Dell Technologies headquarters in Round Rock, Texas.
(Bloomberg) — Dell Technologies Inc. shares declined after the company booked fewer sales of artificial intelligence servers than in the previous three months and reported profit margins on the powerful machines that fell short of analysts’ estimates.
Most Read from Bloomberg
The need for computing to run AI tools has led to a sales boom for makers of high-powered servers like Dell, Super Micro Computer Inc. and Hewlett Packard Enterprise Co. Investors have been concerned about the profitability of AI servers, however, which depend on expensive processors from companies such as Nvidia Corp. and Advanced Micro Devices Inc.
Dell booked $5.6 billion of AI server orders in the fiscal second quarter, which ended Aug. 1, down from $12.1 billion in the previous period. It shipped $8.2 billion worth of the servers and ended the quarter with backlog worth $11.7 billion.
The operating margin in Dell’s infrastructure unit, which includes server and networking sales, was 8.8% in the period, the company said Thursday in a statement. Analysts, on average, estimated 10.3%. Dell’s overall adjusted gross margin was 18.7%, narrowing from a year earlier, and fell short of analysts’ estimates of 19.6%.
Dell shares fell as much as 11% after markets opened Friday in New York, their biggest intraday decline in almost five months. The stock had closed at $134.05 and was up 16% this year before the latest results were announced.
Still, the Texas-based company boosted its annual outlook and posted quarterly sales and profit that topped analysts’ estimates.
“We’ve now shipped $10 billion of AI solutions in the first half of FY26, surpassing all shipments in FY25,” Chief Operating Officer Jeff Clarke said in the statement.
Clarke said the company now expects to ship $20 billion in servers by the end of the fiscal year.
During a conference call after the results, the COO addressed questions from analysts about the profitability of the AI server business. He said there were some atypical expenses in the quarter as Dell worked to win and fill deals to provide servers with the latest Nvidia chips and to cope with the regulatory environment.
“Those were aggressive deals, very competitive deals and they were shipped throughout the quarter,” Clarke said. Plus “we had some expense that I think is one-time in nature in our supply chain as we expedited materials to meet our customer needs and demands.”
