Dell Shares Drop 6-9% on Soft Q3 Profit Outlook, AI Server Demand Boosts Full-Year Forecast

Dell Technologies reported strong second-quarter results driven by robust demand for AI-optimized servers, with AI server shipments reaching $10 billion in the first half of fiscal 2026 and a raised shipment forecast to $20 billion for the full year. Despite beating earnings and revenue expectations for the quarter and raising its full-year revenue and earnings guidance, the company's shares fell sharply due to a softer-than-expected third-quarter profit outlook and concerns about slowing growth in traditional PC sales. Dell forecasted third-quarter adjusted earnings per share at $2.45, below analyst estimates, alongside revenue guidance in line with but not significantly exceeding expectations. The company prioritized fulfilling AI server orders over maintaining margins, leading to a decline in second-quarter gross margin to 18.7%, which further weighed on investor sentiment. While Dell’s infrastructure and client solutions groups are expected to grow, risks remain around competition and weaker spending outside of AI-related segments. Overall, despite near-term challenges and a mixed outlook, analysts remain optimistic about Dell’s long-term prospects fueled by AI-driven momentum.