On February 26, the first day of the 18th Mobile World Congress (MWC), Dell Technologies CEO Michael Dell delivered a speech on “New Strategies for a New Era” at the MWC conference. Barcelona, Catalonia, Spain.
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shares Dell Technologies The company’s shares fell more than 17% in premarket trading on Friday after investors were dismayed by the company’s lower-than-expected backlog of artificial intelligence servers and lower expected profit margins.
Dell reported fiscal first-quarter results on Thursday that beat analysts’ expectations and provided upbeat guidance. The company said revenue for the period was $22.24 billion, above LSEG analysts’ estimates of $21.64 billion.
Dell said it expected second-quarter earnings of $1.65 per share on sales of $23.5 billion to $24.5 billion. Analysts polled by FactSet expected revenue of $23.35 billion. Dell expects full-year sales to be between $93.5 billion and $97.5 billion.
The gains weren’t enough to appease investors, and shares tumbled in extended trading Thursday.
Analysts at Bernstein said the “main disappointment” in Dell’s results was the year-over-year compression of operating profits in its infrastructure solutions group. Additionally, despite the company’s incremental artificial intelligence server revenue of approximately $1.7 billion, operating profit was flat from the same period last year.
Analysts said this has once again raised concerns that Dell’s artificial intelligence server sales are “near zero profits.” In other words, the company’s AI initiatives haven’t translated into profits yet.
“On a net basis, Dell’s 1Q25 results were disappointing relative to very high expectations,” analysts wrote in a note Friday.
Bank of America analysts said Dell reported strong quarterly results and reiterated a buy rating on the stock. However, they said the move after the bell was partly due to Dell’s lower-than-expected AI server backlog of $3.8 billion and the company’s growth margins expected to decline this fiscal year.
“We reiterate Buy as we are still in the early stages of AI adoption, the pipeline and momentum in AI servers continue to be strong, and we believe Dell will continue to grow over time,” analysts said in a report on Thursday. will be able to obtain higher profits in the field of artificial intelligence.
JPMorgan analysts said they were not surprised by investor reaction to the report, but said they believed the concerns were “overblown.” They maintained an overweight rating on the stock and said Dell’s profit margin volatility would create an attractive buying opportunity.
Analysts said the company expects to expand revenue and earnings before hitting its mid-term targets, and they expect Dell to see accelerating demand trends in artificial intelligence and a resurgence in traditional infrastructure.
“Given the high expectations for margin improvement, we expect investors to be disappointed, and we expect investors will be more likely to monitor the execution of promised margin improvements over the remainder of the year,” they said in a note on Thursday. wrote in.
— CNBC’s Michael Bloom and Kif Leswing contributed to this report.
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