Market reacts quickly to Dell's earnings

Dell shares rose about 9% in after-hours trading on Tuesday after the company reported second-quarter results and issued a stronger outlook for fiscal 2027. Investor enthusiasm was driven by demand for AI infrastructure, which pushed the company's revenue and profitability beyond expectations.

For the fiscal second quarter ended July 31, Dell's net profit climbed to $4.13 billion, or $6.34 a share. A year earlier, the company reported net income of $1.16 billion, or $1.70 a share, in the same period. Dell also said quarterly revenue rose about 58% year on year and beat all market estimates.

Why did the fiscal 2027 outlook stand out?

For the fiscal third quarter, the company forecast adjusted earnings of $6.50 per share and revenue of $49.0 billion. Analysts surveyed by LSEG expected adjusted earnings of $4.49 per share and revenue of $41.42 billion.

Dell also raised its full-year fiscal 2027 guidance. The new outlook points to adjusted earnings of $25.50 per share and $192 billion in revenue. Those figures are well above the $18.92 in profit and $172.67 billion in revenue expected by analysts compiled by LSEG. In May, the company had projected adjusted earnings of $17.90 per share and revenue of between $165 billion and $169 billion.

  • Third-quarter outlook: adjusted earnings of $6.50 per share, revenue of $49.0 billion
  • Fiscal 2027 outlook: adjusted earnings of $25.50 per share, revenue of $192 billion

AI servers were the main growth driver

Dell Technologies' Infrastructure Solutions Group, which focuses on data center hardware, generated $31.78 billion in revenue in the second quarter, up 89% year on year. The result topped StreetAccount's forecast of $29.61 billion.

Within the same segment, revenue from AI-optimized servers came to $16.40 billion. Storage revenue rose 26% to $4.85 billion, while traditional server and networking equipment revenue jumped 122% to $10.53 billion. Management said customers needing higher CPU compute capacity to support AI and agentic workflows were also creating additional demand for traditional servers.

PC business grew, but fell short of expectations

Dell's Client Solutions Group, which covers consumer and business PC sales, posted revenue of $15.03 billion. That was up 20% from a year earlier, but slightly below StreetAccount's estimate of $15.08 billion. Management said it was shifting more resources toward infrastructure businesses after seeing signs of weakness in the PC market in the second half of the year.

Contracts and year-to-date performance drew attention

The company won a $9.7 billion contract during the quarter to provide software to the U.S. Army. AI-focused cloud infrastructure company Iren also announced a $1.6 billion deal to buy Dell hardware, including servers equipped with Nvidia chips.

Dell said it expects sales of AI-optimized servers to reach $74 billion in fiscal 2027, implying growth of about 200%. Dell shares were up 236% year to date as of Tuesday's close, compared with an 11% gain in the S&P 500 over the same period.