Dell Technologies, a leading provider of PCs and servers, has reiterated its long-term revenue forecast, expecting growth at a compounded annual rate of 3% to 4%. The announcement came as a disappointment to some investors who had hoped that the rise of artificial intelligence (AI) would drive a more significant sales jump. As a result, Dell’s shares dropped by 4%.

A Conservative Revenue Outlook

Despite the recent surge in AI technology and its potential impact on Dell’s business, the company’s revenue outlook suggests that the boost from generative AI may take longer to materialize. Evercore ISI analysts have commented that the unchanged revenue compound annual growth rate (CAGR) forecast seems conservative, considering the expected future AI tailwinds.

Dell has experienced several quarters of sales declines due to lower digital spending, but the emergence of AI demand has been a bright spot for the company. However, its main revenue generator, the PC market, has been in a slump since the end of the pandemic.

Long-Term Adjusted Earnings and Share Repurchases

In addition to the revenue forecast, Dell also provided guidance on long-term adjusted earnings per share growth. The company expects growth of 8% or more, indicating confidence in its ability to navigate the evolving technology landscape.

To further support shareholder value, Dell announced plans to buy back an additional $5 billion in stock on top of a similarly sized repurchase plan launched in 2021. This move demonstrates the company’s commitment to returning capital to shareholders.

Dividend Increase and Return of Cash Flow

Dell’s meeting with Wall Street analysts also included plans to increase its quarterly dividend by 10% or more annually through fiscal 2028. This initiative is part of Dell’s strategy to return over 80% of its adjusted free cash flow to shareholders through a combination of share repurchases and dividends.

Cost-Cutting Measures

Slowing demand and market challenges have prompted Dell to implement cost-cutting measures. Earlier this year, the company underwent a layoff round resulting in 6,000 job cuts. Dell has also implemented hiring freezes and restrictions on employee travel to control expenses.

Market Performance and Investor Sentiment

Despite the recent drop in share value following the revenue forecast announcement, Dell’s stock has shown resilience throughout the year. From the beginning of the year until now, Dell’s shares have risen by 65%, recovering from a 30% decline in 2022.

Investor sentiment has been influenced by the company’s strong earnings report in August, which highlighted Dell’s role in enabling new technologies. However, the conservative revenue outlook has tempered some of the optimism surrounding Dell’s potential growth.

Conclusion

Dell Technologies has reiterated its long-term revenue forecast, disappointing investors who expected a larger sales jump driven by AI technology. The company remains conservative in its outlook, suggesting that the boost from generative AI may take longer to materialize. Despite this, Dell is confident in its ability to achieve long-term adjusted earnings growth and plans to return significant capital to shareholders through share repurchases and increased dividends. The market performance of Dell’s stock has been mixed, with a significant recovery in share value throughout the year but a slight drop following the revenue forecast announcement. As Dell continues to navigate the evolving technology landscape, investor sentiment remains cautious yet hopeful for future growth opportunities.