Computer hardware giant Dell Technologies crushed Wall Street's estimates for its fiscal second quarter and gave a bullish outlook for the current period. Dell stock soared Friday on the news.
The Round Rock, Texas-based company late Thursday said it earned an adjusted $1.74 a share on sales of $22.93 billion in the quarter ended Aug. 4. Analysts polled by FactSet had expected Dell earnings of $1.14 a share on sales of $20.86 billion. On a year-over-year basis, Dell earnings rose 4% while sales declined 13%.
On the stock market today, Dell stock rocketed 21.3% to close at 68.19. During the regular session Thursday, Dell stock advanced 1% to close at 56.24.
"Our Q2 performance underscores the power of our model to generate cash in a sequential growth environment," Chief Financial Officer Yvonne McGill said in a news release. Dell's revenue grew 10% from its fiscal first quarter.
Dell's Infrastructure Solutions Group reported $8.5 billion in sales, down 11% year over year. The group sells servers, storage and networking gear. Meanwhile, the company's Client Solutions Group posted sales of $12.9 billion, down 16%. The division sells desktop and notebook PCs.
Dell Stock: Current Quarter Forecasts
For the current quarter, Dell predicted adjusted earnings of $1.45 a share on sales of $23 billion. Analysts had called for earnings of $1.37 a share on sales of $21.7 billion in the fiscal third quarter.
For the full fiscal year, Dell now expects to earn an adjusted $6.30 a share on sales of $90.5 billion. Wall Street was looking for earnings of $5.56 a share on sales of $86.9 billion.
"We continue to focus on the most profitable segments of the market where we have a leading position," Chief Operating Officer Jeff Clarke said in the release.
The demand environment is improving and artificial intelligence "is already showing it's a long-term tailwind," Clarke said.
Growing AI Server Business
At least 13 Wall Street firms raised their price targets on Dell stock after the company's earnings report.
UBS analyst David Vogt reiterated his buy rating on Dell stock and raised his price target to 69 from 57.
"In addition to building strength through the quarter in both PCs and servers, Dell disclosed they had about $2 billion in AI server orders in backlog," Vogt said in a note to clients. "Management highlighted that AI servers accounted for roughly 20% of server orders in the first half of fiscal 2024."
Morgan Stanley analyst Erik Woodring kept his overweight rating on Dell stock and upped his price target to 70 from 56. He also named Dell his top pick in the computer hardware space, replacing Apple.
"With signs of hardware spend stabilizing, AI server emerging as a driver of revenue/profit upside, stepped-up capital return commitments and S&P inclusion still ahead of us, and solid execution/cost management driving profitability upside, we are moving Dell to our Top IT Hardware Pick," Woodring said in a note to clients.
Dell Ranks Sixth In Group
Earlier this week, Dell peers HP and Hewlett Packard Enterprise reported quarterly results.
Personal computer and printer maker HP matched earnings expectations for its fiscal third quarter, but its sales were light. HP also guided lower for the current period.
Meanwhile, HPE edged above Wall Street's targets for its fiscal third quarter but gave a mixed outlook. HPE makes computer servers, networking equipment and data storage systems.
Dell ranks sixth out of 14 stocks in IBD's Computer-Hardware/Peripherals industry group, according to IBD Stock Checkup. Dell stock has an IBD Composite Rating of 80 out of 99.
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