Dell Technologies (DELL) -) shares powered higher in pre-market trading after the PC and server maker posted stronger-than-expected second quarter earnings, while boosting its full-year profit forecast thanks to a boost in demand for its AI-powering servers.
The stock was given added support, as well, from an upgrade at Morgan Stanley, which now has Dell as a 'top pick' in the hardware sector, replacing Apple (AAPL) -) with a new price target of $70 per share.
Dell earned an adjusted $1.74 per share over the three months ending in July, smashing Street forecasts by around 60 cents per share, even as sales fell 13.2% to $22.93 billion, a tally that also came in ahead of analysts' forecasts.
A surge in AI investments is expected to support sales of its PowerEdge servers, Dell said, thanks in part to its partnership with Nvidia (NVDA) -), with firming PC demand adding to underlying sales gain. The group sees quarter-quarter revenues in the region of $22.5 billion and $23.5 billion, topping forecasts, with earnings of $1.45 per share, plus or minus 10 cents.
For the full year, revenues were forecast between $89.5 billion and $91.5 billion, with adjusted earnings at $6.30 per share, again with a 10 cents per share margin of error.
"PC demand appears to be stabilizing, particularly for the business segment where DELL has a larger share of the market,' said Crispidea analyst Subhendu Behera. "And the longterm prospects for the PC industry remain encouraging, even if the short-term outlook remains uncertain."
"Dell is capitalizing on its expertise in onpremises data centers and IT capabilities to tap into the flourishing demand for AI in its distinctive manner," he added. "By merging its servers with Nvidia's H100 GPU, DELL enables businesses that operate on-premises data centers to fully harness the capabilities of generative AI."
Dell shares were marked 23.1% higher in Friday morning trading to change hands at $69.26 each, pushing the stock's year-to-date gain to around 72%.
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