Dell forecasts higher annual profit on AI server demand

Texas-based technology company Dell projects a 53% annual revenue rise from its AI server sales, hoping to earn over $15 billion this year from AI server shipments alone.

However, the company expects a drop in its yearly adjusted gross margin rate due to the high production costs of AI servers. So far in 2025, Dell shares have dipped by nearly 5%, though the company’s stock has more than doubled in the past two years due to the growing demand for AI servers.

Dell’s Chief operating officer, Jeff Clarke, even commented on the company’s AI server goals: “Our prospects for AI are strong, as we extend AI from the largest cloud-service providers into the enterprise at scale and out to the edge with the PC.”

Dell is expected to deliver multiple AI servers to Musk’s xAI startup

Dell shipped about $10 billion of AI-optimized servers in its fiscal 2025 and expects another $15 billion in sales in its fiscal 2026.

Moreover, the technology company is already seeing its backlog rise after signing a new deal with Elon Musk’s AI startup, xAI. As of January 31, the computer firm had about $4.1 billion backlog in AI servers.

Now, the figure has ballooned to over $9 billion in less than a month, with the company expected to deliver AI servers embedded with Nvidia Corp. GB200 semiconductors to xAI this year.

The company’s rivals in the AI server market are Super Micro Computer Inc. (SMCI) and Hewlett Packard Enterprise Co. (HPE); however, its latest earnings report shows that it may be profiting much more than its competitors.

Nonetheless, Dell projects its adjusted gross margin rate to plummet by roughly 100 basis points in fiscal 2026 over high server production costs.

Dell estimates its earnings per share for the year to settle at $9.30

In its fiscal fourth quarter, Dell’s Infrastructure Solutions Group reported an operating margin of 18.1%, slightly higher than the 15.3% recorded in the same quarter of the previous fiscal year.

Additionally, Dell estimates that its current quarter revenue will range between $22.5 and $23.5 billion, trailing the LSEG estimate of $23.59 billion. The company also expects its adjusted earnings per share during the quarter to settle at $1.65.

Furthermore, the company has high hopes for its overall revenue accumulation for fiscal 2026. The firm projects its cumulative revenue for the year to oscillate between $101 billion and $105 billion, aligning with LSEG projections of $103.17 billion.

The Texas-based corporation also expects its total earnings per share for the year to reach $9.30.

Not to mention, the tech firm has already raised its dividend by almost 20% and even announced $10 billion in share repurchase authorization.

AI-server supply chain adapts to trade shifts and security concerns

The regional tiering of the AI-server manufacturing supply chain stands to reduce trade friction and mitigate concerns over China in President Donald Trump’s second term. Most of the most important components—GPUs, CPUs, and high-bandwidth memory—are designed and built outside China and thus are not troubled by this.

Some industries, such as high-speed optics, had already moved production out of China during Trump’s first term.

Server assemblers and manufacturers were already regionally aligned as of 2018, when supply-chain collapses led to real-time reallocation of resources. However, to address security and data sovereignty concerns in cloud computing, regional manufacturing has been taking root, and this has now spread to AI servers too.

Dell competes in a broader and more competitive landscape

The AI-server competitive landscape will intensify this year as more traditional electronic manufacturer-service (EMS) providers build at scale. Pegatron, Foxconn, Sanmina and Wywinn are among the hardware makers set to expand their roles in the Blackwell GPU product cycle, competing with Dell and Super Micro for hyperscale, tier-2 cloud and enterprise customers.  The AI-server market should be able to support a large number of vendors, given its size.

Market share may be determined by GPU allocation and availability, regional and global manufacturing footprint and customer exposure. Liquid-cooling capabilities could prove to be a differentiator for HPE and others in larger, clustered deals.

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