To The Moon

$Dell Technologies Inc.(DELL)$ reported results for the Q3 quarter of its fiscal year 2025 ending November 1, 2024 and plunged 12% after hours, triggering widespread concern in the market.

Financials vs. market expectations

• Total revenue of $24.37 billion (up 10.1% year-over-year), slightly below market expectations of $24.52 billion, and

• Operating profit of $2.2 billion, up 2% year-over-year, above the market consensus estimate of $2.16 billion

• Earnings per share EPS: $2.07, up 9% year-over-year

Business Performance by Segment

The Infrastructure Solutions Group and the PC business were key areas:

• Infrastructure Solutions Group: significant revenue growth, up 34% year-on-year to $11.37 billion, driven by strong demand for storage and networking products.Meanwhile, $2.9 billion of AI servers were delivered, above analysts' estimates of $2.8 billion.

• PC business: while the commercial PC business was flat, the consumer PC business declined 2%, with sales of PCs and laptops sold to consumers and businesses by the Customer Solutions Group (CSG) falling 1% year-on-year to $12.1 billion.

• Artificial Intelligence servers: while this area is seen as a key driver of future growth, recent results have been constrained and have failed to drive overall earnings growth as expected.

Earnings guidance

• The company expects fiscal fourth-quarter revenue to be in the range of $24 billion to $25 billion, below market expectations of $25.57 billion.

• Adjusted earnings per share were $2.50, below market expectations of $2.65.

Analysis of Reasons for Difference between Results and Expectations

1. Changes in market environment: The weak recovery of the personal computer market, coupled with seasonal factors, resulted in PC sales failing to meet expectations.

2. Increased competition: In the area of storage solutions, despite Dell's good performance, the overall IT industry was highly competitive, affecting sales of some product lines.

3. Investors had high expectations for Dell's earnings performance: despite high expectations in this area, short-term growth failed to significantly improve overall performance.

Investment concerns

• Continued Growth in Infrastructure Solutions: Strong performance in this segment is likely to continue to support the company's overall revenue growth.The strong performance was primarily due to increased demand for storage and networking products from enterprise customers.The Company will continue to invest in this area to ensure that it can meet the growing demand for data processing and maintain its competitive edge.

• Recovery in the PC market: the CFO responded that the company is aggressively realigning its product portfolio to address the declining demand for consumer-grade PCs.While the commercial PC business remains stable, Dell is improving the attractiveness of its consumer-grade products through innovation and channel optimization with a view to achieving market recovery in the future.

• Development Potential in Artificial Intelligence: With the development of AI technology, it will be an important point of observation to see whether Dell's layout in this area can be translated into actual revenue.The company said that the current market demand for AI servers does not fully reflect expectations, but the company remains optimistic about the long-term potential of this field.Dell is increasing its investment in AI technology research and development, and has established strategic relationships with several partners to drive the development of related products.