Dell Technologies expects a significant boost in annual profit due to rising demand for artificial intelligence (AI) servers.
The Texas-based technology firm projects a 53% increase in AI server revenue, aiming to surpass $15 billion in sales this year. However, the company anticipates a decline in its adjusted gross margin rate due to the high production costs of AI servers. Despite a nearly 5% drop in Dell’s stock this year, the company’s shares have more than doubled over the past two years as AI server demand grows.
Growing AI server sales and new partnerships
Dell shipped approximately $10 billion worth of AI-optimized servers in its fiscal 2025 and expects to generate another $15 billion in fiscal 2026. The company has seen a surge in its AI server backlog, particularly after securing a deal with Elon Musk’s AI startup, xAI. As of January 31, Dell reported a backlog of $4.1 billion in AI servers. Within a month, this figure more than doubled to exceed $9 billion. The company plans to supply xAI with AI servers powered by Nvidia’s GB200 semiconductors this year.
Financial projections and market position
Dell’s Infrastructure Solutions Group reported an operating margin of 18.1% in its fiscal fourth quarter, improving from 15.3% in the previous year. The company expects its revenue for the current quarter to range between $22.5 billion and $23.5 billion, slightly below the LSEG estimate of $23.59 billion. Dell also forecasts adjusted quarterly earnings per share to be $1.65.
Server vendor manufacturing locations. Source: Bloomberg
For fiscal 2026, Dell projects total revenue between $101 billion and $105 billion, aligning closely with LSEG’s estimate of $103.17 billion. The company anticipates full-year earnings per share to reach $9.30. Additionally, Dell has increased its dividend by nearly 20% and approved a $10 billion share repurchase program.
Competition and AI-server supply chain adjustments
Dell maintains competition against both Super Micro Computer and Hewlett Packard Enterprise in its market. The firm’s last earnings release indicates that it is surpassing market competitors beyond expectation. The AI server market undergoes continuous evolution due to the increasing activities of electronic manufacturing service providers including Pegatron, Foxconn, Sanmina, and Wywinn. The companies aim to win customers in the hyperscale and tier-two cloud sector as well as enterprise divisions by entering the Blackwell GPU product cycle.
The artificial intelligence server supply chain continues to evolve its customer service operations to handle security and trade matters. There are multiple critical components including GPUs together with CPUs coupled with high-bandwidth memory that come from production sites outside China thereby minimizing trade problems.
AI server market share. Source: Bloomberg
The high-speed optics industry migrated its production bases out of China when the former U.S. administration took power. Production of AI servers now prioritizes regional manufacturing outlets to resolve security and data territoriality problems for enterprises. Dell pursues industry expansion within the AI server segment while facing market competition alongside supply chain adjustments. The company stands as a prominent leader in this developing industry due to its vigorous sales expansion and numerous key alliances.