Due to the continued downturn in demand for personal computers (PCs) by businesses, Dell announced a deeper decline in revenue for the last quarter than analysts had predicted, and this quarter’s revenue is also lower than expected.
The company stated on Thursday that sales in the third quarter fell 10% to $22.3 billion. Analysts had estimated an average of $23 billion. Sales of Client Solutions Group (CSG), which includes PC sales for both enterprise and consumer customers, declined by 11%, far below market expectations.
CFO Yvonne McGill said during a conference call after the performance announcement that this quarter’s revenue would be around $22 billion. However, analysts’ average expectation was $23.9 billion. McGill stated that PC sales would experience a “low single-digit decline,” although “CSG demand has stabilized in some areas, but the PC market has not yet seen broader recovery.”
Dell, known for its PC business, attracted investor interest this year due to increased demand for AI servers. As of November 3rd, the company generated $500 million in revenue from selling these devices during one quarter. Earlier this month, Dell announced a server supply agreement worth $150 million with AI startup Imbue.
Server revenue for last quarter was $4.66 billion, higher than analysts’ average estimate of $4.43 billion. COO Jeff Clarke stated in the announcement: “Driven by customer interest in generative AI, our server and networking business grew 9% annually.” This performance contrasts sharply with competitor Hewlett Packard Enterprise (HPE), which reported more severe declines in server sales on Tuesday.
Dell’s stock price fell approximately 4% after-hours trading but rose slightly by 1% to $75.87 earlier during regular trading hours. Due to heightened market enthusiasm regarding AI’s potential to drive demand, Dell’s stock has risen by 89% so far this year.
Over the past 18 months, PC manufacturers have been severely impacted by shrinking demand following the pandemic. Dell’s competitor HP also reported lackluster financial results last week. Nevertheless, analysts still see signs of vitality in the industry. In a report published in October, IDC stated that although the global economy remains sluggish, the PC market has “emerged from its trough.”
Clarke’s statement mentioned that Dell expects revenue to grow starting in February for the new fiscal year. Analysts currently predict a 3.5% increase in annual sales.
During the conference call, McGill said: “We expect revenue to recover and exceed our long-term financial framework next year. The opportunity lies in broader IT spending recovery, especially among large US corporations and enterprise customers.”