Dell slides as high AI server costs, competition blunt upbeat demand forecast
Dell logo is seen in this illustration taken August 19, 2025. REUTERS/Dado Ruvic/Illustration
Shares of Dell Technologies fell about 10 per cent on Friday, as high manufacturing costs for AI-optimized servers and intensifying competition overshadowed the company's bullish demand forecast for artificial intelligence infrastructure.
The stock is set to lose roughly $8 billion of its $91 billion market capitalization if losses hold.
AI server demand remained a bright spot for the company. Dell raised its annual shipment forecast to $20 billion from $15 billion, citing strong orders from customers including Elon Musk's xAI and cloud provider CoreWeave.
Dell prioritized fulfilling AI server orders over maintaining margins, as supply chain disruptions and expedited shipping costs added to the profit squeeze from competitive pricing strategies aimed at landing large customer contracts, J.P. Morgan analysts wrote in a note.
The company's adjusted gross margin rate for its second quarter fell to 18.7 per cent from a year earlier and missed estimates of 19.6 per cent, according to data compiled by LSEG. It expects third-quarter profit per share of $2.45, below expectations of $2.55.
Dell expects third-quarter revenue to be in the range of $26.5 billion to $27.5 billion, compared with estimates of $26.05 billion.
Separately, Dell raised its annual revenue forecast to between $105 billion and $109 billion from its earlier expectations of $101 billion to $105 billion, buoyed by demand for its AI-optimized servers.
Its stock has risen 16.3 per cent this year, outperforming rival Hewlett Packard Enterprise and the S&P 500 index. Hewlett Packard is set to report its quarterly results on Wednesday after markets close.
Dell's shares trade at 13.2 times profit expectations, higher than Hewlett Packard's 10.8, but far lower than 22.3 for the S&P 500 index, despite the company's exposure to high-growth AI infrastructure demand.
