Dell Technologies (NYSE:DELL) has released its third-quarter fiscal 2024 results, showcasing non-GAAP earnings of $1.88 per share, surpassing the Consensus Estimate by 27.89%. However, the bottom line experienced an 18% decline compared to the same period last year.

On a non-GAAP basis, revenues witnessed a 10% year-over-year decrease, totaling $22.25 billion, falling short of the consensus estimate by 2.91%. Recurring revenues, on the other hand, demonstrated a positive trend by increasing 4% year over year, reaching $5.6 billion.

Product revenues took a hit, declining by 14% year over year to $16.23 billion, primarily due to increased pricing pressure during the quarter. Services revenues, however, rose by 4% year over year to $6.02 billion.

Following the release of these results, Dell shares experienced a 5.48% decline in after-hours trading. Year to date, the shares have recorded an 88.6% gain, outperforming the Zacks Computer & Technology sector’s return of 45.1%.

Key Revenue Details

Within the Infrastructure Solutions Group (ISG), revenues saw a 12% year-over-year decline, totaling $8.499 billion. This decline was attributed to a 10% decrease in servers and networking revenues, amounting to $4.66 billion, and a 13% decrease in storage revenues, reaching $3.84 billion.

Orders doubled sequentially, accounting for approximately 33% of Dell’s server orders revenues in the reported quarter. The AI-optimized server backlog doubled on a sequential basis, with Dell’s sales pipeline reaching multi-billion dollars, significantly higher compared to the end of the fiscal second quarter.

In the Client Solutions Group (CSG), revenues were $12.28 billion, representing an 11% year-over-year decrease. Commercial revenues also declined by 8% year over year, totaling $9.84 billion, while consumer revenues experienced a 19% drop, reaching $2.44 billion.

Operational Highlights

Dell’s non-GAAP gross profit for the fiscal third quarter decreased by 10% year over year to $5.28 billion, maintaining a gross margin of 23.7%. Selling, general, and administrative (SG&A) expenses declined by 15% year over year to $3.27 billion. Research and development expenses increased by 4% year over year to $677 million.

Non-GAAP operating expenses decreased by 5% year over year to $3.31 billion, with operating expenses, as a percentage of revenues, increasing by 80 basis points year over year to 14.9%. The non-GAAP operating income was $1.96 billion, representing a 17% year-over-year decrease, while the operating margin contracted by 80 basis points to 8.8%.

The ISG segment’s operating income decreased by 22% year over year to $1.07 billion, whereas the CSG segment’s operating income was $925 million, down by 13% year over year.

Financial Position

As of November 3, 2023, Dell had $8.298 billion in cash and cash equivalents, with a debt of $26.617 billion. The company generated a cash flow of $2.2 billion in the fiscal third quarter. Dell returned $744 million to its shareholders through share repurchases and paid $266 million in dividends.

Guidance

For the fourth quarter of fiscal 2024, Dell expects revenues between $21.5 billion and $22.5 billion. Sequentially, ISG revenues are projected to increase mid-single digits, driven by growth in traditional servers and seasonal growth in storage. CSG revenues are expected to decrease low-single digits sequentially. Earnings are anticipated to be $1.70 per share (+/- 10 cents).

For fiscal 2024, earnings are projected to be $6.63 per share (+/- 10 cents).

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