(Bloomberg) — Dell Technologies Inc. fell about 18% in extended trading after its first revenue increase since 2022 wasn’t enough to impress investors with high expectations for the company’s AI server business.
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Sales rose 6.3% to $22.2 billion in the period ended May 3, the Round Rock, Texas-based company said Thursday in a statement. Analysts, on average, estimated US$21.6 billion. Earnings, excluding some items, were $1.27 per share, compared with the average forecast of $1.23.
Revenue from Dell’s powerful servers equipped to handle artificial intelligence tasks more than doubled from the previous quarter to $1.7 billion, Chief Operating Officer Jeff Clarke said in the statement. The backlog for these machines increased more than 30% from the previous quarter to $3.8 billion, he added.
Dell expects the momentum in demand for AI to continue throughout the year, Chief Financial Officer Yvonne McGill said on a conference call following the earnings release.
The company raised its revenue outlook for the fiscal year ending February 2025 to a range of $93.5 billion to $97.5 billion, an 8% increase at the midpoint, which would exceed the average analyst estimate of a 7% gain. Adjusted earnings will be about $7.65 per share, compared to the average estimate of $7.70.
But excitement around demand for AI for Dell’s machines has raised expectations for Thursday’s results, Woo Jin Ho, an analyst at Bloomberg Intelligence, said in an interview with Bloomberg Television after the report was released.
Shares fell to a low of $138.15 in extended trading after closing at $169.92 in New York. Dell shares have more than tripled over the past 12 months as investors view the hardware maker as a beneficiary of demand for artificial intelligence. Large corporations increasingly need high-powered servers to train and perform demanding generative AI tasks, which are sold by Dell and few other companies.
“The results weren’t bad, but expectations were too high and the numbers weren’t strong enough to stimulate new upside in the near term,” analysts at Vital Knowledge wrote.
For its best-known business of selling personal computers, Dell reported revenue of $12 billion, little change from the same period a year ago. Business PC sales rose 3% to $10.2 billion, surprising analysts who had expected a 2% drop.
The PC market has seen a historic decline over the past two years, after many consumers, businesses and schools purchased laptops in the early months of the pandemic. In the first quarter, shipments rose 1.5% – the first increase since the end of 2021 – industry analyst IDC said in April.
PC makers are hopeful that these numbers signal the end of the crisis and that growth would accelerate in 2024 with the launch of machines equipped with a new version of Microsoft Corp.’s Windows software, as well as hardware equipped with chips to handle intelligence. artificial. tools.
Dell’s main PC competitor, HP Inc., reported signs of recovery in the computer market on Wednesday, sending its shares up 17% on Thursday. Like Dell, HP reported an increase in sales among its business customers rather than consumers.
Total sales at Dell’s infrastructure unit, which includes servers and networking and storage equipment, jumped 22% to $9.2 billion.
(Updates with perspective in fifth paragraph.)
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