(BFM Bourse) – The company failed to meet high expectations for the growth of its computer server business, itself linked to AI.
The publications on Wall Street are clearly chilling investors this week. Salesforce had already seized up the market on Thursday, after revealing both disappointing results and prospects.
Again with the hardware specialist (computers, servers, components) Dell, this Friday. The group plunged 19% at the start of the session on Wall Street, after publishing its first quarter accounts, running from the beginning of February to the beginning of May.
Over these three months, the company posted revenues up 6% to $22.24 billion, while its earnings per share fell 3% to $1.27.
According to an LSEG consensus cited by CNBC, analysts expected revenues of $21.64 billion and earnings per share of $1.26.
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The AI is here…
The company indicated that its “infrastructure” division, which includes data centers, had recorded growth of 22% year-on-year to $9.2 billion. “Servers and networking”, a component of this division, saw its revenues jump 42% to $5.5 billion, with the company citing “the strength of demand for AI (artificial intelligence, editor’s note) and traditional servers.
“No company is better positioned than Dell to introduce AI into the enterprise,” said Jeff Clarke, vice president and chief operating officer of Dell Technologies.
“Servers and Networking reported record first-quarter revenue as our orders for AI-optimized servers increased sequentially to $2.6 billion. Shipments grew more than 100% for reach 1.7 billion dollars and the order book increased by more than 30% to reach 3.8 billion dollars,” he explained.
Highlighting its prowess in AI, however, is not enough (anymore) to delight Wall Street, which despite this strong growth, is therefore frowning. Especially since Dell shares jumped 270% in one year, the market having long understood that the group was a winner from the rise of generative AI.
…But margins are compressing
“The results were not bad, but expectations were very high and the numbers were not strong enough to stimulate the increase in the short term,” wrote analysts at Vital Knowledge, cited by Bloomberg.
Toni Sacconaghi, analyst at Bernstein cited by CNBC, notes for his part that the operating profit of the “infrastructure” division remained stable (-1%), despite the jump in its activity. Which revives “fears that artificial intelligence servers will be sold with margins close to zero,” he considers.
Bank of America, for its part, considers that the market is seized by two elements. First, the order book in AI has certainly increased by 30% to 3.8 billion dollars, but the establishment was counting on a level between 4 billion and 5 billion dollars. Second, the company’s management indicated, during a conference call, that its gross margin would decline by 1.5 percentage points in the current fiscal year, compared to one point previously, due in particular to higher sales in servers. AI, less profitable, therefore, than other products, from price pressures and the cost environment.
“The quarter is robust but investors are worried about margins,” concludes the bank.
Julien Marion – ©2024 BFM Bourse