Dell Technologies Inc. reported stronger-than-expected results for its second quarter on Thursday, but Dell shares dropped more than 5% in extended trading after the company issued earnings guidance for the upcoming quarter that fell short of Wall Street expectations. While the company continues to benefit from surging demand for artificial intelligence servers, weaker performance in storage and conservative profit projections weighed on investor sentiment.
Dell shares rose after the systems integrator posted adjusted earnings per share of $2.32, slightly ahead of analyst estimates of $2.30, according to LSEG consensus data. Revenue reached $29.78 billion, also topping forecasts of $29.17 billion. Overall revenue increased 19% compared to the same period last year, a reflection of growing demand for data center solutions and next-generation computing.
AI Servers Power Data Center Growth
Dell’s Servers and Networking segment was the clear highlight of the quarter. Revenue in this division surged 69% year over year to $12.9 billion, largely driven by demand for AI-focused hardware. The company said it shipped $10 billion worth of AI servers over its past two quarters and now expects to ship $20 billion of such systems in fiscal 2026, doubling sales compared to the prior year.
Dell is a key partner of Nvidia Corp., sourcing chips from the AI leader and integrating them into systems sold to enterprise and cloud providers. Among its customers is CoreWeave, a cloud service that has seen rapid growth in AI computing workloads. The strong momentum in AI server shipments highlights Dell’s expanding role in the artificial intelligence ecosystem and its shift toward data-intensive infrastructure—trends that continue to shape investor sentiment around Dell shares.
Mixed Performance Across Other Divisions
Despite strength in its data center operations, other parts of the business showed mixed results. Storage revenue declined 3% to $3.86 billion, falling short of StreetAccount estimates of $4.1 billion. The company noted that storage sales are expected to rebound later in the fiscal year, with seasonality playing a role in how profits are distributed.
Revenue in Dell’s Client Solutions Group, which includes PC sales to enterprises, rose 1% year over year to $12.5 billion. While once the company’s largest revenue driver, the PC division has grown more slowly in recent quarters as businesses continue to manage spending in the wake of broader economic shifts. This slower growth contrasts with the rapid gains in data center and AI-focused infrastructure, a dynamic that continues to influence Dell shares.
Guidance and Outlook
For the third quarter, Dell forecast adjusted earnings per share of $2.45, short of analyst expectations of $2.55. However, its revenue guidance of $27 billion topped consensus estimates of $26.1 billion, suggesting top-line demand remains steady even as profit margins face pressure.
The company attributed the lighter profit outlook to the timing of demand cycles and seasonality, particularly within its storage business. Management emphasized that the fourth quarter is expected to carry more weight in terms of profitability, consistent with prior trends.
Looking at the full year, Dell raised its revenue outlook to $107 billion at the midpoint, up from earlier guidance and ahead of analyst projections of $104.6 billion. The company also increased its diluted earnings per share forecast to $9.55 at the midpoint, compared to Wall Street’s estimate of $9.38.
Capital Returns and Market Position
During the quarter, Dell returned $1.3 billion to shareholders through stock buybacks and dividends, underscoring its ongoing capital allocation strategy. Despite current challenges in storage and conservative short-term profit guidance, the company is reinforcing its position in the enterprise technology market by doubling down on AI infrastructure and next-generation data solutions.
While investors responded negatively to Dell’s cautious earnings outlook, the strong performance of its Servers and Networking division highlights the company’s growing reliance on AI-driven demand. As Dell looks to expand AI server shipments and stabilize its storage performance, Dell shares reflect the ongoing tension between near-term profitability and long-term growth will remain a central focus for both the company and the market.
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Sources:
https://finance.yahoo.com/news/dell-lifts-annual-forecasts-ai-200913176.html
