Dell Technologies (NYSE: DELL) released third-quarter earnings for fiscal 2025 that produced mixed results. Revenue rose 9.3% year-over-year to $24.37 billion, but fell short of analysts’ consensus estimates of $24.66 billion. Adjusted earnings per share (EPS) came in at $2.15, beating expectations of $2.07.
Infrastructure Solutions Group (ISG), buoyed by strong demand for AI servers, delivered outstanding results, reporting a 34% revenue increase to $11.4 billion. Within ISG, server and networking revenue increased 58% to $7.4 billion, highlighting Dell’s strength in meeting AI-related demand.
However, challenges emerged in Dell’s Client Solutions Group (CSG), which saw revenue decline 1% year-over-year to $12.1 billion. Consumer revenues fell 18% to $2 billion, dragged down by weak PC demand and stiff competition.
Other businesses contributed to the headwinds, with revenue falling 41% year over year to $867 million, below analysts’ expectations.
Reaction
Investors reacted sharply to Dell’s revenue decline and cautious fourth-quarter guidance, sending shares down 11% in after-hours trading. That marked a sharp turnaround for a stock that had gained 85% year to date through Tuesday’s close.
Shares are currently 12.25% lower at $124.38.
Dell’s forecast for fourth-quarter revenue of $24 billion to $25 billion fell below Wall Street expectations of $25.57 billion. Likewise, its EPS projection of US$2.50 missed the consensus of US$2.65.
“While Dell remains a leader in AI infrastructure, near-term weakness in its traditional PC segment and delays in AI server deliveries have raised concerns,” noted analysts at Deutsche Bank, who attributed the reaction more to timing issues than to long-term problems. .
Earnings call
The earnings statement following the results highlighted the company’s strong performance in AI-driven markets and infrastructure.
Jeff Clarke, COO, highlighted the momentum of AI Servers, with the company shipping $2.9 billion in the third quarter and achieving five-quarter pipeline growth of more than 50%. Clarke attributed this success to Dell’s engineering expertise and ability to offer scalable solutions tailored to enterprise and Tier 2 cloud providers.
However, he warned of a “non-linear” trajectory for AI-related businesses as customers adapt to evolving silicon roadmaps.
Additionally, the company has seen steady growth in traditional servers, attributed to data center modernization.
View
Despite current headwinds, Dell executives remain optimistic about fiscal 2026. Clarke suggested that a significant PC refresh cycle, driven by Windows 10’s nearing end-of-life in 2025 and advances in PCs powered by artificial intelligence, it could provide an advantage.
Demand for AI servers is expected to accelerate, along with a recovery in traditional server markets.
Analysts are divided on the stock’s trajectory. While some, such as Deutsche Bank, view the sell-off as excessive, others warn that Dell faces stiff competition and unpredictable customer spending patterns in the AI and PC markets.