Dell Technologies Inc. (NYSE: DELL) saw its stock decline by over 1% in premarket trading on Friday after forecasting a drop in its fiscal 2026 adjusted gross margin. The company cited increasing AI server costs and weak PC demand as key factors.

Dell Stock Performance

• Previous Close: $107.83 (-6.76%) on February 27, 4:00 PM EST
• Pre-Market Price: $105.02 (-2.61%) as of 6:12 AM EST
• 52-Week Range: $ [High-Low values]

Dell Expands Stock Buyback Program

Despite margin concerns, the Texas-based tech giant announced a $10 billion expansion to its stock repurchase program, signaling confidence in long-term growth.

AI Server Growth vs. Margin Challenges

Dell’s AI servers, powered by Nvidia’s high-performance chips, are essential for training advanced machine learning models like ChatGPT. This has significantly boosted demand, with the company projecting $15 billion in annual AI server revenue—a 53% increase from the $9.8 billion recorded in the previous fiscal year.

However, rising production costs for AI-driven servers are pressuring profitability. Dell forecasts a 100 basis-point decline in its adjusted gross margin rate due to these expenses.

The company’s AI server backlog has surged to $9 billion, further reinforcing strong demand. Dell also secured a new deal with Elon Musk’s xAI startup, adding to its growth potential in the AI infrastructure space.

Earnings and Revenue Outlook

• Adjusted EPS Forecast: $9.30 (above analysts’ estimate of $9.23)
• Annual Revenue Forecast: $103 billion (midpoint, in line with estimates)
• Q4 Revenue: $23.93 billion (missed estimates of $24.56 billion)
• Q4 Adjusted EPS: $2.68 (beat estimates of $2.53)

Tariffs and Market Headwinds

With U.S. tariffs on Chinese imports looming, tech companies like Dell may face increased production costs. Dell’s Chief Operating Officer Jeff Clarke stated that while the company is evaluating the impact, higher input costs could lead to price adjustments.

Additionally, International Data Corporation (IDC) revised its PC market forecast downward, citing the impact of tariffs and weaker consumer demand.

Segment Performance

• Infrastructure Solutions Group (Storage, Software, Servers): $11.35 billion (+22%)
• Client Solutions Group (PCs, Laptops): $11.88 billion (+1%)

Final Takeaway

While Dell continues to experience strong AI server demand, rising costs and market uncertainties are pressuring profitability. Investors are closely watching how the company navigates these challenges amid an evolving tech landscape.