Dell Raises Forecasts as AI Server Demand Soars Despite Margin Pressure

Dell Raises Annual Forecasts on Surge in AI Server Sales

Dell has upgraded its annual revenue and profit outlook, driven by strong demand for AI-optimized servers powered by Nvidia’s latest chips. Despite this positive outlook, Dell’s shares dropped nearly 5% in after-hours trading due to a third-quarter profit forecast that fell short of analysts’ expectations.

AI servers, built to handle heavy computational workloads, are becoming a key growth area for companies like Dell and Super Micro Computer. However, the high production costs and intense competition are squeezing profit margins.

Key Financial Updates

• Dell now anticipates $20 billion in revenue from AI server shipments in fiscal 2026, up from an earlier estimate of $15 billion.
• Major customers include Elon Musk’s AI startup xAI and CoreWeave.
• The company recorded $5.6 billion in AI orders during Q2 and shipped a record $8.2 billion worth, with an overall backlog of $11.7 billion.
• Annual revenue guidance was increased to between $105 billion and $109 billion, compared to the previous range of $101 billion to $105 billion.
• Adjusted earnings per share (EPS) forecast rose to $9.55, up from $9.40.

Quarterly Performance and Outlook

Dell expects third-quarter revenue between $26.5 billion and $27.5 billion, exceeding analyst consensus of $26.05 billion. However, its adjusted profit forecast of $2.45 per share is slightly below the $2.55 per share estimate.

For Q2, Dell reported revenue of $29.78 billion, beating estimates of $29.17 billion. Adjusted EPS came in at $2.32, just above the expected $2.30. Yet, the adjusted gross margin rate declined to 18.7% from the previous year’s 19.6%, missing expectations.

Business Segments and Market Insights

• The infrastructure solutions group, including storage, software, and servers, saw a 44% revenue increase.
• The client solutions group, mainly PCs, grew by 1%.
• A notable PC refresh cycle is expected as Microsoft ends support for Windows 10 in October, with about half of PCs still running the older OS. Many devices won’t upgrade and will likely need replacement.

For sales professionals, this trend signals opportunities to engage with clients preparing their AI infrastructure and PC upgrades. Understanding these shifts can help tailor pitches and identify prospects with urgent hardware needs.

To stay informed on AI-related sales strategies and product knowledge, consider exploring specialized courses in AI and server technologies on Complete AI Training.