Dell's AI Factory Is Booming With a Backlog of $51 Billion, But Will It Lift Margins?
Written by Bryan White for The Motley Fool -> AI server revenue grew by more than 700% year over year in the first quarter to $16 billion. The shift to lower-margin AI hardware is weighing on Dell's gross margins. After its recent run, shares trade at a lofty valuation for a h
AI server revenue grew by more than 700% year over year in the first quarter to $16 billion.
The shift to lower-margin AI hardware is weighing on Dell's gross margins.
After its recent run, shares trade at a lofty valuation for a hardware company.
Dell (NYSE: DELL) is no longer just a server and personal computer (PC) company. A historic surge in demand for hardware to power artificial intelligence (AI) has sent the stock soaring. It has nearly tripled over the past 12 months.
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The demand driving the rally has been impressive. In the first quarter, Dell reported AI-optimized server revenue of $16 billion, up from less than $2 billion last year. The company now sits on an AI server backlog of $51.3 billion and has raised its full-year revenue guidance for the category to approximately $60 billion.
The market has responded by revaluing Dell from a mature PC vendor to a core AI infrastructure play. With the new valuation comes higher expectations, particularly along the bottom line. For the new valuation to hold, Dell will have to prove it can convert those orders into reliable earnings growth.
Dell's transformation is driven by its ability to capture a significant share of the enterprise AI build-out . The company booked $24 billion in AI server orders this quarter as its customer base broadened to more than 5,000.
