In the third quarter, the company's Infrastructure Solutions Group (ISG) revenue grew by 34% to 11.37 billion dollars, delivering 2.9 billion dollars worth of ai servers, while analysts estimated 2.8 billion dollars. The company also stated that customers have already placed 3.6 billion dollars worth of future ai server orders in that quarter, with order volumes increasing across all customer types. The company's COO indicated that ai presents a strong opportunity and shows no signs of slowing down. Dell's pc business faced pressure during the quarter. A Morgan Stanley analyst noted that investor expectations for Dell's financial performance are very high.

On Tuesday post-market trading, $Dell Technologies (DELL.US)$ released its third quarter financial report as of November 1. Although the company's third quarter profit exceeded expectations and optimistic comments related to AI sales growth were released, due to the stagnation in the personal computer market recovery momentum, the quarterly revenue fell short of expectations, and the revenue and profit outlook for the next quarter were also below expectations, causing Dell's stock price to drop 10% in after-hours trading.

1) Key Financial Data:

Revenue: Overall net revenue in the third quarter increased by 10% to $24.37 billion, below analysts' expectations of $24.59 billion.

Operating Profit: Adjusted operating profit in the third quarter was $2.2 billion, higher than analysts' expectations of $2.16 billion.

EPS: Adjusted EPS in the third quarter was $2.15, higher than analysts' expectations of $2.05.

2) Segment Business Data:

Personal computer business declined by 1% year-on-year to $12.1 billion, below market expectations.

In the third quarter, the Infrastructure Solution Group revenue was $11.37 billion, slightly above analysts' expectations of $11.34 billion.

3) Performance guidance:

Revenue: The estimated fourth-quarter revenue is expected to be between $24 billion and $25 billion, lower than the market's expectations of $25.57 billion.

EPS: The expected adjusted earnings per share are $2.50, below the market expectation of $2.65.

Before the Tuesday financial report was released, Dell fell by nearly 1.7%. After the Tuesday financial report was released, Dell's stock price plummeted by over 10% in post-market trading.

AI Business

This year, the AI frenzy has turned around the veteran computer giant, 40-year-old Dell, hitting a historical high of nearly $180 in May this year. Although Dell's stock price has retreated from its historical high, it still marks a year-to-date increase of nearly 90% based on Tuesday's closing price. This is mainly attributed to its new AI server business line, making Dell one of the significant companies providing tools and systems to AI developers.

Dell is a top supplier in the field of computer clusters, which are essential for the development and deployment of AI, especially based on NVIDIA chips. Dell's competitors in the server manufacturing sector include Supermicro, HPE, etc. Cloud service providers, enterprises, and government institutions have a strong demand for NVIDIA AI accelerators. They often purchase systems with tens of thousands of AI chips installed, while Dell sells complete systems.

This year, nvidia's CEO Jensen Huang praised dell technologies and its founder Michael Dell, suggesting that customers order nvidia's new generation Blackwell ai chips through dell. Earlier this month, dell announced it would deliver servers equipped with nvidia Blackwell to the cloud infrastructure provider CoreWeave.

According to the latest financial report, the strongest performer in dell's ISG business is its server and networking sub-segment, which includes ai systems. This sector saw revenue growth of 58%, reaching 7.4 billion dollars. Dell delivered 2.9 billion dollars worth of ai servers in the third quarter, exceeding the analyst's estimate of 2.8 billion dollars, and the company also stated that customers had booked 3.6 billion dollars in future ai server orders in that quarter, with order volume increasing across all customer types.

Dell noted that the increase in ai server orders has driven traditional server demand to grow by double digits year-on-year. Traditional servers, based on intel or AMD's cpu chips, consume less power and can free up space or electrical utilities within datacenters for companies investing heavily in ai infrastructure.

Dell executives indicated that some customer demand is shifting to the following quarters while waiting for nvidia's Blackwell chips, which are currently in production but have not yet been shipped in bulk to end users. Dell stated that growth in many of its ai systems has already been reflected in the 4.5 billion dollars of future orders.

Dell's Chief Operating Officer (COO) Jeff Clark told investors during the earnings call that growth in ai-related business will exhibit quarterly volatility. He pointed out:

This business will not grow linearly, especially as customers face continuously changing underlying chip technology roadmaps. We saw orders rapidly shift to our Blackwell designs in the third quarter.

We are still in the early stages of businesses learning how to deploy ai. Ai presents a strong opportunity for us, and there are no signs of it slowing down.

dell's computer storage system revenue growth is not as strong as that of servers, increasing by 4% year-on-year to 4 billion dollars.

PC business

dell's personal computer business declined by 1% to 12.1 billion dollars, falling short of expectations. While the amount spent by commercial customers on personal computers for their employees increased by 3% year-on-year to 10.1 billion dollars, the company's consumer-facing personal computer sales saw a significant year-on-year decline of 18% to 2 billion dollars.

In recent years, driven by the surge in demand for students and corporate employees to work from home during the early stages of the pandemic, the PC market experienced a boom, but subsequently faced a historic decline. Although there are signs of recovery this year, data from the industry analyst firm IDC, released in October, shows that PC shipments declined again in the third quarter.

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