On Thursday, Dell Technologies (DELL.N) reaffirmed its expectations for future revenue growth, estimating a consistent annual increase of 3% to 4%. This news left some investors disappointed as they had hoped that the growth would be more significant, especially with the anticipation of AI driving sales higher. Consequently, Dell’s shares dropped by 4%.
The company, known for manufacturing PCs and servers used in various technologies like ChatGPT, also projected an 8% or greater growth in adjusted earnings per share over the long term. Additionally, Dell announced plans to repurchase $5 billion worth of its own stock, building upon a similar buyback program initiated in 2021.
The company’s revenue expectations indicate that the benefits from generative AI might not show up as quickly as some had hoped. Dell’s shares had previously risen by almost 20% following a strong earnings report in August, driven by optimism about its involvement in enabling this new technology.
Some analysts from Evercore ISI believe that the company’s decision to maintain its previous revenue growth forecast might be overly cautious. They argue that recent tailwinds in AI are expected to not only continue but also strengthen in the future.
AI has become a promising area of growth for Dell, similar to other tech companies. Dell experienced several quarters of declining sales due to reduced digital spending. Its primary income source, the PC market, has been sluggish since the pandemic’s impact waned.
Dell has announced plans to increase its quarterly dividend by at least 10% each year until fiscal 2028. This decision is part of a broader strategy to give back more than 80% of its adjusted free cash flow to shareholders. This return will be achieved through a combination of buying back shares and paying dividends.
Dell presented these numbers during its meeting with financial analysts from Wall Street on Thursday.
Due to a decline in demand, Dell has been taking steps to reduce expenses, including a recent round of layoffs that affected 6,000 employees earlier this year. The company also temporarily halted hiring and imposed restrictions on employee travel.
Dell’s stock has experienced significant growth, increasing by 65% this year. This is a notable turnaround from the previous year when the stock had dropped by nearly 30% in 2022.
