Dell Technologies Inc. reported better-than-expected sales of personal computers and data center hardware, fueling hopes of a recovery in the market for corporate technology. The company also said demand for products that help businesses use artificial intelligence are a “long-term tailwind.”
Fiscal second-quarter revenue dropped 13% to $22.9 billion, Round Rock, Texas-based Dell said Thursday in a statement. That exceeded the $20.8 billion average projection of analysts surveyed by Bloomberg. Profit, excluding some items, was $1.74 a share, beating the average estimate of $1.14.
“We are encouraged with some of the signs we are seeing in the macro environment as we move into the second half,” Chief Operating Officer Jeff Clarke said during a conference call after the results. “The demand environment improved at a faster rate than we anticipated, particularly as we moved into June and July.”
Chief Financial Officer Yvonne McGill said the company projects revenue of about $23 billion in the current quarter ending in October, which would top analysts’ average estimate of $21.7 billion. For the full year, Dell raised its sales forecast to $89.5 billion to $91.5 billion, which would be about an 12% decline from a year earlier. Analysts, on average, estimated $86.9 billion, or a 15% drop. While there are signs that demand from small businesses and government clients is stabilizing, the largest customers continue to show “measured” buying, McGill said.
The shares rose about 8% in extended trading after closing at $56.24 in New York. The stock had gained 40% this year through Thursday’s close.
The computer industry has had a difficult year, experiencing a sharp demand slowdown as the pandemic waned. Dell has responded to the changing market by restructuring its sales organization and cutting roughly 6,650 jobs earlier this year. Dell’s co-Chief Operating Officer Chuck Whitten resigned earlier this month.
Dell had sales-focused job cuts in the quarter, according to a spokesperson earlier this month. The company recorded $364 million in severance payments in the three months ended Aug. 4, according to the statement. That’s in addition to the $415 million the company said it spent through May on the workforce reduction announced in February. The company declined to comment Thursday on the scope of the layoffs.
The results painted a better picture for the PC market than that from HP Inc. on Tuesday. The rival computer maker cut its full-year forecast, saying a demand rebound would take longer than previously expected.
Dell reported that revenue in the computer division declined 16% to $12.9 billion from a year earlier. Still, the figure topped estimates, and the unit produced a better-than-expected sales performance with consumers and businesses.
The infrastructure business unit reported $8.5 billion in sales in the period, compared with the average estimate of $7.3 billion. Servers and networking revenue declined 3% to $4.27 billion, topping analysts’ predictions.
One of the servers Dell says is optimized for generative AI performance has about $2 billion in backlogged orders, Clarke said. In May, Dell announced a service in collaboration with Nvidia Corp. to help businesses run generative AI in on-premise data centers.
“AI is already showing it’s a long-term tailwind, with continued demand growth across our portfolio,” Clarke said in the statement.
(Updates with the forecast in the fourth paragraph.)
