Dell Earnings Preview: AI Server Orders Hit Record, Hidden Profit Worry in the Second Half

Dell will announce its first-quarter financial report after the market closes on May 28, Eastern Time (early morning of May 29, Beijing Time), and analysts generally expect strong performance, but remain cautious about profitability in the second half of the year.

The market expects Dell's first-quarter earnings per share (EPS) to be $2.90, a year-on-year increase of 87.1%; revenue is expected to grow by 51.3% year-on-year to $35.38 billion. Over the past three months, the EPS forecast has been raised 15 times and lowered only once, while the revenue forecast has been raised 15 times and not lowered at all, reflecting an overall optimistic sentiment among analysts.

Morgan Stanley analyst Erik Woodring anticipates that the first-quarter results will significantly exceed expectations, and the second-quarter guidance will also be above the market consensus. He expects management to raise the full-year EPS guidance from $12.90 to over $13.50, driven by strong demand for GPU/AI servers and advance purchases from large enterprise customers.

The order data for AI servers is particularly impressive. Seeking Alpha's Oakoff Investments points out that Dell's current backlog of AI server orders has reached a record $43 billion, with $34.1 billion in new AI orders signed in the last quarter alone. "I believe this momentum did not wane in the first quarter, and it is very likely that a new backlog record will be set again, in which case management will have ample reason to offer an optimistic outlook."

However, analysts have also expressed clear concerns about the prospects for the second half of the year. Woodring's team notes that within the past 90 days, memory price inflation and supply shortages have become significantly worse, and the advance spending on demand in the first half of the year will lead to the dual risks of shrinking demand and profit margin compression in the second half.

Historical data shows that over the past two years, Dell has a 75% probability of surpassing EPS expectations and a 63% probability of surpassing revenue expectations.