DELL shares tumble as solid results, AI server orders fail to satisfy investors

Dell Technologies (NYSE:DELL) shares plummeted by 11.5% in afterhours Thursday trading despite the company reporting a solid set of Q1 results.

The technology giant announced first-quarter revenue of $22.2 billion, a 6% increase from the same quarter last year, surpassing the consensus estimate of $21.65 billion.

The company's Infrastructure Solutions Group (ISG) was a standout performer, with revenue climbing 22% YoY to $9.2 billion, bolstered by a record 42% increase in servers and networking revenue, which hit $5.5 billion.

However, the Client Solutions Group (CSG) revenue remained flat YoY at $12.0 billion, with commercial client revenue seeing a modest 3% rise.

Dell's adjusted earnings per share (EPS) for the quarter was $1.27, slightly above the analyst estimate of $1.25 but marked a 3% decrease from the previous year. 

Most importantly, AI server orders came in at $2.6 billion, rising about $500 million from the last quarter. Goldman Sachs was expecting $2.1 billion in Q1 AI server orders.

"While we’re encouraged by DELL’s AI server momentum, the $2.6 bn of orders likely disappointed high investor expectations; DELL stock is up 36% month-to-date and 127% year-to-date," Goldman Sachs analysts said in a note. 

CFO Yvonne McGill highlighted the company's execution and cash flow, noting the role of AI in driving new growth.

"Revenue was up 6% at $22.2 billion, servers and networking revenue was up 42%, and we generated $7.9 billion of cash flow from operations over the last 12 months," McGill stated.