Shares of Dell Technologies (NYSE: DELL) took a dip today as the company reported only modest growth in its first-quarter earnings report and expectations for the rest of the year were disappointing.
As a result, the stock fell 19.6% as of 1:29 PM ET.
Dell is missing the point
Dell has emerged as a potential winner in the artificial intelligence (AI) boom, but its overall performance continues to be dragged down by older tech companies.
Revenue in the quarter rose 6% to $22.2 billion, beating estimates of $21.64 billion. Infrastructure Solutions Group’s revenue, which is more focused on AI, rose 22% to $9.2 billion and included 42% growth in server and networking revenue to $5.5 billion. However, the PC-focused Client Solutions Group reported flat revenue growth of $12 billion.
Ultimately, adjusted earnings per share fell 3% to $1.27, essentially matching the $1.26 consensus.
CFO Yvonne McGill said: “We have once again demonstrated our ability to execute and deliver strong cash flow, with AI continuing to drive new growth.” Chief Operating Officer Jeff Clarke also noted that AI-optimized server orders rose sequentially to $2.6 billion, shipments rose more than 100% to $1.7 billion, and backlog grew more than 30% to $3.8 billion.
What’s next for Dell
Dell’s expectations for the rest of the year also fell short of expectations. The company expects adjusted earnings per share (EPS) of $1.55 to $1.75 for the quarter, below consensus of $1.84.
For the full year, the company expects adjusted earnings per share of $7.40 to $7.90, which is slightly below the average estimate of $7.69 at the mid-range.
Dell’s stock is already up significantly over the past year, and 6% revenue growth and a decline in adjusted earnings per share won’t get investors excited, despite the company’s AI potential.
If investors want to take advantage of the growing demand for AI servers, they should look at a similar server Super microcomputerwhich is experiencing much faster growth.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Dell Stock Plunged Today was originally published by The Motley Fool
