Dell Shares soared 22% on Friday after the company beat fourth-quarter earnings estimates and issued strong guidance as historic memory shortages weighed on prices in the sector.
Dell reported adjusted earnings of $3.89 per share, beating the $3.53 per share expected by analysts surveyed by LSEG. The company had revenue of $33.38 billion in the quarter, beating expectations of $31.73 billion.
The company forecast fiscal 2027 sales of $138 billion to $142 billion, blowing away the $124.7 billion that FactSet had expected.
Dell expects artificial intelligence server revenue to reach $50 billion in 2027, more than doubling from the previous year.
Memory chip manufacturers are prioritizing high-bandwidth memory needed for AI chips produced by the following companies: Nvidia, AMD and googlewhich meant reduced supply for laptop and smartphone manufacturers.
Dell Chief Operating Officer Jeff Clark told analysts on an earnings call that the company is working with its memory partners “to be as flexible and nimble as possible.”
Dell began raising prices on its computers last year to manage rising costs, but Chief Financial Officer David Kennedy said on an earnings call that the company set prices to “offset” those cost pressures.
“Customers are evaluating their needs and priorities in an environment where demand for components exceeds supply, increasing input costs and lengthening lead times,” Kennedy said.
But analysts have expressed concern that these price increases could weigh on future demand.
“While the short term is clearly positive, we are not confident about the elasticity of demand created by the rapid and significant price action taken by Dell,” Bank of America analyst Wamsi Mohan said in a note Thursday.
The bank reiterated its buy rating on the stock and raised its price target to $155 from $135.
Earlier this week, rival PC manufacturers’ stock prices HP company. The stock hit a 52-week low after the company reported earnings and cited pressure from rising memory prices.
HP Chief Financial Officer Karen Parkhill said in an earnings call that memory costs are up nearly 100% from last quarter, and the company expects this increase to continue into the fiscal year. Parkhill added that memory costs account for about 35% of a PC’s bill of materials, which is twice as much as last year.
—CNBC’s Kristina Partinevelos contributed to this report.
Dell’s daily stock price chart.
