Dell slides lower following revenue miss, tech romp

Dell Technologies reported its fiscal Q4 2025 earnings with a mixed performance, as the company exceeded analyst expectations on earnings per share (EPS) but fell short on revenue. Adjusted EPS came in at $2.68, surpassing the consensus estimate of $2.52, while revenue of $23.9 billion missed expectations of $24.55 billion. Shares of Dell dropped approximately 8% in reaction to the report, as investors digested guidance and concerns about profit margins.

A major driver of Dell’s business remains artificial intelligence (AI) server sales, which have seen strong demand. The company disclosed that it sold approximately $10 billion in AI-optimized servers in fiscal 2025 and expects to sell about $15 billion in AI systems in the current fiscal year. However, management noted that margins on Blackwell-based AI servers are lower than those on Hopper, which could pressure profitability moving forward. AI server backlog was reported at $4.1 billion at the end of January.

Dell's traditional PC and mobile businesses continue to face headwinds. The Client Solutions Group (CSG) reported revenue of $11.88 billion, up just 1.4% year-over-year but below analyst expectations of $12.02 billion. Within CSG, commercial revenue rose 4.5% to $10 billion, while consumer revenue fell 12% to $1.89 billion. Management commented that the PC refresh cycle is expected to be more backloaded into the second half of the year, reflecting cautious enterprise and consumer spending.

From a financial perspective, the company announced that its gross margin rate is expected to decline by approximately 100 basis points in the coming quarters. Dell also uncovered an accounting issue related to accumulated supplier credits that had not been recorded in previous periods. These credits impacted the Client Solutions Group and overstated cost of goods sold by about $200 million in fiscal 2024 and $148 million in the first nine months of fiscal 2025. The company stated that the correction would be material to fiscal 2025 results but not to prior periods.

Guidance from Dell was another focal point of the earnings release. For the upcoming Q1, Dell projected revenue between $22.5 billion and $23.5 billion, below the consensus estimate of $23.72 billion. Adjusted EPS for Q1 is expected to be $1.65, missing the $1.83 consensus. For the full fiscal 2026 year, Dell provided revenue guidance of $101 billion to $105 billion, aligning with expectations of $103 billion. Full-year EPS guidance of $9.30 slightly exceeded Wall Street estimates of $9.24.

On the shareholder return front, Dell announced an 18% increase in its annual dividend to $2.10 per share and authorized a $10 billion stock repurchase program. This move underscores confidence in the company’s long-term profitability and cash flow generation.

Tariffs were a key concern during the earnings call, particularly with the looming implementation of new trade policies. While Dell did not provide direct commentary on the potential impact of tariffs, broader market concerns about supply chain disruptions and increased component costs have weighed on sentiment. The company’s reliance on international suppliers means any additional trade restrictions could impact cost structures.

Technically, Dell shares are approaching the psychological $100 level, with the February low around $98 serving as a key support point. The stock has more than doubled in the past two years due to AI-driven demand, but near-term concerns over margin compression and guidance uncertainty have led to recent volatility.

Overall, Dell’s Q4 report highlights strong AI-driven momentum but also reflects challenges in traditional computing and the broader macroeconomic landscape. While management remains optimistic about future AI sales and enterprise demand, investors appear cautious given the softer revenue guidance and margin pressures.