Dell shares fall on soft third-quarter earnings outlook

Despite beating on its top and bottom lines, shares of Dell Technologies fell more than 5% Thursday in extended trading after giving third-quarter earnings per share guidance that below Wall Street's expectations.

Here's how the systems integrator did versus LSEG consensus estimates:

• EPS: $2.32, adjusted vs. $2.30 estimated
• Revenue: $29.78 billion vs. $29.17 billion estimated

Dell raised its full year outlook for revenue to be $107 billion at its midpoint and diluted earnings per share to $9.55 at the midpoint, topping Wall Street estimates of $104.6 billion and $9.38 per share.

However, Dell's guidance for third-quarter earnings per share of $2.45 came in short versus LSEG's mark of $2.55, despite Dell's guide for $27 billion in third-quarter revenue topping estimates of $26.1 billion.

Dell said that part of the reason its profit forecast is concentrated in the fourth quarter is due to seasonality, particularly in its storage business.

For the second quarter, overall revenue rose 19% on an annual basis. That was driven by the company's Servers and Networking revenue, including AI servers, which came in at $12.9 billion, which was up 69% on an annual basis.

Dell is one of Nvidia's key customers. Dell buys chips from the AI leader and builds computers around them, which it sells to end-users such as CoreWeave, a cloud service. Dell said it shipped $10 billion in AI servers in its past two quarters.

Dell said that it now plans to ship $20 billion of artificial intelligence servers in its fiscal 2026, double what it sold last year.

However, the company's storage revenue declined 3% to $3.86 billion and missed a StreetAccount estimate of $4.1 billion in sales.

Revenue in the company's client solutions group, which includes PC sales to enterprises, rose 1% on an annual basis to $12.5 billion. While it used to be Dell's largest business group, in recent quarters it has grown much slowly than the company's data center business.

Dell said it spent $1.3 billion on share repurchases and dividends during the quarter.

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