Dell’s Stock Declines as AI Server Sales Disappoint Investors

Dell Technologies Inc. experienced a significant drop in its stock price, falling about 18% in extended trading after its latest revenue increase failed to meet investors’ high expectations for the company’s AI server business. Despite a 6.3% increase in sales to $22.2 billion, which surpassed analysts’ estimates, the stock took a hit as investors were hoping for stronger numbers.

The revenue from Dell’s AI servers, which more than doubled from the previous quarter to $1.7 billion, showed promising growth in the AI market. Chief Operating Officer Jeff Clarke highlighted the backlog for these machines, which increased by over 30% quarter-over-quarter to $3.8 billion, indicating strong demand for AI-capable servers.

Looking ahead, Dell expects the momentum in AI demand to continue throughout the year, with Chief Financial Officer Yvonne McGill raising the revenue outlook for the fiscal year ending in February 2025 to a range of $93.5 billion to $97.5 billion. This represents an 8% increase at the mid-point, exceeding analysts’ average estimates.

However, despite the positive outlook, the excitement around AI demand for Dell’s machines raised expectations for the company’s results, leading to the stock price drop in extended trading. Analysts noted that while the results were not bad, they were not strong enough to meet the high expectations set by investors.

In addition to its AI server business, Dell’s personal computer sales remained steady at $12 billion, with a surprising 3% increase in sales of business PCs. The company’s infrastructure unit, which includes servers and networking and storage equipment, also saw a significant jump in total sales, increasing by 22% to $9.2 billion.

Overall, Dell’s performance reflects the ongoing shift towards AI technologies in the market, with investors closely monitoring the company’s progress in this rapidly growing sector.