AI demand exceeds expectations, driving Dell's second-quarter server revenue to surge by 80%, with shares jumping more than 8% after hours | Financial Report Insights

The artificial intelligence (AI) boom has revitalized the veteran computer giant Dell, with double-digit growth in the AI server business in the recent quarter offsetting the decline in the personal computer (PC) business, delivering a more impressive performance than Wall Street expected.

After the U.S. stock market closed on Thursday, August 29, Dell announced the financial data for the second quarter of the 2025 fiscal year, as well as performance guidance for the third quarter and the full year.

1) Key Financial Data:

Revenue: Revenue for the second quarter was $25.03 billion, a 9% year-on-year increase. Analysts expected $24.12 billion, while Dell's own guidance was in the range of $23.5 billion to $24.5 billion, representing a 6% year-on-year increase from the previous quarter.

EPS: Diluted earnings per share (EPS) for the second quarter were $1.17, an 86% year-on-year increase. Non-GAAP diluted EPS for the second quarter increased by 9% to $1.89. Dell's guidance range was $1.55 to $1.75, representing a 3% decrease from the previous quarter.

2) Segment Data:

ISG: Infrastructure Solutions Group (ISG) revenue for the second quarter was $11.65 billion, a 38% year-on-year increase. Within ISG, server and networking revenue for the second quarter was $7.7 billion, an 80% year-on-year increase.

CSG: Client Solutions Group (CSG) revenue for the second quarter was $12.4 billion, a 4% year-on-year decrease. Commercial revenue within CSG was $10.6 billion, flat compared to a year ago.

3) Performance Guidance:

Revenue: Revenue for the third quarter is expected to be between $24 billion and $25 billion, with a mid-point of $24.5 billion, representing a 10% year-on-year increase.

EPS: Non-GAAP diluted EPS for the third quarter is expected to be $2.0, with a range of $1.9 to $2.1.

Following the financial report, Dell's stock price fell more than 0.7% on Thursday but quickly surged after hours, with an increase of over 8% at one point.

AI Server Demand Up 23% Quarter-on-Quarter, Consumer PC Down 22% Year-on-Year in Q2

Dell's total revenue in the second quarter accelerated compared to the first quarter, driven by rapid growth in Infrastructure Solutions Group (ISG), including AI servers. The year-on-year growth rate of ISG in the quarter increased by nearly 73% compared to the first quarter, setting a new single-quarter revenue record for the business. Specifically, server and networking revenue grew by 80%, almost double the growth rate of the first quarter.

Dell specifically mentioned that the demand growth for servers in the second quarter continued to outpace shipment speed, with strong demand for AI servers. Revenue from AI-optimized server orders increased by 23% quarter-on-quarter to $3.1 billion in the quarterIn contrast, PCs are still dragging down Dell. In the second quarter, the Client Solutions Group (CSG) where PCs are located not only failed to return to positive growth in revenue, but also declined by 4% year-on-year, mainly due to a 22% decrease in consumer PC revenue and flat revenue for commercial PCs.

Dell's Vice Chairman and Chief Operating Officer (COO) Jeff Clarke commented on the second quarter performance, stating that the company once again demonstrated its execution capabilities and ability to generate strong cash flow, with AI continuing to drive new growth. He said:

"Our AI momentum accelerated in the second quarter, and we see an increasing number of enterprise customers purchasing AI solutions every quarter. The demand for AI-optimized servers reached $3.2 billion, up 23% quarter-on-quarter, and $5.8 billion year-to-date. Backlog orders amount to $3.8 billion, and our product line has grown to several times the backlog orders."