Finance
Dell slides as high AI server costs, competition blunt upbeat demand forecast
Published by Global Banking & Finance Review®
Posted on August 29, 2025
2 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on August 29, 2025
2 min readLast updated: January 22, 2026
Dell's shares dropped 7% due to high AI server costs and competition, despite a strong demand forecast for AI infrastructure.
By Shashwat Chauhan and Akash Sriram
(Reuters) -Shares of Dell Technologies fell about 7% premarket on Friday, as high manufacturing costs for AI-optimized servers and intensifying competition overshadowed the company's bullish demand forecast for artificial intelligence infrastructure.
The stock is set to lose roughly $5 billion of its $91 billion market capitalization if premarket losses hold.
AI server demand remained a bright spot for the company. Dell raised its annual shipment forecast to $20 billion from $15 billion, citing strong orders from customers including Elon Musk's xAI and cloud provider CoreWeave.
Dell prioritized fulfilling AI server orders over maintaining margins, as supply chain disruptions and expedited shipping costs added to the profit squeeze from competitive pricing strategies aimed at landing large customer contracts, J.P. Morgan analysts wrote in a note.
The company's adjusted gross margin rate for its second quarter fell to 18.7% from a year earlier and missed estimates of 19.6%, according to data compiled by LSEG. It expects third-quarter profit per share of $2.45, below expectations of $2.55.
Dell expects third-quarter revenue to be in the range of $26.5 billion to $27.5 billion, compared with estimates of $26.05 billion.
Separately, Dell raised its annual revenue forecast to between $105 billion and $109 billion from its earlier expectations of $101 billion to $105 billion, buoyed by demand for its AI-optimized servers.
Its stock has risen 16.3% this year, outperforming rival Hewlett Packard Enterprise and the S&P 500 index. Hewlett Packard is set to report its quarterly results on Wednesday after markets close.
Dell's shares trade at 13.2 times profit expectations, higher than HPE's 10.8, but far lower than 22.3 for the S&P 500 index, despite the company's exposure to high-growth AI infrastructure demand.
(Reporting by Shashwat Chauhan and Akash Sriram in Bengaluru; Editing by Krishna Chandra Eluri)
Dell's shares fell about 7% due to high manufacturing costs for AI-optimized servers and increasing competition, overshadowing the company's positive demand forecast.
Dell raised its annual shipment forecast for AI servers to $20 billion from $15 billion, citing strong orders from notable customers.
Dell's adjusted gross margin rate for the second quarter fell to 18.7%, missing estimates of 19.6% and down from the previous year.
Dell expects its third-quarter revenue to be between $26.5 billion and $27.5 billion, surpassing estimates of $26.05 billion.
Dell's shares trade at 13.2 times profit expectations, which is higher than Hewlett Packard Enterprise's 10.8 but lower than the S&P 500 index's 22.3.
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