Welcome leap: Dell Client Solutions Group president Sam Burd at a forum in Taipei, Taiwan. The company’s sales of business PCs increased 3% to US$10.2bil, surprising analysts who expected a 2% drop. — Reuters
NEW YORK: Dell Technologies Inc fell the most since it returned to the public market in 2018 after its first revenue increase since 2022 wasn’t enough to impress investors with high expectations for the company’s artificial intelligence (AI) server business.
Sales increased 6.3% to US$22.2bil in the period ended May 3, the Round Rock, Texas-based company said in a statement.
Analysts, on average, estimated US$21.6bil. Profit, excluding some items, was US$1.27 a share, compared with the average projection of US$1.23.
Revenue from Dell’s powerful servers equipped to handle AI tasks more than doubled from the previous quarter to US$1.7bil, chief operating officer Jeff Clarke said in the statement.
The backlog for those machines increased more than 30% quarter-on-quarter to US$3.8bil, he added.
But excitement around AI demand for Dell’s machines created high expectations for last Thursday’s results.
The shares dropped 18% to US$139.56 at the close of last Friday in New York, the biggest single-day decline since Dell again became a public company in December 2018.
Dell’s stock had more than tripled over the past 12 months as investors have viewed the hardware maker as a beneficiary of demand for AI.
Large corporations increasingly need high-powered servers to train and run demanding generative AI tasks, which are sold by Dell and a few other companies.
“Relative to very high expectations, Dell’s 2025 first quarter results were disappointing,” Toni Sacconaghi, an analyst at Sanford Bernstein, wrote.
He pointed out that a decrease in adjusted operating margin in the quarter resurfaced “concerns that AI servers are being sold at near-zero margins”.
Dell expects the momentum from AI demand will continue through the year, chief financial officer Yvonne McGill said on a conference call after the results were released.
The company raised its revenue outlook for the financial year ending in February 2025 to a range of US$93.5bil to US$97.5bil, an 8% increase at the mid-point, which would top analysts’ average estimates of a 7% gain.
Adjusted profit will be about US$7.65 a share, compared with the US$7.70 average estimate.
Still, that outlook implies relatively flat AI server sales through the rest of the year, which “will cast some doubt on near-term competitiveness”, wrote Bloomberg Intelligence analyst Woo Jin Ho.
For its better-known business of selling personal computers (PCs), Dell reported US$12bil in revenue, little changed from the same period a year earlier.
Sales of business PCs increased 3% to US$10.2bil, surprising analysts who expected a 2% drop.
The PC market had seen a historic decline over the last two years after many consumers, businesses and schools purchased laptops in the early months of the pandemic.
In the first quarter, shipments picked up 1.5% – the first increase since the end of 2021 – industry analyst IDC said in April.
PC-makers have been hopeful that those numbers signalled the end of the slump 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 new artificial intelligence tools.
Dell’s primary PC competitor, HP Inc, reported signs of a recovering computer market last Wednesday, sending its shares up 17% the next day.
Like Dell, HP reported a bump 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 US$9.2bil. — Bloomberg
