Dell Technologies Reveals $20 Billion AI Server Shipment Plan for Fiscal 2026, Beats Revenue Projections but Misses Earnings Expectations

In an unexpected turn of events, Dell Technologies shares experienced a decline of over 5% in extended trading on Thursday, following the release of third-quarter earnings per share (EPS) guidance that fell short of analyst predictions.

Here’s a breakdown of how the systems integrator performed compared to consensus estimates:

– Dell increased its full-year revenue outlook, with the midpoint projected at $107 billion and diluted EPS at $9.55 also at the midpoint. These figures surpass analyst expectations of $104.6 billion in revenue and $9.38 per share EPS.
– However, Dell’s Q3 EPS guidance of $2.45 fell short of the projected $2.55 by LSEG, despite a third-quarter revenue projection of $27 billion, which exceeded estimates of $26.1 billion.
– Dell attributed part of this discrepancy to seasonality, particularly in its storage business, with a concentration of profits expected in the fourth quarter.

In the second quarter, overall revenue surged by 19% year-on-year. This growth was primarily driven by Servers and Networking revenue, including AI servers, which totaled $12.9 billion, marking a 69% increase year-on-year.

Dell is a significant customer of Nvidia, purchasing chips from the AI leader to build computers around them for sale to clients such as CoreWeave, a cloud service. Dell reported shipping $10 billion worth of AI servers over the past two quarters.

Looking ahead, Dell plans to increase this figure significantly, aiming to ship $20 billion in artificial intelligence servers during its fiscal 2026, doubling last year’s sales.

However, a decline of 3% was noted in Dell’s storage revenue, which fell short of the StreetAccount estimated sales of $4.1 billion at $3.86 billion.

Revenue in the company’s client solutions group, encompassing enterprise PC sales, rose by 1% year-on-year to $12.5 billion. Despite being Dell’s largest business group in the past, it has grown at a slower pace than the data center business in recent quarters.

Dell reported spending $1.3 billion on share repurchases and dividends during the quarter.