EN 
SE 
A weak reporting week for tech companies, driven by weak consumer demand for PCs (Dell and HP) and continued weakness on the industrial semiconductor side (ADI). On the software side, Workday fell and dragged the sector down on Wednesday. The guidance for the beginning of 2025 was somewhat weaker than expected due to tough comparative figures and the fact that the margin lift is stalling somewhat in the short term. A number of questions were also asked during the conference call after the report about how the company will be affected by Dogecoin and the expected savings in the public budgets.
- Workday: weaker guidance for early 2025
- Dell: strong AI order book but needs more Nvidia Blackwells
- ADI: demand for semiconductors in industry remains weak
This week's quote from Carl Eschenbach, CEO at Workday:
"With more than 70 million users under contract generating more than 800 billion transactions a year on our platform, our AI leverages the world's largest and cleanest HR and Finance dataset. In our industry, where decisions are high-stakes and complex, the quality and quantity of our data is a critical differentiator. And the combination of this data, with our ability to understand the context behind it, enables Workday to unlock value in a way no competitor can do.”
The Global Technology Fund portfolio
We have not made any major changes in the portfolio during the week.
Workday (small position)
Subscription sales reached USD 1.959 billion in the quarter, up 16 %, while services reached USD 201 million. This was somewhat above expectations. EPS came in at $1.89, which was 0.13 above expectations. The 12-month subscription order book was worth USD 6.98 billion at the end of Q3, up 15 % y-o-y, while the total order book was up 20 % y-o-y to USD 22.2 billion. The company has a number of large orders to be converted into sales in the second half of 2025, which should drive growth after somewhat weaker growth in the first part of 2025. The company is guiding for total subscription growth of 14 % for 2025, which is below market expectations on 15 %.
Our view: The quarter came in line with what we've seen from other software companies recently, with sales in line with expectations and an expanding margin. However, the initial guidance of 14 % growth for 2025 is disappointing. That said, if growth accelerates during the year and reaches above 15 % by the end of the year, we believe this will reduce disappointment and raise expectations for 2026.
Dell (no position)
Reported a sales increase of 10 % during the quarter, driven by ISG, i.e. the server part, mainly AI servers (in the quarter USD 2.9 billion). However, this affected the gross margin, which fell by 1.4 %. Sales totaled $24.4 billion, slightly below expectations, while EPS of $2.15 was slightly above. ISG sales were up 34 % year-over-year, driven by AI infrastructure, particularly servers and network components, while the storage segment only grew by 4 %. CSG was down 1 % y-o-y to USD 12.1 billion, driven by reduced consumer demand for PCs, which was down a full 18 % y-o-y, while the commercial side showed growth of 3 %. The company also says that price pressures on the consumer side have increased during the quarter and are affecting profitability.
ISG is expected to grow further in Q4 but will be affected by the availability of GPUs from Nvidia. Orders taken during the quarter were record strong on AI servers ($3.6 billion), up 11 % compared to the previous quarter, driven by tier 2 cloud providers, and the number of deals increased by 50 % compared to the previous quarter.
Our view: Dell continues to grow well on the AI server side, while the PC side is lagging behind, especially on the consumer side. These two effects negatively affect margins during the quarter and we believe this will also continue in 2025. We expect a better PC market in the second half of 2025, but the question is how the price picture develops.
Analog Devices (board in Thyra)
Reported sales of $2.44 billion, down 10.4 1TP3Q from the prior year, but slightly above expectations, with EPS of $1.67. The company is guiding for sales of around USD 2.34 billion with EPS of USD 1.53 in the coming quarter, which is in line with expectations. The quarter's sales and guidance indicate that demand has now stabilized and that inventory levels have reached better levels. Demand in aerospace and defense remained good, the automotive and communications side showed stability, while the industrial side continues to be weak.
Our view: We believe that the company's demand has stabilized at this level, but we find it difficult to see that demand will lift significantly during the first half of 2025. This means that margins will continue to be pressured by low utilization rates and may also lead to increased price pressure to get more volumes. We see growth in other parts of the semiconductor sector that we find significantly more interesting.