By Harshita Mary Varghese
(Reuters) -Dell Technologies on Thursday reported third-quarter revenue below estimates due to a slower-than-expected recovery in the hardware and software market, sending its shares down 4% after the bell.
Vendors in the market have seen a slowdown in demand following the surge in sales of electronic devices during COVID lockdowns on the back of increased work-from-home measures.
The company's client solutions group, which includes its consumer and enterprise personal computer business, posted revenue of $12.28 billion for the third quarter, a near 11% fall compared to a year earlier.
"Dell (NYSE:DELL) was not the only PC vendor to face the challenge. However, Dell has more impact than its competitors due to the weakness in the business PC market, which is a core market (for the company)," said Mikako Kitagawa, analyst at Gartner.
Dell's servers and networking business revenue was up 9% from the second quarter, fueled by customer interest in generative artificial intelligence, Chief Operating Officer Jeff Clarke said.
However, server makers have been struggling with supply constraints for AI chips made by Nvidia (NASDAQ:NVDA), used to run large language models that power apps like ChatGPT.
Revenue for the third quarter came in at $22.25 billion for Dell, missing estimates of $23 billion, according to LSEG data.
Dell raised its expectations for full-year earnings per share to $6.63, plus or minus 10 cents, compared with its prior forecast of $6.30, plus or minus 20 cents.
Positive results posted by major PC chipmakers like Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD) signaled that recovery is gathering pace in the market ahead of the much awaited holiday season.
The PC market is expected to bank on demand from AI boost, according to research firm Canalys, as it projects adoption of AI-capable PCs to accelerate from 2025 onward, with such devices accounting for around 60% of all PCs shipped in 2027.