Dell Technologies Inc. on Thursday 
Dell The company reported first-quarter results that beat expectations but also revealed that profits fell short of revenue, and its shares tumbled on Friday as Wall Street expressed displeasure that AI servers are being sold with near-zero profit margins.
First Quarter Highlights
Revenue for the quarter ended May 3 rose 6.3% year over year to $22.24 billion, beating LSEG's forecast of $21.64 billion and signaling a return to sales growth for Dell after six consecutive quarters of year-over-year declines. However, despite the sales increase, profits fell 3%, to adjusted earnings per share of $1.27, in line with FactSet estimates.
Revenue from powerful servers capable of handling artificial intelligence tasks more than doubled from the previous quarter to $1.7 billion, while backlog grew more than 30% sequentially to $3.8 billion.
Its Infrastructure Solutions Group, which sells servers, storage and networking equipment, reported revenue rose 22% year over year to $9.2 billion.
But its Client Solutions group, which owns desktop and notebook PCs, posted flat sales of $12 billion, while PC sales rose 3 percent to $10.2 billion. Meanwhile, PC industry peer HP 
HPQ HP released its second-quarter financial results on Wednesday, beating analysts' expectations. HP reported sales of $12.8 billion and adjusted earnings per share of 82 cents. However, HP saw its sales fall nearly 1 percent, marking its eighth consecutive quarter of declining revenue. However, HP also reported a 4 percent increase in profits for the quarter ended April 30, which also gave HP hope that the computer market is recovering.
guidance
For the current quarter, Dell expects revenue of $23.5 billion to $24.5 billion and earnings per share of $1.65, above the $23.35 billion expected by FactSet. For the full year ending in February 2025, it now sees revenue in the range of $93.5 billion to $97.5 billion, above its previous outlook, but suggests AI server sales will still be relatively flat.
The AI server was unimpressive.
Wall Street was disheartened by the forecast that Dell's AI server backlog would be lower than expected, leading to lower profit margins. Simply put, analysts are concerned that Dell's AI initiatives have yet to translate into profits. However, Dell Chief Operating Officer Jeff Clark said that looking at the composition of the backlog, NVIDIA Corporation 
NVDA The blame lies with NVIDIA's failure to meet the surge in demand caused by the AI craze. Clark said the situation for the H100 is improving, but he expects supply for the H200 to improve later this year. In addition, NVIDIA plans to launch the B200, its newest and most powerful product to date. With Blackwell now in production, NVIDIA promises to drive a new era of computing. At the Dell Technologies World conference, held from May 20 to 23, Dell also announced an expansion of its partnership with NVIDIA.
Dell revealed in its latest quarterly report that AI adoption in the enterprise is sluggish. AI comes with complexities that businesses can't overcome overnight. But the potential remains, and Dell has secured the perfect partner for AI adoption. This is why expectations were so high.
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