Dell bets on rising AI server demand to forecast higher growth

Core Insights - Dell forecasts fourth-quarter revenue and profit above Wall Street estimates, driven by increased demand for AI-optimized servers, leading to a 5% rise in shares during premarket trading [1] - The company raised its annual revenue and profit expectations, anticipating $25 billion in fiscal 2026 revenue from AI server shipments, up from a previous estimate of $20 billion [2] - Dell's AI server backlog reached $18.4 billion by the end of the third quarter, supported by $12.3 billion in new orders, with $5.6 billion in servers shipped during the quarter [2] Financial Performance - Dell expects fourth-quarter revenue between $31 billion and $32 billion, surpassing expectations of $27.59 billion, with an adjusted profit forecast of $3.50 per share, above estimates of $3.21 [5] - The company raised its annual revenue forecast to between $111.2 billion and $112.2 billion from earlier expectations of $105 billion to $109 billion, and adjusted earnings per share to $9.92 [8] - Third-quarter revenue was reported at $27.01 billion, slightly missing estimates of $27.13 billion, while adjusted profit of $2.59 per share exceeded estimates of $2.47 [8] Market Dynamics - Increased competition in the AI server market from rivals like Super Micro Computer is raising concerns about margin pressure, alongside rising production costs [2] - The demand for AI infrastructure from major tech companies has led to price increases for dynamic random access memory and NAND chips, impacting the server market [3] - Dell's Chief Operating Officer noted that the current market conditions allow for potential price increases due to higher customer demand than available supply [4]