(AOF) – Supported by promising growth prospects thanks to the rise of artificial intelligence, Dell shares have more than doubled since the start of the year. Expectations surrounding the quarterly performance of the IT group were therefore high. The verdict is in, Dell shares fell 21.02% to $134.20. “We believe investors may be concerned about the cost needed to support the strong revenue growth trajectory, with margins falling short of expectations for both last quarter and the current quarter,” JPMorgan explains.
In the first quarter, ended in early May, Dell saw its net profit jump 65% to $955 million, or $1.32 per share. Adjusted for exceptional items, earnings per share came to $1.27, where the market was targeting only $1.23.
Gross margin, a closely watched measure of profitability, came in at 22.2%, coming in below expectations: 22.9%. JPMorgan was even more optimistic, targeting 23.2%. Dell explained this 250 basis point drop in gross margin by greater price competition and a greater component of AI servers in the product mix.
Revenues increased 6% to $22.2 billion, coming in above expectations: $21.69 billion. They were supported by its ISG division housing the server business, whose sales jumped 42% to $5.5 billion. It benefits from the boom in artificial intelligence.
“Servers and Networking reported record revenue in the first quarter as our AI-optimized server orders increased sequentially to $2.6 billion, with shipments increasing more than 100% to $1.7 billion of dollars and the order book having increased by more than 30% to reach 3.8 billion dollars. detailed Vice President and COO, Jeff Clarke.
The IT group anticipates revenues for the current fiscal year of between $93.5 and $97.5 billion, or on average growth of 8%, compared with Wall Street’s forecast of 7% growth. The ISG division is expected to grow in excess of 20%. Adjusted earnings per share are forecast between $7.40 and $7.90, or $7.65 on average, while analysts are targeting an average of $7.70.
According to JPMorgan’s analysis, Dell is targeting a gross margin of around 22%, below the consensus of 23.2%. The group justifies this decline of around 150 basis points by the increase in input prices, the competitive environment and a greater component of AI servers in the product mix.
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