Dell Technologies (DELL) stock fell as much as 12% early Wednesday after the company was cautious in its forecast for investors, warning that AI growth is “not linear” did.
“AI is a powerful opportunity, and interest in our portfolio is at an all-time high and shows no signs of slowing down,” Dell Chief Operating Officer Jeffrey Clark told investors Tuesday night. spoke on the phone. “However, this business is not linear, especially as customers navigate an ever-changing underlying silicon roadmap.”
Dell’s AI server revenue fell 9% sequentially in the third quarter.
A broader downturn in the PC market, along with non-linear growth in the AI sector, contributed to Dell’s downward revision of its full-year outlook for the fiscal year 2025, which ends in February.
Bernstein analyst Toni Sacconaghi noted on the earnings call that the midpoint of the company’s full-year revenue guidance range has decreased from $97 billion to $96.1 billion since last quarter. The company said it will provide investors with its formal outlook for fiscal 2026 early next year.
Despite Wednesday’s decline, Dell stock is still up more than 65% this year.
Asked about the downward revision to Dell’s guidance during the conference call, Clark primarily cited a slower-than-expected recovery in the PC market, but also a trend of customers shifting toward the latest AI chips. pointed out. Clarke said Dell consumers are considering using Nvidia’s (NVDA) latest Blackwell AI chips in Dell’s servers, but those chips are facing some delays. Last week, Nvidia said “production is progressing at full speed” on these chips.
“In the third quarter, orders shifted to our Blackwell designs and shifted pretty quickly,” Clark said, adding that orders for Blackwell-designed servers made up a “significant portion” of the backlog. He pointed out that there was.
Traditionally a PC company, Dell’s expansion into IT products in the 2010s paid off amid the AI boom.
The company’s servers, powered by Nvidia AI chips, are used as critical hardware to run generative artificial intelligence software by companies such as Elon Musk’s xAI and $23 billion cloud provider CoreWeave. has been.
TD Cowen analyst Krish Sankar said Dell’s decline in AI server revenue in the most recent quarter was “largely due to the well-understood Blackwell push.”
Sankar added that Dell’s growing backlog and orders for AI servers worth an estimated $8 billion in the third quarter “better represent actual demand,” adding that Dell’s AI pipeline is “currently at $20 billion worth of orders.” “It’s slightly below that.”
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