Despite growth in AI sales, Dell's revenue remains light.

• Dell Technologies reported earnings per share that exceeded analyst expectations on Tuesday, but their overall revenue fell short.
• In 2024, Dell's shares have increased by 86%, indicating that investors recognize its significance as a provider of essential tools and systems for AI developers.

Although the company's quarterly earnings per share exceeded analyst expectations, its overall revenue was lower than anticipated, causing shares to fall 6% in after-hours trading.

Dell's fiscal third quarter performance exceeded LSEG's consensus estimates for the quarter ending Nov. 1.

• Earnings per share: $2.15 adjusted versus $2.06 expected
• Revenue: $24.4 billion versus $24.67 billion expected

In the year-ago period, net income was $1.12 billion, or $1.58 per share, while overall revenue increased by about 10% from $22.25 billion.

Dell will provide a forecast for the current quarter on the call.

In 2024, the company's shares have increased by 86%, indicating its significance as a provider of tools and systems for AI developers.

Dell is a leading supplier of computer clusters for artificial intelligence development and deployment, particularly those utilizing chips. It faces competition from other server manufacturers such as HP and Lenovo, as well as Asian manufacturers.

The demand for Nvidia's AI accelerators is high among cloud providers, enterprises, and government institutions, with many purchasing systems containing tens of thousands of AI chips. Dell offers these completed systems for sale.

Jensen Huang, CEO of Nvidia, named Dell and its founder as the go-to company for placing orders of the new Blackwell AI chips this year.

Dell chief operating officer Jeff Clarke stated that AI presents a strong prospect for us without any indication of slowing down.

The Infrastructure Solutions Group (ISG) of Dell, which comprises AI servers, storage, networking components, and traditional servers, reported a 34% increase in revenue, primarily due to AI sales, amounting to $11.4 billion.

Dell's ISG business experienced significant growth, with its Servers and Networking subsidiary, which includes AI systems, generating $7.4 billion in revenue, up 58% from the previous year. Additionally, Dell shipped $2.9 billion in AI servers during the quarter and received $3.6 billion in future AI server orders from customers.

The company reported that the demand for its traditional servers increased by "double digits" due to the rise in AI server orders. These servers, which are powered by Intel or AMD CPU chips, can conserve power and space in data centers for companies that heavily invest in AI infrastructure.

Sales of pricier AI systems contributed to the overall profitability of the ISG unit, which saw growth in computer storage systems at a slower rate, reaching $4 billion with a 4% increase.

The Client Solutions Group of Dell, responsible for selling PCs and laptops to consumers and enterprises, experienced a 1% decline in annual revenue, reaching a total of $12.1 billion.

Despite a 3% annual increase in commercial clients purchasing PCs, totaling $10.1 billion, the company experienced a 18% decline in PC sales to consumers, resulting in $2 billion.