Dell Technologies Inc. (NYSE:DELL) shares surged more than 5% pre-market today after the company reported impressive second-quarter results, surpassing Wall Street expectations, fueled by record-breaking revenue in its infrastructure solutions segment, particularly driven by strong demand for AI-optimized servers. The company also raised its full-year earnings outlook.
For the quarter, Dell posted adjusted earnings of $1.89 per share on revenue of $25.00 billion, outperforming analyst predictions of $1.68 per share on $24.14 billion in revenue.
The Infrastructure Solutions Group (ISG), which includes AI-optimized servers and networking hardware, achieved record revenue of $11.6 billion, marking a 38% year-over-year increase. The segment’s servers and networking revenue alone reached $7.7 billion, up 80% from the previous year.
Reflecting its strong performance, Dell raised its earnings per share (EPS) guidance for the full year 2025 to a range of $7.55 to $8.05, up from the previous forecast of $7.40 to $7.90.
Bernstein analysts noted that while Dell’s AI server metrics were robust, the profitability of the segment remains a challenge. They estimate AI server gross margins to be between 8% and 14%, with an operating profit margin of around 5%.
Goldman Sachs analysts were optimistic about Dell’s improving AI server margins, suggesting that these gains should bolster the company’s valuation and support its mid-term growth outlook. They also anticipate a recovery in PC demand, similar to what HP has experienced, within the next 12 months.