Dell Q3 Profit Forecast Falls Short, AI Demand Boosts Full-Year Guidance

Dell's stock dropped 7% in premarket trading after the company projected soft Q3 profit, citing strong AI demand. However, Dell raised its full-year AI server shipment guidance to $20 billion from $15 billion, which is good news for Nvidia and Micron Technology. Dell's Q2 adjusted EPS of $2.32 on revenue of $29.78 billion topped estimates, driven by strong AI demand.

Dell Technologies' stock dropped 7% in premarket trading on Friday following the company's projection of a soft third-quarter profit. The Round Rock, Texas-based tech giant reported adjusted earnings per share (EPS) of $2.45 at the midpoint, falling short of the $2.49 expected by analysts. Despite the earnings miss, Dell's forecasts for Q3 revenue and full-year profit and revenue came in above Visible Alpha consensus [1].

The primary driver behind the company's performance is the exceptional demand for its AI solutions. Dell Chief Operating Officer Jeff Clarke announced that the company has shipped $10 billion worth of AI solutions in the first half of fiscal 2026, surpassing all shipments in fiscal 2025. This strong demand led Dell to lift its full-year AI server shipment guidance to $20 billion from $15 billion-plus [2].

The increased AI server shipment guidance is seen as positive news for Nvidia and Micron Technology. Citi analysts noted that Dell's Q2 PC segment sales were below consensus forecasts by 3% or roughly $357.0 million, and that it likely lost share in PCs. However, the company's AI server business is expected to grow, which could benefit Nvidia and Micron Technology [1].

While Dell's AI server demand has been robust, the company faces challenges in other segments. Its storage revenue declined 3% to $3.86 billion, missing analyst estimates, and the high cost of producing AI servers has put pressure on margins, with the adjusted gross margin rate falling to 18.7% [2]. Despite these challenges, Dell remains optimistic about future PC demand, with the upcoming end of support for Windows 10 expected to drive a strong PC refresh cycle [2].

In summary, Dell's stock drop was primarily due to the company's softer-than-expected Q3 profit outlook. However, the strong demand for AI servers and the company's raised full-year AI server shipment guidance provide a positive outlook for the company's future performance.

References:
[1] https://finance.yahoo.com/news/dell-stock-drops-soft-q3-105517707.html
[2] https://theoutpost.ai/news-story/dell-raises-annual-forecasts-amid-booming-ai-server-demand-19678/