By Zaheer Kachwala
(Reuters) -Dell forecast fourth-quarter revenue below Wall Street expectations on Tuesday, weighed down by weaker demand for its traditional PCs and competition from rival server makers, sending its shares down more than 10% in extended trading.
Despite booming demand for the company's AI-optimized servers used to handle large artificial intelligence workloads, Dell (NYSE:DELL)'s PC segment has been grappling with stiff competition from rivals and weak consumer spending amid an uncertain economy.
Enterprise customers are being mindful of their PC and IT spending in the short term, Dell executives said on a post-earnings conference call, adding that the company's consumer business was weaker than expected.
Dell forecast fourth-quarter revenue between $24 billion and $25 billion. The average analyst estimate is $25.57 billion, according to data compiled by LSEG.
"The entire PC market is in a transition period and moving towards on-device AI functionality which still isn't that defined and is expected to solidify in 2025," Gadjo Sevilla, senior analyst for AI and Tech at Emarketer, said.
Revenue from Dell's client solutions group, which houses its PC business, came in at $12.13 billion, below expectations of $12.43 billion.
Rival PC maker HP (NYSE:HPQ) also provided a weak first-quarter profit forecast, while electronics retailer Best Buy (NYSE:BBY) trimmed its annual forecasts against the backdrop of weak consumer electronics demand.
Investors are also keenly eyeing Dell's costs after the company flagged in May that higher expenses to build AI-heavy servers and competitive pricing would hurt its margins.
"Interest in our portfolio is at an all-time high, driving record AI server orders demand of $3.6 billion in Q3 and a pipeline that grew more than 50%," Dell's Chief Operating Officer Jeff Clarke said on Tuesday.
Revenue from the company's infrastructure solutions group unit, which houses its AI servers business, rose 34% to $11.37 billion and beat estimates.
Dell reported revenue of $24.37 billion in the third quarter, missing estimates of $24.67 billion.