"AI Server Sales Surge 757%... Why Dell's Stock Doubled in a Month" [Click e-Stock]

"AI Order Backlog Reaches $51.3 Billion"
Traditional Server Replacement Demand Also Expanding

With demand for both AI (artificial intelligence) servers and traditional server replacements recovering, securities analysts have projected that Dell Technologies (DELL.US) will continue to see sustained earnings growth.

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According to Kiwoom Securities on June 2, analyst Park Kihyun stated the previous day, "For Dell, first quarter revenue for the fiscal year reached $43.8 billion (approximately 66 trillion won), up 88% year-on-year, and earnings per share (EPS), excluding one-off costs, surged 214% to $4.86, delivering an earnings surprise that exceeded market expectations by over 60%."

The Infrastructure Solutions Group (ISG) led the performance, with revenue rising 181% year-on-year to $29 billion. Within ISG, AI-optimized server sales skyrocketed 757% to $16.1 billion, while traditional server and networking revenue also grew 92% to $8.5 billion. The ratio of operating expenses to revenue fell to 8.4%, marking the lowest level in the past 20 years.

During the quarter, Dell secured new AI orders totaling $24.4 billion, bringing the ending AI order backlog to a record $51.3 billion. Based on this, Dell dramatically raised its annual revenue guidance for next year by $27 billion to $167 billion.

Analyst Park attributed the strong performance in the traditional server segment to structural changes that go beyond a short-term recovery in demand. He explained, "The majority of mainstream server installations consist of aging equipment, which is driving strong demand for upgrades to high-density platforms." He added, "As AI services expand toward inference and the use of agentic AI increases, demand is also rising for existing CPU (central processing unit) servers that assist and control GPUs (graphics processing units)."

In terms of valuation, there is still significant upside potential. Dell's 12-month forward price-to-earnings ratio (PER) stands at 27 times, below the industry average of 29 times. Although the stock price has roughly doubled in the past month, the fact that the PER remains below the industry average reflects that profit forecasts have been raised faster than the share price.

Park stated, "Profitability improvements have led to robust cash generation, with first-quarter operating cash flow reaching a quarterly record of $4.1 billion." He continued, "Based on this, the company returned a total of $2.1 billion to shareholders through share buybacks and dividends. This consistent shareholder return policy will serve as a safety net supporting the stock’s downside rigidity."

However, the report also noted that it remains to be seen whether demand in coming quarters will maintain a normal trajectory. Park added, "Some of the demand was brought forward as customers made advance purchases due to supply uncertainty," and "there are ongoing supply chain bottlenecks in component procurement."

This content was produced with the assistance of AI translation services.