(Bloomberg) — Dell Technologies Inc. and HP Inc. reported quarterly financial results that indicate the long-awaited recovery of the PC market is stalling. Shares of each company fell in extended trading.
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Revenue generated by Dell’s PC business fell 1% to $12.1 billion in the fiscal third quarter, falling below expectations. While HP’s PC division’s revenue rose 2% to $9.59 billion in the same three-month period, that also fell short of analysts’ average estimate.
“The PC refresh cycle will continue into next year,” Dell Chief Financial Officer Yvonne McGill said on a call with analysts after the results on Tuesday. HP Chief Executive Officer Enrique Lores said in an interview that the release of the new edition of Microsoft Corp.’s Windows software. hasn’t boosted PC sales from business customers as quickly as in previous releases.
The market had suffered a historic decline in recent years after a burst in demand for new laptops in the early months of the pandemic, when students and corporate workers were stuck at home. While signs of recovery emerged this year, deliveries fell again in the third quarter, industry analyst IDC said in October.
PC makers had hoped that new machines, touted as better for artificial intelligence, would boost demand. But “buyers have yet to see clear benefits or business value,” Mikako Kitagawa, an analyst at Gartner Inc., said in a report last month.
Dell shares fell about 10% in late trading after closing at $141.74 in New York. The stock was up 85% this year through Tuesday’s close. HP shares fell about 8% after closing at $39.10. HP shares were up 30% this year.
Dell is best known for its computing business, but the Round Rock, Texas-based company has seen a resurgence in investor interest thanks to its powerful servers for artificial intelligence workloads. Earlier this month, Dell announced that it would be launching servers with Nvidia Corp.’s new Blackwell semiconductors. would supply cloud infrastructure provider CoreWeave.
Dell’s infrastructure division’s revenue, including servers, rose 34% to $11.4 billion in the period ended Nov. 1, the company said in a statement. That’s slightly more than the $11.3 billion analysts expected. Total revenue rose 10% to $24.4 billion, missing the average analyst estimate of $24.6 billion, according to data compiled by Bloomberg.
The company shipped $2.9 billion worth of AI-optimized servers this quarter, executives said. This metric was a step down from the $3.1 billion reported in the previous period.
“AI is a robust opportunity for us and there are no signs of slowing down,” Dell Chief Operating Officer Jeff Clarke said in the statement. He touted AI server orders in the quarter worth $3.6 billion and growth “across all customer types.”
For the quarter ending in February, Dell provided revenue guidance of about $24.5 billion. Analysts on average had forecast $25.4 billion. Adjusted earnings will be $2.40 per share to $2.60, compared to the average estimate of $2.66.
HP’s prospects also failed to impress. Earnings, excluding some items, will be 70 to 76 cents per share in the period ending in January, the Palo Alto, California-based company said. Analysts had predicted an average of 86 cents.
“Weaker-than-expected Personal Systems sales and profits were the biggest drag on HP’s fiscal fourth-quarter results, and below-consensus first-quarter earnings per share expectations indicate little improvement in PC demand in the seasonally stronger December quarter,” Woo Jin Ho, an analyst at Bloomberg Intelligence, said in a note after the results.
–With help from Ian King.
(Updates with unit sales graph.)
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