Dell Technologies (NYSE:DELL) extended its recent rally, climbing more than 4% in premarket trading on Thursday, as robust quarterly results from rival Lenovo reinforced expectations of sustained demand for AI-optimized servers. The stock was trading near $504.28 at 06:52 EDT, ahead of the 09:30 EDT opening bell, following a 9.87% jump on Wednesday. This two-day surge has lifted Dell's shares by 14.36% from Tuesday's close of $440.97.
Lenovo's fiscal first-quarter revenue reached $26.94 billion, a 43% year-over-year increase that comfortably beat the $22.3 billion analyst consensus. The company attributed a significant portion of this growth to its AI-related businesses, which generated $9.3 billion in revenue, representing 34.5% of total quarterly sales and growing 60% from the prior year. Lenovo's AI server pipeline also expanded dramatically, reaching $54 billion, up 157% sequentially. CEO Yang Yuanqing described the company as becoming "a global AI infrastructure leader," and its shares surged as much as 22% in Hong Kong trading.
The read-through for Dell is direct. Dell's own AI-optimized server revenue accounted for 36.7% of its latest quarterly revenue, a figure remarkably similar to Lenovo's AI exposure. While the two companies define AI-related revenue differently—Lenovo includes broader AI products and services, whereas Dell focuses on AI-optimized servers—the comparable revenue shares suggest that the AI infrastructure buildout is benefiting multiple vendors simultaneously. This is a positive signal for the entire sector, including other hardware makers like HP Inc. (NYSE:HPQ), which also saw its shares rise 1.8% premarket.
Dell's own fundamentals have been robust. In its fiscal first quarter, the company reported total revenue of $43.84 billion, up 88% year over year, with Infrastructure Solutions Group revenue soaring 181% to $29.0 billion. AI-optimized server revenue alone jumped 757% to $16.1 billion, and the company booked $24.4 billion in AI orders. Dell's operating cash flow also improved to $4.08 billion, up 46%. However, the shift toward lower-margin AI systems has pressured profitability; non-GAAP gross margin fell 350 basis points to 18.1%.
Looking ahead, Dell has raised its fiscal-year AI server revenue outlook to approximately $60 billion, and its guidance for the upcoming fiscal second quarter calls for revenue between $44.0 billion and $45.0 billion, implying 49% growth at the midpoint. The company is scheduled to report those results on September 3.
Wall Street remains constructive on Dell, though price targets vary widely. Morgan Stanley recently cut its target to $430 with a Hold rating, while J.P. Morgan maintains a Buy with a $550 target. The consensus among 27 analysts is a Buy, with an average price target of $502.78. Notably, Dell's premarket price of $504.28 has edged above that average, suggesting the stock may be fairly valued or slightly ahead of expectations.
Key risks include persistent memory price inflation, which could further pressure margins, and the pace at which AI orders convert into profitable revenue. Additionally, Thursday's producer price index report could influence growth stocks broadly. For now, Lenovo's results have validated the demand side of the AI infrastructure story, but Dell's upcoming earnings will be crucial in determining whether investors are paying a fair price for that growth.
