Riding the AI wave! Dell's Q4 performance and guidance exceed expectations, with the stock price surging 18% after hours.

On Friday morning Beijing time, Dell Technologies (DELL.US) announced its performance for the fourth quarter of the 2024 fiscal year. The data shows that the company's Q4 revenue was $22.3 billion, a year-on-year decrease of 11%, slightly higher than the market's expected $22 billion; the earnings per share excluding certain items was $2.20, a 22% increase from the previous year, better than the market's expectation of $1.72. Personal computer sales decreased by 12% year-on-year to $11.7 billion, exceeding market expectations of a 10% decline, reflecting the continued weakness in the personal computer market. Business sales decreased by 11% to $9.56 billion, while consumer sales decreased by 19% to $2.15 billion. Dell is well-known for its personal computer business, and due to the increased interest in high-performance servers required for running artificial intelligence (AI) workloads, the company has attracted investors' attention over the past year. In the fourth quarter, revenue from the infrastructure department, including servers, decreased by 6% year-on-year to $9.33 billion, but better than market expectations. Dell stated on Thursday that the continued growth in revenue compared to the previous quarter was "primarily driven by AI-optimized servers." Dell's Chief Operating Officer Jeff Clarke said, "We are just beginning to touch the AI opportunity in front of us, and we believe that with our extensive product portfolio, Dell is uniquely positioned to help customers build generative AI solutions that meet performance, cost, and security requirements." He stated that as of February 2nd, the backlog for AI servers was $2.9 billion. Clarke stated that Dell shipped $800 million worth of AI-optimized servers in the quarter. Like many companies in the industry, this business is currently hindered by the availability of advanced computer chips. Demand continues to exceed supply, "although we see delivery times for Nvidia H100 improving." Looking ahead, Dell expects its revenue to reach $91 to $95 billion in the fiscal year ending February 2025, while the market's average expectation is $92.1 billion. After the financial report was released, CFO Yvonne McGill stated on a conference call that the earnings per share, excluding certain items, would be $7.50, with a range of 25 cents. Analysts' average expectation is $7.11. McGill stated that the revenue in the computer department should grow at a "low single-digit" pace, while the infrastructure department will achieve around 15% growth "driven by AI." Dell also increased its annual dividend by 20% to $1.78 per share. Clarke said, "In the short term, the personal computer market remains soft, and we expect the recovery to be delayed until the second half of the year, as businesses and large customers remain cautious about spending." With aging current inventory and the release of new personal computers related to Microsoft Windows 11 software and AI hardware, the new PC purchase cycle should begin. On Wednesday, HP (HPQ.US), a competitor in the personal computer market, reported computer sales that were below analysts' expectations, stating that demand would take longer to recover. Research firm IDC wrote in a report last month that while the computer market experienced an unprecedented downturn, there is a possibility of a turnaround later in 2024. In January of this year, Dell announced the termination of its distribution agreement with VMware, which is now owned by Broadcom (AVGO.US). A Dell spokesperson stated that apart from embedded tools like VxRail and Carbon Black, Dell no longer resells most VMware products. At the time of writing, Dell's stock rose 17.9% after hours to $111.60. Driven by optimistic expectations for demand in the AI server market, the stock has more than doubled over the past 12 months.