Dell Technologies shares tumbled 10% in after-hours trading on Tuesday after the company issued a lighter-than-expected fourth-quarter revenue and earnings forecast, despite robust growth in its artificial intelligence (AI) business. The third-quarter earnings exceeded Wall Street estimates for adjusted earnings per share but fell short on overall revenue.
For the fiscal third quarter ending November 1, Dell reported adjusted earnings per share of $2.15, surpassing the $2.06 expected by analysts polled by LSEG. However, revenue came in at $24.4 billion, below the forecasted $24.67 billion. Net income rose 12% year-over-year to $1.12 billion, or $1.58 per share, compared to $1 billion, or $1.36 per share, in the prior-year period. Revenue grew 10% from $22.25 billion a year earlier.
The company forecasted revenue between $24 billion and $25 billion for the fourth quarter, falling short of analysts’ expectations of $25.57 billion. Dell also projected $2.50 in adjusted earnings per share, compared to the anticipated $2.65. Chief Operating Officer Jeff Clark noted that growth in the AI segment would vary, stating, “This business will not be linear, especially as customers navigate an underlying silicon roadmap that is changing.”
Dell’s shares have surged 86% so far in 2024, reflecting its strong positioning as a major supplier of tools and systems for AI developers. The company is a leading vendor of computer clusters that power AI development, particularly those utilizing Nvidia chips, placing it in competition with Super Micro Computer, Hewlett Packard Enterprise, and several Asian manufacturers.
During the quarter, Dell shipped $2.9 billion worth of AI servers, with $3.6 billion in future AI server orders booked. Its Infrastructure Solutions Group (ISG), which encompasses AI servers, storage, and networking components, reported a 34% revenue increase to $11.4 billion, driven largely by AI demand. Within ISG, servers and networking revenue surged 58% to $7.4 billion.
Dell attributed part of the demand shift to customers awaiting Nvidia’s next-generation Blackwell chips, which are in production but not yet widely available. The company’s traditional servers, designed with Intel and AMD CPUs, also saw double-digit growth as companies prepared data centers for AI infrastructure.
While the AI business grew significantly, Dell’s Client Solutions Group, which sells PCs and laptops, faced challenges. Revenue declined 1% to $12.1 billion, with commercial PC sales up 3% to $10.1 billion but consumer PC sales down 18% to $2 billion.
Despite the missed forecasts, Dell executives emphasized a strong $4.5 billion AI pipeline, signaling early-stage adoption by enterprises learning to deploy AI.
