Dell and HP Stocks Decline Amid Revenue Drop

Dell Technologies recently experienced a significant drop in its stock prices after reporting a decline in revenue. The company's consumer revenue fell by 18%, amounting to US$2 billion, as it faced challenges in introducing innovative laptops.

In after-hours trading, Dell's shares plummeted more than 11%, and over the past six months, the stock has declined by 24.9%. The fall in revenue was largely attributed to the performance within Dell's client solutions group, which encompasses PCs and laptops. This segment reported a 1% decline in revenue, totaling $12.1 billion year-over-year.

Looking ahead to the fourth quarter, Dell has forecasted revenue between $24 billion and $25 billion, which is below the average analyst expectation of $25.57 billion according to LSEG data. Analysts from Deutsche Bank noted that the weaker guidance for Q4 primarily stems from delays in AI server sales and a slowdown in PC refresh activity.

Nick Ross, a notable reviewer in the notebook sector, even called for a boycott of both Dell and Alienware, alleging that their actions had severely impacted him. This sparked discussions about the relationship between PR firms and tech media, sometimes perceived as being influenced by financial incentives to produce favorable reviews.

The decline in Dell's stock is compounded by the recent withdrawal of the Alienware product line from JB Hi-Fi stores. Both Dell and Hewlett-Packard (HP) have adjusted their earnings forecasts, with both companies facing lower-than-anticipated earnings for the current quarter, primarily due to reduced demand for AI laptops that come with high price tags.

The shares of Dell and HP have dropped by an average of 12%, marking a significant downturn for HP, which saw its stock price fall to just over $34, positioning it for its most severe single-day drop since March 2020 when it plummeted over 14%.

As Dell's fourth quarter commenced on November 2, the company anticipates revenue to settle between $24 billion and $25 billion, alongside an adjusted earnings forecast of $2.50 per share. This is less favorable compared to the anticipated revenue of $25.5 billion and earnings of $2.65 per share as projected by analysts, according to FactSet.

In contrast, HP has estimated its earnings per share for its first quarter, starting November 1, to fall between 70 and 76 cents, which is below the 85 cents anticipated by analysts.

Despite the challenges, Jeff Clarke, Dell's Chief Operating Officer, acknowledged that the AI market represents a strong opportunity for the company, noting that growth in this sector may be non-linear as customers adapt to a shifting market landscape.

On the other hand, HP's personal systems division, which includes personal computers, reported a net revenue increase of 9% year-over-year, totaling $11.5 billion. HP's printing revenue also saw a modest rise of 1% to $4.5 billion, while personal systems revenue grew 2% to $9.6 billion in its most recent quarter.

Analysts at Bernstein commented that HP’s guidance suggests an unusually back-loaded fiscal year, which depends on sustained strong margins and resilience in PC growth. Morgan Stanley analysts echoed similar sentiments, indicating that an inline year forecast coupled with a below-seasonal Q1 outlook implies that 2025 will be exceptionally back-loaded.

Dell, HP, Revenue