Dell Technologies has posted notable growth in its infrastructure solutions unit, which includes its artificial intelligence (AI) servers business, for the third quarter of fiscal 2025 (Q3 FY25). Despite this, its stock fell sharply as revenue missed estimates and the company lowered its full FY25 guidance.
The technology giant reported $24.4bn in revenue for the quarter, a 10% increase year-on-year (YoY), but slightly below analyst expectations of $24.67bn. Its infrastructure solutions group (ISG) led the way, generating a record $11.4bn in revenue, up 34% compared to the corresponding period in the prior fiscal year. Within ISG, servers and networking products saw significant demand, with revenue surging 58% YoY to $7.4bn, bolstered by the growing adoption of AI-powered systems.
“AI is a robust opportunity for us with no signs of slowing down,” said Dell vice chairman and chief operating officer Jeff Clarke. “Interest in our portfolio is at an all-time high, driving record AI server orders demand of $3.6 billion in Q3 and a pipeline that grew more than 50%, with growth across all customer types.”
Despite the robust performance in infrastructure, Dell’s stock tumbled more than 10% in after-hours trading, falling from approximately $142 to just over $127. Analysts attributed the dip to weaker-than-expected guidance and challenges in other business segments.
Dell’s client solutions group (CSG), which houses its PC business, faced hurdles. CSG revenue declined 1% YoY to $12.1bn. While commercial client revenue rose 3% to $10.1bn, consumer revenue fell sharply by 18% to $2bn. Company executives cited weaker consumer spending and ongoing delays in the PC refresh cycle tied to the Windows 10 end-of-life.
FY25 and Q4 forecast fall short of expectations
Adding to its challenges, Dell lowered the midpoint of its full-year revenue forecast for FY25 from $97bn to $96.1bn. The company attributed this revision to the delayed availability of Nvidia’s Blackwell GB200 accelerators and weaker PC demand. Nvidia’s new chips, critical for next-generation servers, are already backlogged, impacting associated sales of storage, networking, and cooling equipment.
Dell’s fourth-quarter revenue forecast of $24bn-$25bn also fell short of analysts’ expectations of $25.57bn. However, the company delivered strong earnings growth, with net income rising 12% YoY to $1.13bn, up from $1bn in Q3 FY24. Diluted earnings per share grew 16% to $1.58, while non-GAAP earnings per share rose 14% to $2.15 in Q3 FY25. In addition, the company reported $1.6bn in cash flow from operations and closed the quarter with $6.6bn in cash and investments.
“Our continued focus on profitability resulted in EPS growth that outpaced revenue growth, and we again delivered strong cash performance,” said Dell chief financial officer Yvonne McGill.
In September, Dell was reportedly hit by a second data breach within the span of a week, with hackers claiming to have exposed sensitive internal files through compromised Atlassian tools. According to Hackread, which first reported the incident, the leaked data allegedly includes information from Jira, Jenkins, and Confluence platforms.
Read more: Dell reportedly hit by second data breach in space of a week
