Dell shares soared more than 20% on Friday after the company beat fiscal fourth-quarter estimates and issued strong guidance, as a historic memory shortage puts pressure on prices in the sector.
Dell reported adjusted earnings of $3.89 per share, exceeding the $3.53 per share expected by analysts surveyed by LSEG. The company posted $33.38 billion in revenue for the quarter, topping a forecast of $31.73 billion.
The company estimates fiscal 2027 revenue will come in between $138 billion and $142 billion, blowing away the $124.7 billion expected by Factset.
Dell expects revenue for its artificial intelligence servers to hit $50 billion in 2027, more than double the year prior.
With memory chip makers prioritizing the high-bandwidth memory needed for AI chips made by companies including Nvidia, AMD and Google, it has meant less supply for the makers of laptops and smartphones.
Dell COO Jeff Clarke told analysts on the company’s earnings call that Dell is working with memory partners “to be as flexible and as agile as possible.”
Dell started to increase prices for its PCs last year to manage surging costs and CFO David Kennedy said on the earnings call that the company has priced to “offset” the pressure from those costs.
“Customers are assessing their needs and priorities in an environment where component demand is outpacing supply, which is elevating input costs and extending lead times,” Kennedy said.
But analysts have raised concerns about those price hikes weighing on demand moving forward.
“While the near term is clearly strong, we are unsure of the demand elasticity created by the swift and significant price actions taken by Dell,” Bank of America analyst Wamsi Mohan wrote in a note Thursday.
The bank reiterated its buy rating on the stock and upped its price objective from $135 to $155.
Earlier this week, shares of competitor PC maker HP Inc. hit a 52-week low after the company reported earnings and noted pressure from increased memory prices.
HP CFO Karen Parkhill said on the company’s earning call that memory costs have risen roughly 100% sequentially, and the company expects that increase to continue into the fiscal year. Parkhill added that memory costs make up about 35% of its PC’s bill of materials, which is double the amount from a year prior.
— CNBC’s Kristina Partsinevelos contributed to this report.
Dell one-day stock chart.