- AI server growth projections strong
- Rising costs will impact gross margins
- Stock drifts pre-market, down 10% year-to-date
As one of the world’s biggest players in servers, the powerful computers that sit inside datacentres, Dell (DELL:NYSE) should be sitting pretty as corporates bulk up computing capacity to power AI tools, yet that doesn’t seem to be playing out as many investors might have hoped.
Higher performance servers will of course come with higher costs, and passing those expenses on to customers is seldom straight-forward, hence word from the Texas-based company that it will see adjusted gross margins in its 2026 fiscal year come under further pressure.
Combined with tepid demand for PCs, Dell said full year to January 2026 adjusted gross margin will fall by around 100 basis points, US President Donald Trump’s tariff plans on input costs another potential sore point.
AI SERVER SHIPMENTS GROWTH
That said, Dell is still forecasting rampant AI server shipments revenue growth of 53% year-on-year to $15 billion, implying confidence that its Nvidia (NVDA:NASDAQ) chip powered products can compete with servers from rival Super Micro Computer (SMCI:NASDAQ), HP (HPQ:NYSE) and others.
Dell increased its annual cash dividend by 18% to $2.10 per share and announced a $10 billion jump in its stock buyback program, clearly an attempt to appease investors worried by what might be seen as ‘soft’ guidance for Q1 2026, where Dell is projecting adjusted diluted EPS (earnings per share) of $1.65 and sales in a range of $22.5 billion to $23.5 billion, light of previous consensus pitched at $1.83 and $23.72 billion respectively.
Full year 2026 adjusted diluted EPS was expected to be $9.30 on revenue between $101.0 billion and $105.0 billion, about on track with consensus of $9.29 and $103.62 billion.
Dell stock drifted 2.5% to $105.12 in pre-market trading, implying a 10% drop year-to-date.
