Dell Technologies (DELL.N) reported third-quarter revenue that fell short of expectations, causing a 4% drop in its shares after the bell.
This underperformance was attributed to a slower-than-anticipated recovery in the hardware and software market.
Many vendors in the tech industry have experienced a decline in demand following the initial surge in electronic device sales during the COVID-19 lockdowns, which were driven by the shift to remote work.
Dell’s client solutions group, which encompasses both consumer and enterprise personal computer business, posted third-quarter revenue of $12.28 billion, marking nearly an 11% decrease compared to the previous year.
Analysts, including Mikako Kitagawa from Gartner, pointed out that Dell was not the only PC vendor facing these challenges, but its impact was more significant due to the weakness in the business PC market, a core segment for the company.
On a more positive note, Dell’s servers and networking business saw a 9% increase in revenue from the second quarter.
This growth was fueled by customer interest in generative artificial intelligence, according to Chief Operating Officer Jeff Clarke.
However, server manufacturers have faced supply constraints for AI chips, particularly those made by Nvidia (NVDA.O), which are crucial for running large language models like ChatGPT.
Dell’s third-quarter revenue came in at $22.25 billion, falling short of the estimated $23 billion.
Despite this setback, the company raised its full-year earnings per share expectations to $6.63, plus or minus 10 cents, compared to the previous forecast of $6.30, plus or minus 20 cents.
Positive results reported by major PC chipmakers such as Intel (INTC.O) and AMD (AMD.O) indicate that the market is gradually recovering, especially as the holiday season approaches.
Research firm Canalys predicts that the PC market will rely on demand from AI-driven advancements, with AI-capable PCs expected to gain momentum from 2025 onwards, eventually constituting around 60% of all PCs shipped in 2027.