Yahoo Finance DELL Q1 Earnings Beat Estimates, Lower PC Sales Hurt Revenues
Dell Technologies DELL reported non-GAAP earnings of $1.31 per share in first-quarter fiscal 2024, beating the Zacks Consensus Estimate by 50.57%. The bottom line fell 29% year over year.
Revenues, on a non-GAAP basis, declined 20% year over year to $20.92 billion but beat the consensus mark by 3.82%.
Product revenues fell 27% year over year to $15.03 billion. Services revenues rose 4% year over year to $5.89 billion.
Dell shares were down 3.1% in after-hours trading following the results. Shares have risen 13% year to date compared with the Zacks Computer & Technology sector’s rise of 32.1%.
Dell Technologies Inc. Price, Consensus and EPS Surprise
Dell Technologies Inc. price-consensus-eps-surprise-chart | Dell Technologies Inc. Quote
The company suffered from lower PC shipments in the reported quarter. It witnessed weak PC demand and slowing infrastructure demand, which was partially offset by strong growth in storage.
Dell’s fiscal 2024 view is also not encouraging. The company expects top-line growth to suffer from cautious IT spending, which will likely remain weak due to slowing economic growth, inflation, rising interest rates and currency pressure.
Top-Line Detail
Infrastructure Solutions Group (“ISG”) revenues were down 18% year over year to $7.59 billion. The downside can be attributed to a 24% fall in servers and networking revenues that totaled $3.83 billion. Storage revenues fell 11% year over year to $3.76 billion.
Client Solutions Group (“CSG”) revenues were $11.98 billion, down 23% year over year. Commercial revenues declined 18% year over year to $9.86 billion. Consumer revenues were down 41% to $2.12 billion.
CSG revenues were hurt by lower PC shipments. Per IDC Worldwide Quarterly Personal Computing Device Tracker for the first quarter of 2023, Dell’s market share declined to 16.7% from 17.1% in the year-ago quarter. Per IDC data, Lenovo LNVGY continued to dominate in terms of market share and PC shipment, trailed by HP HPQ and DELL.
Lenovo and Apple AAPL lost market share, while HP gained market share that came to 21.1% from 19.7% in the year-ago quarter. Lenovo’s market share came down to 22.4% from 22.8% in the year-ago quarter. Apple registered its market share at 7.2% compared with the year-ago quarter’s 8.6%.
In terms of PC shipments, Lenovo, HP, Apple and Dell were down 30.3%, 24.2%, 40.5%, and 31%, respectively.
Operating Details
Dell’s fiscal first-quarter non-GAAP gross profit fell 13% year over year to $5.16 billion. The gross margin expanded 200 basis points (bps) year over year to 24.7%.
SG&A expenses declined 8% year over year to $3.26 billion. Research and development expenses were up 1% year over year to $688 million in the reported quarter.
Non-GAAP operating expenses declined 6% year over year to $3.57 billion. Operating expenses, as a percentage of revenues, increased 260 bps on a year-over-year basis to 17.1%.
The non-GAAP operating income was $1.6 billion, down 25% year over year. The operating margin contracted 60 bps year over year to 7.6%.
The ISG segment’s operating income decreased 32% year over year to $740 million. Meanwhile, the CSG segment’s operating income was $892 million, down 20% year over year.
Balance Sheet
As of May 5, 2023, DELL had $9.2 billion in cash and investments. Debt was $28.43 billion as of May 5, 2023.
This Zacks Rank #3 (Hold) company returned $527 million to its shareholders through a combination of share repurchases and dividends.
Guidance
For the second quarter of fiscal 2024, Dell expects revenues between $20.2 billion and $21.2 billion, down 21.6% year over year at the mid-point, with ISG down in the low single digits sequentially. The company expects roughly 200 bps negative impact of unfavourable forex on revenues.
Dell expects earnings in the range of $1 to $1.20 per share, down 34.5% year over year at the midpoint for the fiscal second quarter.
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