Dell Struggles To Protect Margins As Supply Chain Costs Mount Anusuya LahiriAugust 30, 2025 at 4:52 AM Dell Struggles To Protect Margins As Supply Chain Costs Mount Dell Technologies (NYSE:DELL) reported a sharp rise in secondquarter revenue but tempered investor enthusiasm with profit guidance that...
- - Dell Struggles To Protect Margins As Supply Chain Costs Mount
Anusuya LahiriAugust 30, 2025 at 4:52 AM
Dell Struggles To Protect Margins As Supply Chain Costs Mount
Dell Technologies (NYSE:DELL) reported a sharp rise in second-quarter revenue but tempered investor enthusiasm with profit guidance that fell short of expectations, sending shares lower on Friday.
The company posted revenue of $29.78 billion, up 19% year over year, driven by booming demand for its AI servers. Adjusted earnings came in at $2.32 per share, narrowly topping Wall Street's consensus of $2.31.
Dell also lifted its full-year fiscal 2026 revenue outlook to as much as $109 billion, compared with the prior consensus of $104.59 billion, and raised its earnings forecast to a range of $9.40 to $9.55 per share from $9.38.
Also Read: Dell Poised To Ride AI Server Boom Toward Higher Sales, Long-Term Profit Growth: Analyst
For the third quarter, Dell guided earnings of $2.45 per share, below analyst expectations of $2.55, citing margin pressures from supply chain costs and aggressive pricing despite record AI growth. Third-quarter revenue is expected to be between $26.5 billion and $27.5 billion, ahead of the $26.05 billion estimate.
Wall Street was quick to parse the results. JP Morgan analyst Samik Chatterjee reiterated an Overweight rating with a price forecast of $145, pointing to stronger-than-expected AI server revenue of $8.2 billion in the quarter versus his $7.2 billion estimate.
He noted Dell also booked $5.6 billion in incremental AI orders, which helped lift its fiscal 2026 revenue forecast midpoint by $4 billion to $107 billion. This growth came at the cost of margins, Chatterjee cautioned, citing supply chain inefficiencies, expedite costs, and competitive pricing to win concentrated AI server deals.
Even so, Dell raised its fiscal 2026 AI server revenue guidance to $20 billion, up from a prior outlook of at least $15 billion. Chatterjee said that strength more than offset weakness in storage, traditional server demand, and modest shortfalls in its client solutions group (CSG). The $5 billion AI upside, he added, translated into the $4 billion companywide revenue raise.
Management expects margin recovery in the second half of the fiscal year, helped by a more favorable storage mix and operational improvements. Dell projects average margins of about 10% in the back half, up from 7.4% in the first, with profits improving roughly 35% despite revenue remaining balanced across both halves.
Chatterjee argued Dell is well-positioned to leverage rising AI infrastructure demand, cost discipline, and share buybacks for sustained earnings growth. But he underscored that margin stabilization will be a critical near-term focus, particularly ahead of the company's October Analyst Meeting.
Goldman Sachs reiterated a Buy rating, raising its 12-month price forecast to $150 from $140, citing Dell's leadership in AI infrastructure, ongoing PC refresh opportunities, and shareholder returns. Key risks include weaker enterprise IT spending, PC demand softness, competitive pricing pressure, and macroeconomic headwinds.
Goldman said Dell's $2.32 EPS topped estimates on stronger CSG, offsetting weak Infrastructure Solutions Group (ISG) margins. While AI server demand drove a revenue guidance raise to $105–$109 billion and lifted fiscal 2026 EPS outlook, limited flow-through to EBIT highlighted margin pressure from traditional servers, storage, and early AI deals.
Goldman expects ISG and AI margins to improve in the second half as one-time costs fade, with CSG also benefiting from share gains and PC refresh demand.
DELL Price Action: Dell stock is trading lower by 9.43% to $121.41 at last check Friday.
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Latest Ratings for DELL
Date
Firm
Action
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Mar 2022
Evercore ISI Group
Upgrades
In-Line
Outperform
Feb 2022
Raymond James
Maintains
Outperform
Feb 2022
Morgan Stanley
Maintains
Overweight
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