DELL Q1 Earnings Miss Estimates, Revenues Up Y/Y, Shares Fall
After the results were announced, shares of DELL plunged 0.84% in pre-market trading.
Product revenues rose 9% year over year to $17.59 billion, beating the Zacks Consensus Estimate by 4.43%.
Dell Technologies Inc. price-consensus-eps-surprise-chart | Dell Technologies Inc. Quote
Services revenues declined 6% year over year to $5.77 billion missing the Zacks Consensus Estimate by 2.40%.Infrastructure Solutions Group (ISG) revenues increased 12% year over year to $10.31 billion.The upside can be attributed to servers and networking revenues of 6.32 billion, which grew 16% year over year, with demand strength across AI and traditional servers. Storage revenues increased 6% year over year to $3.99 billion.In the reported quarter, Dell Technologies' AI-optimized server momentum saw an increase of $12.1 billion in orders. The flagship PowerEdge XE9680 experienced strong demand, contributing to the momentum in the AI space.Dell Technologies shipped $1.8 billion worth of AI servers in the fiscal first quarter, and the AI server backlog remained healthy at $14.4 billion.CSG revenues were $12.50 billion, up 5% year over year. Commercial Client revenues increased 9% year over year to $11.04 billion, while Consumer revenues fell 19% to $1.46 billion.
The company's fiscal first-quarter non-GAAP gross profit increased 1% year over year to $5.05 billion. The gross margin contracted 80 basis points (bps) year over year to 21.6%.SG&A expenses fell 5% year over year to $2.96 billion. Research and development expenses increased 6% year over year to $808 million in the reported quarter.Non-GAAP operating expenses declined 2% year over year to $3.39 billion. Operating expenses, as a percentage of revenues, contracted 110 bps on a year-over-year basis to 14.5%.The non-GAAP operating income was $1.66 billion, up 10% year over year. The operating margin expanded 30 bps year over year to 7.1%.The ISG segment's operating income jumped 36% year over year to $998 million. The CSG segment's operating income was $653 million, down 16% year over year.
As of May 2, 2025, DELL had $7.70 billion in cash and cash equivalents compared with $3.63 billion as of Jan. 31, 2025.Total debt was $28.78 billion as of May 2, 2025, compared with $24.57 billion as of Jan. 31, 2025.The company generated a cash flow from the operation of $2.8 billion. The adjusted free cash flow was $2.23 billion in first-quarter fiscal 2026.Dell Technologies returned $2.4 billion of capital to its shareholders through $2 billion of share repurchases and paid out $396 million in dividends.
For the second quarter of fiscal 2026, revenues are expected to be between $28.5 billion and $29.5 billion, with the mid-point of $29 billion suggesting 16% year-over-year growth.Dell Technologies anticipates 19% growth at the midpoint for the combined ISG and CSG, with ISG growing significantly and CSG up to a low-to-mid single digit.Non-GAAP earnings are expected to be $2.25 per share (+/- 10 cents), indicating 15% growth at the mid-point.For fiscal 2026, revenues are expected to be between $101 billion and $105 billion, with the mid-point of $103 billion indicating 8% year-over-year growth.Dell Technologies anticipates 10% growth at the mid-point for ISG and CSG combined, with ISG expected to increase in the high teens and CSG likely to grow in the low to mid-single digits. Non-GAAP earnings are expected to be $9.40 per share (+/- 25 cents), up 15% at the midpoint. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Dell Technologies has a Zacks Rank #3 (Hold) at present.Amphenol APH, Juniper Networks JNPR and Upwork UPWK are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. APH, JNPR and UPWK sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.APH shares have gained 28.1% in the year-to-date period. The Zacks Consensus Estimate for APH's full-year 2025 earnings is pegged at $2.66 per share, up by 8 cents over the past 30 days, suggesting growth of 40.74% from the year-ago quarter's reported figure.JNPR shares have lost 4% in the year-to-date period. The Zacks Consensus Estimate for JNPR's full-year fiscal 2025 earnings has been revised upward to $2.09 in the past 30 days, suggesting year-over-year growth of 21.51%.UPWK shares have lost 4.5% in the year-to-date period. The Zacks Consensus Estimate for UPWK's full-year 2025 earnings is pegged at $1.14 per share, implying a rise of 9.62% from the year-ago quarter's levels.
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