Dell Shares Dive 10% After Earnings Reveal Sales Miss, AI Momentum Fails To Offset PC Slump

• Dell shares fell 10% following its earnings report on Tuesday.
• The PC maker saw an overall revenue increase of 10% year-on-year.
• Dell’s PC sales continued to slump, with an 18% fall in consumer sales.
• The company’s AI server business saw significant growth.

Shares in Dell Technologies plummeted 10% on Tuesday after its third-quarter revenue and earnings failed to beat initial expectations.

The world’s third-largest PC maker failed to beat estimates on hardware sales despite a healthy boost in its AI-related server business.

Revenue Increase

Dell reported  revenue of $24.4 billion, marking a 10% rise year-over-year from $22.2 billion.

The PC maker’s net income totaled $1.13 billion, up from $1 billion year-on-year.

Dell has exceeded earnings expectations in the last four quarters, with an average earnings surprise of 16.32%.

Dell’s PC Earnings Slump

Dell’s Client Solution Group, the part of its business that sells PCs and laptops, saw revenue fall by 1% to $12.13 billion, failing to beat estimates of $12.43 billion.

Sales of PCs to consumers fell 18% across the year to $2 billion, while commercial client revenue rose 3% to $10.1 billion.

Revenue from Dell’s computer storage systems totaled $4 billion, up from $3.8 billion last year, representing a 4% increase.

The continued slowdown in consumer PC sales reflects broader challenges for Dell and its rivals.

After a widespread decline following a flurry of new laptop sales during the pandemic, signs of a resurgence began to appear earlier this year.

“The PC refresh cycle is pushing into next year,” Dell chief financial officer Yvonne McGill said Tuesday on a call with analysts after the results.

AI Server Demand

Dell’s success came from its AI server and storage sales under its Infrastructure Solutions Group.

The company’s revenue increased 34% to $11.4 billion, with servers and networking revenue of $7.4 billion, up 58%.

Dell is a leading supplier of computer clusters that deploy AI, including computers based on Nvidia’s leading chips. The company competes closely with other AI server makers such as Hewlett Packard Enterprise and Super Micro Computer in this area.

Demand for Nvidia’s AI chips continues to surge, driven by the increasing adoption of AI across industries. Dell is capitalizing on this trend by integrating Nvidia’s cutting-edge technology into its systems and offering solutions tailored for AI workloads.