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Dell Technologies Inc.’s recent AI boost was derailed slightly on Tuesday, as the computer maker’s weaker outlook — due to a double whammy of AI product transitions in both servers and PCs — disappointed investors.
Shares of Dell
DELL -1.68% tumbled 11% in after-hours trading, a big move in the wrong director for a company that has seen its shares jump 88% so far this year, as it has become a leading AI-server provider.
While Dell still sees a “robust opportunity” for its AI servers, and saw record revenue growth of 58% in its fiscal third quarter for servers and networking, it forecast revenue below expectations for the fiscal fourth quarter. Dell said it shipped $2.9 billion of AI servers in the most recent quarter.
Read more: Dell sees AI-server boom gain more steam, but overall revenue falls short
Dell Chief Financial Officer Yvonne McGill said she expects fiscal fourth- quarter revenue to come in a range between $24 billion and $25 billion, while the consensus on FactSet is for revenue of $25.6 billion.
“There’s two elements. PCs, it’s not a matter of if the refresh is going to happen, it’s when, and … we’re seeing that move more into next year,” McGill said, while also citing “the unpredictability of the AI shipments,” referring to Nvidia Corp.’s
NVDA 0.66% transition to its new Blackwell chips.
Dell executives said that the anticipated customer refresh to new AI-enabled PCs is going slower than expected, in part because of the response by companies regarding the end-of-support date for Microsoft Corp.’s
MSFT 2.20% Windows 10 in October 2025, though customers can extend their security updates if they are willing to pay an extra $30.
That could put off some upgrades among consumers, at least. Hewlett-Packard Inc.
HPQ -0.51%, on its earnings call with investors on Tuesday, said that it agrees with industry forecasts that the PC industry will grow in 2025 by the mid-single digits. IDC forecast in September that the PC market will grow about 4.3% in 2025, due to the Windows refresh cycle.
“While AI has been a buzzword of late, it has yet to be a purchase driver among PC buyers,” IDC analyst Jitesh Ubrani said at the time.
On the AI-server front, Dell said its backlog of orders grew to $4.5 billion, up from a backlog of $3.8 billion in the second quarter. Wamsi Mohan, a BofA Securities analyst, had predicted that Dell’s backlog would increase to about $4.45 billion. He had forecast a decline of 8% in Dell’s AI-server revenue at $2.85 billion for the third quarter, but added there’s “potential for higher revenues if Dell can get all the parts it needs.”
