Shares of computing company Dell Technologies (DELL 3.00%) skyrocketed on Friday after the company reported completed financial results for its fiscal 2024. As of 11:45 a.m. ET, Dell stock was up about 27% and hitting a new all-time high since it became a publicly traded company again in 2018.
Artificial intelligence drives financial results for Dell
Dell's fiscal year ended on Feb. 2, and the headline numbers in isolation weren't necessarily great. The company's net revenue fell 14% year over year. And its operating income dropped 10% to $5.2 billion. But the headline numbers don't tell the whole story.
NYSE: DELL
Key Data Points
In reality, Dell generated more revenue in the fourth quarter than Wall Street expected because it's benefiting from surging interest in artificial intelligence (AI). The company offers AI servers, but demand is outpacing supply.
In its fiscal Q4, AI server orders for Dell were up 40% just from its fiscal third quarter. And its backlog for these products hit $2.9 billion. For perspective, its backlog for this was only $1.6 billion at the end of Q3.
Headed into its fiscal 2024, Dell's management is optimistic it will be growing again. Interest in AI will drive demand for its servers as well as its data-storage products. Regarding its personal computing business, demand is historically cyclical. And it appears that the cycle will soon improve. All of this bodes well for top- and bottom-line growth.
Is Dell stock getting ahead of itself?
Dell is confident that business will be good in the coming year and beyond. It's so confident that it just raised its dividend by 20%.
Dell is certainly proving itself to be a top business. But the stock might be getting a little ahead of itself. Dell stock is up by 200% over the last three years. And by various metrics, it's never been more expensive than right now, which is a reflection of the market's excitement over AI.
Considering the business is lower growth even with AI tailwinds, it may be prudent for investors to approach Dell stock with caution here due to the valuation risk.
