Dell shares fall on mixed outlook but AI-related momentum drives optimism

Dell Technologies’ shares slipped nearly 9% in trading on Friday, after the company raised its full-year guidance but issued a softer-than-expected forecast for the current quarter.

Investors focused on the weaker near-term outlook even as Dell highlighted strong demand for artificial intelligence (AI) servers, which has become the company’s standout growth driver.

Full-year guidance lifted on AI-driven demand

The Round Rock, Texas-based technology firm now expects revenue for the full fiscal year to range between $105 billion and $109 billion, up from its earlier projection of $101 billion to $105 billion.

Earnings per share were forecast at a midpoint of $9.55, an increase of 10 cents from its prior guidance.

Dell’s AI-optimised servers were the clear highlight of the second quarter.

The company shipped $8.2 billion worth of AI servers during the period, taking its first-half shipments to $10 billion, already ahead of last year’s total.

It ended the quarter with an $11.7 billion backlog and raised its AI server shipment forecast for fiscal 2026 to $20 billion.

Chief Operating Officer Jeff Clarke said Dell was beginning to see a recovery in North American server sales and expected the momentum to continue, supported by growing demand for AI systems.

Third-quarter guidance disappoints investors

Despite the upbeat full-year outlook, Dell’s guidance for the current quarter failed to meet investor expectations.

The company forecast adjusted earnings per share of $2.45 at the midpoint, below analysts’ estimates of $2.51.

Revenue was projected to come in between $26.5 billion and $27.5 billion, in line with but not significantly above Wall Street’s consensus of $26.4 billion, according to FactSet.

While Dell anticipates profit growth in its infrastructure and client solutions groups, analysts noted that its traditional business segments remain more exposed to macroeconomic uncertainty.

Analysts weigh strength of AI cycle against risks

Brokerages were largely positive on Dell’s long-term prospects, though several flagged risks around competition and weaker spending in non-AI segments.

JPMorgan maintained an “overweight” rating with a $145 price target, citing optimism around the AI-driven compute cycle and the resulting demand for high-end branded servers.

Melius Research reiterated a “buy” with a $172 target, saying Dell should benefit each quarter from increased availability of Nvidia’s Blackwell GB300 systems.

TD Cowen, with a “hold” rating and a $130 target, warned that traditional server sales may flatten in fiscal 2026 as slower US government spending offsets upgrade demand elsewhere.

Barclays, at “equal weight” with a $131 target, pointed to concerns that larger customers may diversify purchases as AI server competition intensifies.

Morgan Stanley, with an “overweight” rating and a $144 target, said improvements in US enterprise execution and Dell’s PC business could help clean up the growth story.

The stock is rated a “buy” on average, with a median price target of $144.5, according to LSEG data.

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