(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 hopes for the company’s AI server business.
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Revenue rose 6.3% to $22.2 billion in the period ended May 3, the Round Rock, Texas-based company said in a statement Thursday. Analysts estimate an average of $21.6 billion. Earnings, excluding some items, were $1.27 per share, compared to the average projection 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 rose more than 30% quarter-over-quarter to $3.8 billion, he added.
Dell expects AI demand momentum to continue throughout the year, Chief Financial Officer Yvonne McGill said on a conference call after the results were announced.
The company raised its revenue outlook for the fiscal year ending February 2025 to a range of $93.5 billion to $97.5 billion, up 8% at the midpoint, which would be 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 that excitement around demand for AI for Dell’s machines raised expectations for Thursday’s results, Woo Jin Ho, an analyst at Bloomberg Intelligence, said in an interview on 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 in the past 12 months as investors have seen the hardware maker as a beneficiary of demand for artificial intelligence. Large companies increasingly need powerful servers to train and run demanding generative AI tasks, which are sold by Dell and some other companies.
“The results were not bad, but expectations were very high, and the numbers were not strong enough to drive further upside in the near term,” Vital Knowledge analysts wrote.
For its better-known business of selling personal computers, Dell reported revenues of $12 billion, little changed from the same period a year earlier. Business PC sales rose 3% to $10.2 billion, surprising analysts who expected a 2% decline.
The PC market had suffered a historic decline over the past two years after many consumers, businesses and schools bought laptops in the early months of the pandemic. In the first quarter, shipments rose 1.5% – the first increase since late 2021 – industry analyst IDC said in April.
PC makers were hopeful that these figures would mark 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. and of hardware equipped with chips to handle artificial intelligence. tools.
Dell’s main PC rival, HP Inc., reported signs of a recovering computer market on Wednesday, sending its shares up 17% on Thursday. Like Dell, HP reported sales growth among its business customers rather than consumers.
Total revenue for Dell’s infrastructure division, which includes servers, networking and storage equipment, rose 22% to $9.2 billion.
(Updates with outlook in fifth paragraph.)
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