Dell Technologies (DELL.N) reported third-quarter revenue below estimates due to a slower-than-expected recovery in the hardware and software market, sending its shares down 4% after the bell. The Round Rock, Texas-based company expects full-year profit and revenue to exceed its previous forecast. The company has been bolstered by the artificial intelligence boom and stabilizing demand for computer hardware and servers following a months-long slump.
Analysts expected the company to report revenue of $22.3 billion for the quarter, which would have been a 12% decrease from the year-ago period. The company’s Infrastructure Solutions Group revenue slipped 7% sequentially but was up 9% year-over-year, thanks to AI-optimized servers and storage sales. However, the Client Solutions Group saw its revenue decline 11%, well below analysts’ estimate of 5%.
Gartner’s latest PC shipment estimates show that worldwide shipments of laptops and desktops declined by 29% year-over-year in the fourth quarter, which is far worse than the previous quarter’s slide of 19%. However, the research firm said that the quarterly declines are “not necessarily a sign of further weakness,” and the drop in Q4 is likely essentially the result of business budget cuts.
The global IT spending is expected to fall by 6% this year, the second consecutive decline, according to research firm IDC. Gartner and IDC said the fall resulted from continuing economic uncertainty and fears about a global recession, leading companies to cut IT spending.
However, the research firms also noted that some of the weakness in the IT market is temporary and should pick up in the second half of 2023 as budgets are restored, and the economy strengthens. The research firms also attributed the sharp decline in PC shipments to the continued shift towards mobile devices, especially tablets, and smartphones, which are less expensive than traditional computers.
Dell has benefited from the shift toward portable computing by expanding its presence in retail and office supply stores, which can act as product service centers. The company also sells its products through Amazon and eBay and has partnered with other online retailers. In addition, it is starting to open physical stores in Central Europe and Russia.
The company dropped its original name of PC’s Limited in 1987 to become Dell Computer Corporation, reflecting the change in its business focus. It has expanded its operations globally and is now a leading manufacturer of information technology systems, including hardware, software, and services. The company’s stock has risen 36% this year and ranks among IBD’s top-rated tech stocks.