Dell raises its boom predictions for AI servers

By Mofeoluwa Awe

AI Servers Fuel Revenue Growth

Dell Technologies raised its annual revenue and profit forecasts after strong demand for its AI-optimized servers built with Nvidia’s advanced chips. The company now expects $20 billion in fiscal 2026 revenue from AI server shipments, up from its earlier forecast of $15 billion.

Major customers like Elon Musk’s xAI and CoreWeave are driving this growth. In the second quarter alone, Dell booked $5.6 billion in AI orders, shipped a record $8.2 billion, and built a backlog worth $11.7 billion.

Revised Annual Outlook

The company increased its full-year revenue forecast to between $105 billion and $109 billion, compared with its prior range of $101 billion to $105 billion. Adjusted earnings per share are now expected to reach $9.55, up from $9.40.

Third-Quarter Pressure

Despite the stronger annual outlook, Dell’s third-quarter profit forecast fell below Wall Street expectations. The company projected revenue between $26.5 billion and $27.5 billion, above analyst estimates of $26.05 billion. However, it guided adjusted profit at $2.45 per share, lower than the expected $2.55. Shares dropped 5% in extended trading.

Strong Q2 Performance

Second-quarter revenue reached $29.78 billion, beating forecasts of $29.17 billion. Adjusted profit came in at $2.32 per share, slightly ahead of expectations. However, Dell’s adjusted gross margin slipped to 18.7%, missing the projected 19.6%.

Segment Breakdown

Revenue from Dell’s infrastructure solutions group, which includes servers, storage, and software, jumped 44%. In contrast, the client solutions group, home to its PC business, grew only 1%.

PC Market Outlook

Analysts expect a strong PC refresh cycle in 2025. Microsoft will end support for Windows 10 in October, and nearly half of PCs in use still run the system. Many devices cannot upgrade, forcing users to buy replacements.

Big Picture

Dell’s AI server sales are surging, placing the company at the center of one of the fastest-growing markets in tech. Yet, pressure on profit margins shows the challenges of scaling AI infrastructure at speed.