Affected by continued sluggish demand for corporate PCs, Dell Technologies disclosed in a statement Thursday that third-quarter sales fell 10% to $22.3 billion. The Customer Solutions segment, which includes business and consumer PC sales, fell 11%, well below analysts' expectations.
Chief Financial Officer Yvonne McGill said on a conference call after the earnings release that revenue as of January this year will reach about $22 billion. Analysts' average estimate was $23.9 billion. McGill said the PC division's sales will see "a low-single-digit sequential decline," and while "we're seeing stabilization in CSG demand, there's not yet a broader recovery in the PC market."
Dell is best known for its PC business, and the Round Rock, Texas-based company said it has attracted investor interest this year as demand surges for high-powered servers used to run artificial intelligence workloads. The company earned $500 million from sales of the devices in the period ended Nov. 3. Earlier this month, Dell announced a $150 million server deal with artificial intelligence startup Imbue.
Data compiled by Bloomberg showed that the server business generated revenue of $4.66 billion in the quarter, compared with the average analyst estimate of $4.43 billion. "Our server and networking business grew 9% sequentially, driven by customer interest in generative artificial intelligence," Chief Operating Officer Jeff Clarke said in a statement.
The performance was in stark contrast to rival Hewlett Packard Enterprise Co., which reported a larger-than-expected decline in server sales on Tuesday.
Dell shares fell about 3% in after-hours trading before paring losses during the company's conference call. Dell's shares surged 89% this year to close at $75.87 in New York as enthusiasm grew over the potential for artificial intelligence to boost demand.
PC makers have been hammered over the past 18 months as demand shrank in the wake of the Great Recession. Peer HP's earnings results last week were also tepid.
Still, analysts are starting to see life in the industry. IDC wrote in an October report that although the global economy is still sluggish, the PC market has "turned out of the bottom."
Clark said in the statement that Dell expects revenue to grow in the new fiscal year, which begins in February. Analysts currently expect annual sales to grow 3.5%.
"We expect revenue to return to growth next year, above our long-term financial framework," McGill said on the call. "The opportunity lies in the recovery in broader IT spending, particularly among large companies and enterprise customers in the U.S."