Investing.com -- Dell Technologies shares fell sharply after the company guided fourth-quarter revenue below Wall Street expectations amid weaker demand for its traditional PCs and competition from peers.
Dell Technologies Inc (NYSE:DELL) fell more than 13% Thursday following the report.
For the third quarter, the AI server maker reported adjusted earnings per share (EPS) of $2.15 on revenue of $24.4 billion, compared with estimates for $2.06 per share and $24.69B, respectively.
Revenue was hurt by a performance in the company’s client solutions group, which includes PCs and laptops, saw revenue fall 1% to $12.1B year-on-year in Q3.
The infrastructure solutions group saw revenue jumped 34% YoY in Q3, driven by strong AI-related demand.
Consumer revenue fell down 18% to $2B.
Looking ahead to the fourth quarter, Dell forecast revenue between $24 billion and $25 billion, missing the average analyst projection of $25.57 billion, according to LSEG data.
Commenting on the report, Deutsche Bank (ETR:DBKGn) analysts believe Dell's weaker Q4 guide comes mainly due to delays in AI server sales and PC refresh activity.
"To be clear, we believe these headwinds are generally more deferrals/delays than anything else (ie: not lost revenue), that should theoretically enhance the set up for DELL entering FY26E," analysts said.
"That said, near-term estimates are likely to trend lower post print, and hence we expect a negative reaction in shares, given the strength seen year to date," they added.
However, analysts at Morgan Stanley (NYSE:MS) described the investor reaction as "overdone," adding they "would be buyers post-earnings."
Citi analyst noted that Dell's "Server-4Q guide suggest AI server will be down sequentially with management citing demand trajectory as non-linear and is contingent on timing related to Blackwell allocation and customer readiness to accept products."
UBS explained in its reaction note that while several industry cross-currents over the past several months created a difficult set-up into earnings, "the quarterly results do not change our long-term fundamental view that Dell's more muted end-markets should all recover in CY25 with AI-server acting as tail wind driving at least 7% revenue growth and mid-teens EPS growth."
JPMorgan wrote: "Dell delivered earnings ahead of expectations for F3Q25 (Oct-end), led by strong operating leverage and margins on the back of ISG tailwinds, while the cyclical recovery in PCs continued to fail to live up to expectations. That said, it was the F4Q25 (Jan-end) guide which took investors by surprise as Dell remained cautious."
Bank of America reiterated its Buy rating on Dell, saying "we are still in the early stages of AI adoption, margins growth over time on better mix, and tailwind from upcoming PC refresh and longer-term AI PC adoption."
Bernstein believes AI server profitability remains a challenge. "AI server GMs improved very modestly sequentially, and we estimate that AI server GMs are still likely around 8-14%, with OP margins in the ~5% range," said the firm.
Goldman Sachs stated: "We expect the stock to be weaker on elevated expectations going into the earnings call on SMCI-related share gains, which could still materialize in orders next quarter, but we remain Buy-rated and continue to see DELL shares as attractive given growing demand for AI servers, as well as the upcoming PC refresh."
Finally, Evercore ISI said it understood the softer January-quarter guide, but they "think several catalysts are stacking up in DELL’s favor for FY26" to ensure accelerating revenue and EPS growth.
Yasin Ebrahim contributed to this report.