downturn. 

For the undergoing third quarter, Dell projected a revenue range from $22.5 billion to $23.5 billion, topping Refinitiv’s estimate of $21.67 billion. Dell guided for earnings per share of about $1.45, surpassing the estimated $1.38.

For the full year, Dell lifted its projections for revenue that is now expected in the range between $89.5 billion to $91.5 billion with EPS of $6.30, up or down 20 cents. Dell’s full year outlook shows its confidence in sustainable growth.

Partnership With Nvidia

Nvidia Corporation NVDA undoubtedly provided the most impressive Q2 report as its second sales revenue doubled to $13.51 billion, eclipsing Wall Street’s consensus estimate of $11.22 billion thanks to skyrocketing demand for AI chips. Through its collaboration with Nvidia that was launched in May through Project Helix, Dell got the opportunity for exposure to this smashing success. The partnership with Nvidia, through which the two companies aim to empower businesses to utilize generative AI, has the potential to strengthen Dell’s positioning and boost its financial performance.

Dell And Salesforce Provided Some Much-Needed Optimism

Unlike HP that provided a weaker than expected guidance and PC demand backdrop, Dell provided signs of life for the PC universe. Its latest report quarter shows that Dell has undoubtedly benefited from a stabilizing market for computer hardware and server products and that it capitalized on the surging demand for generative artificial intelligence solutions. As the global technology landscape continues to evolve, Dell’s strong results provide a glimmer of hope of a potential rebound in tech spending. 

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.