Dell Technologies Plummets 10% on Weak Q3 Outlook Amid AI Growth Hype

Summary
• Dell shares plunge 10.03% intraday to $120.60 amid soft third-quarter guidance
• Earnings beat estimates but EPS forecast falls short of $2.55 target
• AI server sales surge to $10B in two quarters, yet storage revenue declines 3%
• Options market sees heavy put buying with DELL20250905P116 trading at 16.67% price change

Dell Technologies is under pressure as a bearish earnings outlook clashes with its AI-driven growth narrative. Despite a $29.78 billion revenue beat and $9.55 full-year EPS guidance, the stock has fallen to its lowest level since March 2024. The sharp intraday drop—trading between $119.63 and $124.70—reflects investor skepticism about near-term profitability amid seasonal storage business headwinds.

Bearish Earnings Guidance Overshadows AI Optimism
Dell’s 10% selloff stems from a third-quarter EPS forecast of $2.45, below the $2.55 LSEG consensus, despite $27 billion in revenue guidance. The disconnect arises from seasonal storage business weakness and delayed profit concentration in Q4. While AI server sales doubled to $10 billion in two quarters, storage revenue missed estimates by $250 million, signaling mixed performance. The market is punishing near-term visibility despite long-term AI tailwinds, as investors price in execution risks for Dell’s $20 billion AI server target in FY26.

Computer Hardware Sector Mixed as HP Gains 2.57%
The Computer Hardware sector shows divergent momentum, with HP (HP) rising 2.57% on strong energy services demand. Dell’s decline contrasts with broader sector resilience, as AI infrastructure demand remains robust. However, Dell’s storage segment struggles highlight sector-specific risks in commoditized hardware lines, while peers with stronger cloud/server growth trajectories outperform.

Bearish Options Play and ETF Neutral Outlook
• 200-day MA: 113.52 (below current price) • RSI: 42.61 (oversold) • MACD: 0.94 (bearish divergence) • Bollinger Bands: Price at 120.60 (near lower band at 124.72)

Technical indicators suggest short-term oversold conditions but bearish momentum. The 200-day MA at 113.52 offers a key support level, while RSI at 42.61 indicates potential rebound. MACD histogram (-0.79) and bearish crossover signal continued downward pressure. Traders should monitor the 124.72 lower Bollinger Band as a critical resistance for a bounce.

Top Options Picks:
• DELL20250905P116 (Put):
- Strike: $116 | Expiry: 2025-09-05 | IV: 38.27% | Leverage: 135.86% | Delta: -0.22 | Theta: -0.0306 | Gamma: 0.0432 | Turnover: $36,097
- IV: Moderate volatility | Leverage: High reward potential | Delta: Sensitive to price moves | Theta: Decent time decay | Gamma: Strong sensitivity to price changes
- This put option offers high leverage (135.86%) and strong gamma (0.0432) for a 5% downside scenario (ST=114.57), yielding a $1.43 payoff. Liquidity and moderate IV make it ideal for bearish bets.
• DELL20250905P119 (Put):
- Strike: $119 | Expiry: 2025-09-05 | IV: 40.75% | Leverage: 60.46% | Delta: -0.38 | Theta: -0.005 | Gamma: 0.0522 | Turnover: $10,290
- IV: Slightly elevated | Leverage: Moderate reward | Delta: Strong directional sensitivity | Theta: Low time decay | Gamma: High sensitivity to price swings
- This put benefits from high gamma (0.0522) and a 5% downside scenario (ST=114.57), producing a $4.43 payoff. Lower theta (-0.005) suits a longer-term bearish stance.

Action Insight: Aggressive bears should prioritize DELL20250905P116 for short-term volatility, while DELL20250905P119 offers a safer, longer-term play if the stock breaks below $120.

Backtest Dell Technologies Stock Performance

Dell at Pivotal Crossroads: Watch $113.52 Support and HP’s Momentum
Dell’s 10% drop reflects near-term execution risks despite its AI server momentum. The stock’s 52-week range (66.25–147.66) and 19.2x P/E suggest undervaluation if the $113.52 200-day MA holds. However, bearish technicals and weak Q3 guidance demand caution. Investors should monitor the 124.72 lower Bollinger Band for a potential rebound and track HP’s 2.57% gain as a sector benchmark. For now, short-term bears have a clear path with the selected puts, but patience is key as Dell’s AI ambitions could yet drive a reversal.