Dell share price jumps 16% on mention of AI server backlog

Not bad considering exec had said '2024 didn't go as planned' due to declining overall sales

The mesmeric power that AI holds over Wall Street was in evidence again last night as Dell homed in on the huge backlog of orders for "AI-optimized" servers rather than fiscal 2024's overall declining sales, and the share price soared.

"Our strong AI-optimized server momentum continues, with orders increasing nearly 40 percent sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion," Dell chief operating officer Jeff Clark said in a statement. The company said it shipped $800 million in servers built for AI in its last quarter.

Dell shares then lit up, causing the market capitalization of the PC-cum-tech-infrastructure maker to swell by some 16 percent in after-hours stock trades.

This is despite a bit of a rocky ride for Dell's financial performance in its fiscal 2024 that ended February 2. According to the unaudited results, Q4 revenue was down 11 percent year-on-year to $22.32 billion and for the 12 months it was down 14 percent to $88.42 billion.

"In a year where revenue declined, we maintained our focus on operational excellence, delivering solid earnings per share and outstanding cash flow. FY24 was one of those years that didn't go as planned, but I really like how we navigated it," the CCO said on a conference call.

"We showed our grit and determination by quickly adapting to a dynamic market, focusing on what we can control, and extending our model into the high-growth AI opportunity."

Dell has, he added, "positioned ourselves well in AI. We've already started to benefit from the momentum we're seeing. We saw strong demand continue for our AI-optimized server portfolio, including our flagship PowerEdge XE9680, which remains the fastest-ramping solution in company history."

Rather than in the cloud, the "long-term AI action is on-prem where customers can keep their data and intellectual property safe and secure. PCs will become even more essential as most day-to-day work with AI will be done on the PC."

The potential inflationary effects on a company's share price when tech execs discuss AI on earnings calls is something that might sound familiar to Reg readers: in September research indicated that a mere mention of those two letters could send stock prices soaring.

Back to more sobering business, Dell reported that Q4 turnover at its Infrastructure Solutions Group declined six percent. This included a two percent dip in server and networking, while storage was down ten percent . The Client Solutions Group was down 11 percent, with both commercial and consumer sales down.

For the year, ISG fell 12 percent and CSG was down 16 percent.

Profit for the year was up 32 percent to $3.195 billion, helped by a seven percent drop in operating expenses.

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