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Why Dell Stock Plunged Today

Shares of Dell Technologies (DELL -17.87%) were taking a dive today as the company reported only modest growth in its first-quarter earnings report and guidance for the rest of the year disappointed.

As a result, the stock was down 19.6% as of 1:29 p.m. ET.

Dell misses the mark

Dell has emerged as a potential winner in the artificial intelligence (AI) boom, but its overall performance is still being dragged down by legacy tech businesses.

Revenue in the quarter rose 6% to $22.2 billion, which beat estimates at $21.64 billion. Revenue from the Infrastructure Solutions Group, which is more focused on AI, rose 22% to $9.2 billion and included 42% growth in servers and networking revenue to $5.5 billion. However, the PC-focused Client Solutions Group reported flat revenue growth at $12 billion.

On the bottom line, adjusted earnings per share fell 3% to $1.27, which essentially matched the consensus at $1.26.

CFO Yvonne McGill said, “We again demonstrated our ability to execute and deliver strong cash flow, with AI continuing to drive new growth.” Chief Operating Officer Jeff Clarke also noted that AI-optimized server orders increased sequentially to $2.6 billion, shipments were up more than 100% to $1.7 billion, and backlog grew more than 30% to $3.8 billion.

What’s next for Dell

Dell’s guidance for the rest of the year was also short of expectations. The company sees adjusted earnings per share (EPS) of $1.55 to $1.75 for the quarter, which was below the consensus at $1.84.

For the full year, it expects adjusted EPS of $7.40 to $7.90, which is slightly below the average estimate at $7.69 at the midpoint of the range.

Dell stock has already run up substantially over the last year, and 6% revenue growth and a decline in adjusted EPS aren’t going to get investors excited, despite the company’s AI potential.

If investors are looking to capitalize on the growing demand for AI servers, they are better off looking at a peer like Super Micro Computer, which is seeing much faster growth.

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