Dell Inc. (NASDAQ:DELL) shares plunged almost 22% on Friday after the tech titan failed to meet investors’ high AI server expectations.
In its latest update, the computer hardware specialist raised its revenue outlook for fiscal 2025, ending in February next year, to a range of $93.5 billion to $97.5 billion, which represents an 8% increase at the mid-point.
This is higher than the 7% increase expected by analysts but implies relatively flat server sales for the rest of the financial year, which sparked a sell-off in the stock despite a Q1 earnings beat.
Dell reported a 6% year-over-year jump in revenue to $22.2 billion for Q1, above estimates of $21.7 billion.
Infrastructure Solutions Group revenue grew 22% year-over-year. In this segment, Services and Networking revenue was a record $5.5 billion, up 42%, attributed to demand strength across AI and traditional services.
"No company is better positioned than Dell to bring AI to the enterprise," said Dell chief operating officer Jeff Clarke.
"Servers and networking hit record revenue in Q1, with our AI-optimized server orders increasing sequentially to $2.6 billion, shipments up more than 100% to $1.7 billion, and backlog growing more than 30% to $3.8 billion."
Adjusted earnings per share (EPS) contracted 3% from $1.31 in the year-ago quarter to $1.27 but were above estimates of $1.25.
Shares of Dell traded down 21.9% at US$133 late morning on Friday.