Two years ago, the demand for AI was underestimated! Dell significantly raised its performance forecast for the next four years, and its stock price once rose by over 6%

Dell Technologies has added fuel to the recently reignited artificial intelligence (AI) craze by OpenAI.

On Tuesday, October 7, Eastern Time, due to an unexpected surge in demand for AI products, Dell significantly raised its performance expectations for the next four years, nearly doubling its annual revenue growth forecast to 7%-9%, and increasing its earnings per share (EPS) growth target to over 15%. Dell's Chief Operating Officer Jeff Clarke admitted that management underestimated the momentum of the AI market: he said:

"Two years ago, our assessment of the AI market size was completely off; today, it will only continue to grow."

After raising its performance expectations, Dell's stock price opened up 4.8% on Tuesday, briefly rising over 6.1% at the start of trading, before retreating and turning slightly negative towards the end of the morning session. Similarly, the stock prices of Super Micro Computer (SMCI) and Hewlett Packard Enterprise (HPE), which also sell AI servers, jumped, rising over 5% and 4% respectively at the start of trading.

AI Server Business Drives Growth Expectations

Ahead of an investor meeting held in New York on Tuesday, Dell announced an updated "long-term financial framework," significantly raising its annual revenue growth forecast from the previous 3%-4% to 7%-9%, and adjusting its EPS growth target from 8% or higher to 15% or higher. The new expectations will extend through the fiscal year 2030.

Dell's infrastructure division benefits from strong demand for AI servers from new-generation cloud service providers like CoreWeave and Elon Musk's x.AI. Dell has also signed relevant agreements with government entities such as the U.S. Department of Energy and Abu Dhabi AI company G42.

Clarke stated that Dell's traditional business, including traditional servers and PCs, will achieve "low single-digit to mid-single-digit" growth. Although investors welcomed the growth in AI server sales, the costs of rapidly launching devices based on the latest chips are eroding profit margins.

Clarke revealed that Dell's AI server business is expected to have "mid-single-digit operating profit margins," a level that is "acceptable," and this business is contributing to the company's earnings. The company has the opportunity to improve margins by selling to more large enterprise customers and encouraging AI clients to purchase Dell's other higher-margin products such as storage and networking equipment.

Dell's financial report released last month showed that for the second fiscal quarter of 2026, ending August 1 of this year, the operating profit margin of the infrastructure division, including server and networking sales, was 8.8%, below analyst expectations.

Strong Orders Support Business Outlook

Dell received $5.6 billion in AI server orders for the second quarter of the fiscal year ending August 1, down from $12.1 billion in the previous quarter. The company delivered servers worth $8.2 billion, with a backlog of orders valued at $11.7 billion at the end of the quarter.

Dell CEO Michael Dell stated in a statement on Tuesday:

"Customers are eager for AI and the computing, storage, and networking we provide to achieve large-scale intelligent deployments. We have successfully translated this demand into growth and strong cash flow, most of which has been returned to shareholders. As AI continues to expand into global enterprises and governments, the future opportunities are limitless." Dell's statement claims that its engineering, deployment, ecosystem, and other services "make it a leader in AI infrastructure solutions." The strong performance of its server business has helped drive Dell's stock price up 26% year-to-date as of Monday's close.

Commitment to Increasing Shareholder Returns

Dell reiterated its performance expectations for the current quarter and the next fiscal year ending in January 2026.

When Dell announced its quarterly earnings last month, it stated plans to deliver $20 billion in AI servers in fiscal year 2026, doubling last year's sales.

On Tuesday, Dell also announced an extension of its commitment to increase quarterly dividends by 10% or more each year, extending the term to fiscal year 2030. Dell is committed to returning over 80% of its adjusted free cash flow to shareholders through stock buybacks and dividends.

As one of NVIDIA's key customers, Dell procures chips from this AI chip leader and builds computers around them, which are then sold to cloud service providers like CoreWeave and end users such as Musk's AI startup xAI