Dell Technologies announced its forecast for 2025 in a recent filing, indicating a "continued reduction" in headcount as the company faces challenges with the much-anticipated refresh cycle in the personal computer (PC) market, which has yet to materialize. The PC manufacturer's strategies include cost-cutting measures through minimal hiring and employee reorganizations, as detailed in their fiscal second-quarter Form 10-Q filing.
Alongside these measures, Dell aims to lower expenses through the implementation of new technologies and the optimization of existing business processes. In the filing, the company explicitly stated, "We anticipate these actions will result in a continued reduction in our overall headcount." The reduction seems to be yielding results; during the second quarter, as well as in the first six months of fiscal 2025, the company reported a 9% decrease in selling, general, and administrative expenses, largely attributed to a decreased workforce.
In fact, Dell recorded $328 million in severance expenses for the quarter. Reports from Bloomberg News in August indicated that job terminations at Dell were part of a broader restructuring initiative concerning its sales teams. Interestingly, despite these cutbacks, Dell revealed a surprising increase in adjusted earnings per share for the second quarter, along with a revenue gain of 9% that surpassed market expectations.
This unexpected growth can be largely tied to the rising demand for artificial intelligence (AI) servers, with the company's infrastructure solutions group seeing a remarkable 38% year-over-year revenue increase, reaching an impressive $11.65 billion. Conversely, the revenue for Dell's Client Solutions Group (CSG), which encompasses PCs, fell by 4%.
This decline was primarily driven by a drop in the consumer category, where revenue plummeted to $1.86 billion during the August quarter, down from $2.39 billion the previous year. Commercial CSG sales showed negligible change, amounting to $10.56 billion. Dell attributed the decrease in consumer net revenue to lower sales volumes and a decline in average selling prices, which was outlined in the 10-Q filing. Looking ahead, Dell anticipates either flat or low-single-digit revenue growth within its Client Solutions Group for the full fiscal year.
During a call with analysts in late August, Chief Financial Officer Yvonne McGill expressed optimism about the prospects for growth, highlighting the anticipated PC refresh cycle and the long-term impacts of AI as key drivers for the market. She noted, "The coming PC refresh cycle and the longer-term impacts of AI will create tailwinds for the PC market." At an industry conference held recently, Chief Operating Officer Jeff Clarke commented on the delayed PC refresh cycle, suggesting that while he had expected it to occur sooner, it now seems to be pushed toward the end of the current year and into the next.
This shift is reflected in Dell's updated guidance for full-year revenue growth, which has increased to 10% at the midpoint, up from a previous estimate of 8%. Even though the demand for infrastructure solutions is making a recovery, UBS Securities reflected in a report from late last month that "demand for PCs is a bit delayed at Dell." This dual dynamic presents both challenges and opportunities for the company as it navigates the evolving landscape of technology and consumer needs..