Dell Stock Rises on Earnings. ‘This Was Supposed to Be a Disaster.’

Dell laptop computers are shown at a California Best Buy store in 2024. (David Paul Morris / Bloomberg)

Dell reported better-than-expected earnings results. Its shares were rising in premarket trading Wednesday after the company raised its AI server guidance.

For the October quarter, the technology company reported earnings per share of $2.59, compared with Wall Street’s consensus estimate of $2.47, according to FactSet. Revenue came in at $27 billion, roughly in line with analysts’ expectations of $27.15 billion.

Guidance was stronger than expected. For the current quarter, Dell forecast a revenue range of $31 billion to $32 billion, above analysts’ expectations of $27.58 billion.

Dell also raised its AI server shipment guidance to $25 billion from $20 billion for fiscal 2026.

“AI momentum is accelerating in the second half of the year,” Dell chief operating officer Jeff Clarke said in the release. “Dell is winning in AI because of our unique ability to engineer bespoke high-performance solutions, rapidly deploy large, complex clusters, and provide global support.”

Dell shares were up 3.2% to $130 in premarket trading Wednesday, having climbed even higher in after-hours trading Tuesday following the earnings print. Shareholders badly needed a jolt; the stock is down 22% since the start of November.

Analysts were watching for any deterioration in Dell’s margins due to the rising costs of components like memory chips. But the company’s gross margins for the quarter were 21.1%, ahead of consensus estimates.

“This was supposed to be a disaster due to components,” wrote Melius Research analyst Ben Reitzes. “It wasn’t and Dell should be rewarded.”

Reitzes reiterated a Buy rating and a $200 price target for the stock in a research note Wednesday, arguing that “some relief is coming for Dell, which looks extremely cheap.”

Last week, J.P. Morgan analyst Samik Chatterjee reaffirmed his Overweight rating and raised his price target to $170 from $165 for the shares.

Management’s guidance, he correctly predicted, was “likely to be revised higher on stronger AI server demand trends.”

Dell is a leading provider of computers and servers for artificial intelligence. Elon Musk’s xAI and CoreWeave, a cloud-computing company that runs on graphics-processing units, are both buyers of Dell hardware as they build their AI infrastructure.

Despite the recent pullback, Dell shares are up 9% this year as of Tuesday’s close.

Write to Tae Kim at tae.kim@barrons.com