Dell Technologies Inc. experienced its largest decline in four years on Friday following its first revenue increase since 2022, which failed to meet investors' high expectations for its AI server business. According to a statement released on Thursday, sales rose 6. 3% to $22. 2 billion in the period ending on May 3, surpassing analysts' average estimate of $21. 6 billion. Profit, excluding certain items, amounted to $1. 27 per share, beating the average projection of $1. 23. Dell's Chief Operating Officer, Jeff Clarke, stated that revenue from the company's powerful servers designed for artificial intelligence tasks more than doubled from the previous quarter, reaching $1. 7 billion. The backlog for these machines increased over 30% quarter-over-quarter to $3. 8 billion. Despite these positive developments, the hype surrounding the demand for Dell's AI machines set high expectations for the company's quarterly results. As a result, shares plummeted up to 19% in Friday morning trading in New York, marking the sharpest decline since March 2020. Over the past 12 months, Dell's stock had soared over three-fold as investors saw the hardware manufacturer as a beneficiary of the demand for artificial intelligence.

Large corporations increasingly require high-performance servers to train and execute demanding generative AI tasks, which are primarily supplied by Dell and a few other companies. Analyst Toni Sacconaghi from Sanford Bernstein commented, "Relative to very high expectations, Dell's Q1 2025 results were disappointing. " He highlighted that the decrease in adjusted operating margin raised concerns about AI servers being sold with minimal profit margins. Dell's Chief Financial Officer, Yvonne McGill, expressed confidence that the momentum from AI demand would persist throughout the year during a conference call after the release of the results. The company revised its revenue outlook for the fiscal year ending in February 2025 to a range of $93. 5 billion to $97. 5 billion, an 8% increase at the midpoint, surpassing analysts' average estimate of a 7% gain. The adjusted profit is expected to be approximately $7. 65 per share, slightly below the average estimate of $7. 70. However, this outlook suggests relatively flat AI server sales for the remainder of the year, which "will cast some doubt on near-term competitiveness, " according to Bloomberg Intelligence analyst Woo Jin Ho. With regards to its well-known personal computer business, Dell reported $12 billion in revenue, showing little change from the same period last year. Surprisingly, sales of business PCs grew by 3% to $10. 2 billion, defying analysts' expectations of a 2% decline. The PC market experienced a significant decline in the last two years after many consumers, businesses, and schools purchased laptops in the early stages of the pandemic. However, in the first quarter of this year, shipments increased by 1. 5%, marking the first growth since the end of 2021, according to industry analyst IDC. PC manufacturers are optimistic that these numbers signal the end of the slump and anticipate accelerating growth in 2024 with the introduction of machines equipped with a new version of Microsoft Corp. 's Windows software and hardware featuring AI tools. HP Inc. , Dell's primary competitor in the PC market, reported signs of recovery on Wednesday, leading to a 17% surge in its shares on Thursday. Similar to Dell, HP observed growth in sales among its business customers rather than consumers. Dell's infrastructure unit, which encompasses servers, networking, and storage equipment, saw a substantial increase of 22% in total sales, reaching $9. 2 billion.