Dell stock drops on weak forecast despite rising AI revenue
Dell Technologies announced its quarterly earnings, exceeding analyst expectations for earnings per share but falling short on overall revenue. Despite strong growth in AI sales, Dell’s forecast for the fourth quarter came in below Wall Street’s expectations.
In the fiscal third quarter, Dell reported adjusted earnings per share of $2.15 compared to the expected $2.06, and revenue of $24.4 billion compared to an expected $24.67 billion. Net income increased by 12% to $1.12 billion, or $1.58 per share. Overall revenue saw a 10% increase from the previous year.
Looking ahead, Dell anticipates between $24 billion and $25 billion in revenue for the fourth quarter, below the anticipated $25.57 billion. The company expects $2.50 in adjusted earnings per share, compared to expectations of $2.65 per share.
Chief Operating Officer Jeff Clark explained that growth in AI sales may not be consistent quarter to quarter, especially as customers navigate evolving silicon technologies. Despite this, Dell’s shares have risen by 86% in 2024 as the company is recognized as a leading provider of tools and systems for AI developers.
Dell’s AI server sales, a part of its Infrastructure Solutions Group, experienced a 34% revenue growth to $11.4 billion, largely driven by AI sales. The strongest segment within ISG was servers and networking, which saw a 58% revenue increase to $7.4 billion.
While Dell’s Client Solutions Group reported a decline in sales of PCs and laptops to consumers, commercial clients buying PCs for their workforce increased by 3%. The company attributed some of this decline to consumers delaying purchases in anticipation of Nvidia’s next-generation Blackwell AI chips.
Overall, Dell remains a key player in the AI industry, competing with other server makers and continuing to meet the demand for AI accelerators from various sectors. As the company navigates changing customer demands and technological advancements, investors will be closely watching its performance in the coming quarters.
