Dell Technologies posted mixed financial results for its latest quarter, with strong profits offset by softer-than-expected revenue and continued weakness in corporate PC demand.

While the company didn’t give formal guidance for the January 2025 fiscal year, upbeat comments about the potential for a rebound in demand seemed to be offsetting concerns about the top line miss in the quarter.

In late trading, Dell shares were fractionally higher after trading as much as 5% lower earlier in the after-hours session.

For the fiscal third quarter ended Oct. 31, Dell reported revenue of $22.3 billion, down 10% from a year ago, and below the $23 billion midpoint of the company’s guidance range. Wall Street consensus as tracked by FactSet also had been $23 billion.

Adjusted earnings were $1.88 a share, well above both the company’s forecast for $1.45 a share and Street consensus as tracked by FactSet of $1.46 a share. Under generally accepted accounting principles, the company earned $1.36 a share. Results were aided by a number of factors: a mix shift to the company’s higher-margin enterprise hardware products and away from PCs, lower component costs, a lower-than-expected tax rate, and lower than forecast interest expense.

Revenue in the company’s Client Solutions Group, mostly PCs, was $12.3 billion, down 11% from a year ago, and below the Street consensus forecast at $12.9 billion. Commercial client revenue was $9.8 billion, well shy of consensus at $10.4 billion; consumer client revenue was $2.4 billion, just missing the Street consensus at $2.5 billion. 

While Dell continues to expect the PC market to return to growth in calendar 2024, the company saw improving demand over the summer plateau in September.

Dell said revenue at its Infrastructure Solutions Group, which includes servers, networking and storage hardware, was $8.5 billion, a little ahead of consensus at $8.3 billion. Servers and networking revenue was $4.7 billion above consensus at $4.4 billion, and up 9% sequentially, as the company saw strong demand for “AI-optimized” servers. Storage revenue was $3.8 billion, shy of Street consensus at $4.1 billion.

The company said backlog for AI-optimized servers doubled sequentially in the quarter. Dell said it shipped over $500 million of AI-optimized severs in the October quarter.

For the fourth quarter, Dell projects revenue of between $21.5 billion and $22.5 billion, falling short of Street consensus at $23.97 billion. The company projects adjusted profits of $1.70 a share, below the Street at $1.82 a share. For the full year, the company now sees profits of $6.63 a share, up from a previous forecast of $6.30.

In announcing earnings, Dell said it expects a return to revenue growth in the January 2025 fiscal year, “given the tailwinds to our business.”

The company said in comments prepared for its post-earnings conference call with analysts that it is “seeing signs of stability and inflection in parts of the portfolio including traditional and AI optimized servers.” Dell adds that “the opportunity is a broader IT spending recovery with large corporate and enterprise customers, particularly in the U.S.”

Dell said it repurchased $744 million of stock in the latest quarter.

For the year, Dell shares are up 87%.

Write to Eric J. Savitz at eric.savitz@barrons.com

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