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Published on
August 30, 2024
8 min read
Dell Leverages AI Servers to Boost Revenue Growth
This past week, Dell shares gained 4% in value due to the Nvidia AI server surge. According to Reuters, demand for Dell’s AI-powered servers led to increased annual revenue and profit forecasts.
Dell AI-optimized servers demand marks an important milestone in the company’s growth trajectory. It also signals a strategic shift from PCs to advanced tech solutions. Dell’s focus on AI servers is expected to fuel its growth as the broad tech market embraces AI innovations.
Emerging Opportunities
Dell servers are designed to handle intense computational demands that characterize AI systems. These include training of large language models.
“Enterprise remains a significant opportunity for us, as many are still in the early stages of AI adoption,” Jeff Clarke, Chief Operating Officer said.
Dell will be leveraging its relationships with governments across the globe to explore opportunities in sovereign AI.
Last week, Nvidia said that countries that are developing AI models in local languages were using its AI chips. The chip maker expects this to contribute double-digit billions to its revenue by the end of January 2025.
Earlier this year, Nvidia’s CEO, Jensen Huang encouraged companies to partner with Dell. At the time, Huang said Dell was helping companies to develop their own AI factories.
Nvidia launched its Blackwell chip series this year. However, the company announced that production of these chips could be delayed for three or more months due to design flaws.
Significant Growth
Dell has experienced significant growth this year. The company’s quarter two revenue increased by about 9% to reach $25.03 billion. This was more than the $24.14 billion projected by analysts. The company also reported an adjusted profit per share of $1.89 per share- which is $0.18 more than the projected $1.71 per share.
This growth was driven by Dell AI server surge. In quarter two of this year, demand for Dell’s AI-optimized servers grew by about 23% to rake in $3.2 billion. The company had a $3.8 billion backlog for AI servers.
“Our pipeline has grown to several multiples of our backlog,” Clarke added.
Its stock also rose by 45%. Last week, the company said it expects its annual revenue outlook to grow to hit between $95.5 billion and $98.5 billion, up from $93.5 billion and $97.5 billion. The tech company also forecasts a rise in its annual adjusted profit per share to $7.80.
PC Business
As Dell’s AI optimized server demand surged, its PC business was struggling to stay afloat. The company lost its market share to competitors. Its revenue from home to PCs dipped by 4% to hit a low of $12.41 billion.
“Dell lost PC shipment shares in key markets in the second quarter. It is the top vendor in the U.S. business market, but its competitors have shown growth and gained more shares than they did a year ago,” Director Analyst at Gartner, Mikako Kitagawa said.
Dell is currently exploring the possibility of selling its cybersecurity firm. Despite these challenges, Dell’s focus on AI servers places it as a strong competitor in the tech industry. Its partnership with Nvidia AI servers continues to bolster its server offerings.
Nvidia continues to maintain its dominance in chip manufacturing even after leading tech firms announced that they were developing an AI-networking standard for data center linkage.
