Dell Technologies (DELL) stock fell as much as 12% Wednesday morning after the company took a cautious approach in its forecasts for investors, while warning that AI’s growth “will not be linear.”
“AI is a solid opportunity…and interest in our portfolio is at an all-time high with no signs of slowing down,” Dell Chief Operating Officer Jeffrey Clarke said on a call with investors Tuesday evening. “That said, this business will not be linear, especially as customers follow an underlying silicon roadmap that evolves.”
Dell’s AI server revenue fell 9% in the third quarter from the prior period.
Along with a broader collapse in the personal computer market, this non-linear growth in AI has contributed to Dell’s lower annual outlook for its 2025 fiscal year ending in February.
The midpoint of the company’s forecast range for annual revenue fell to $96.1 billion, from $97 billion since last quarter, Bernstein analyst Toni Sacconaghi noted during the call for results. The company said it would provide investors with a formal outlook for fiscal 2026 early next year.
Even with Wednesday’s drop, Dell stock is still up more than 65% this year.
On the call, Clarke primarily cited a slower-than-expected recovery in the PC market when asked about Dell’s lower forecast, but he also pointed to shifting customer trends toward chips Latest AI. Clarke said Dell consumers are looking to use Nvidia’s (NVDA) latest Blackwell AI chips in Dell servers and these chips have experienced some delays. Last week, Nvidia said “production is in full swing” for these chips.
“We saw in the third quarter a fairly rapid shift and shift in orders to our Blackwell design,” Clarke said, noting that orders for its servers with the Blackwell design make up “a significant portion” of its order backlog.
Traditionally a PC company, Dell’s expansion into computing products in the 2010s paid off during the AI boom.
Its servers equipped with Nvidia AI chips are used by businesses including xAI by Elon Musk and the CoreWeave, $23 billion cloud provider as part of the crucial hardware used to run generative artificial intelligence software.
Krish Sankar, an analyst at TD Cowen, noted that Dell’s AI server revenue decline last quarter was “primarily driven by Blackwell’s well-understood rejections.”
Sankar added that Dell’s growing backlog and AI server orders worth an estimated $8 billion for the third quarter “are a better representation of actual demand,” noting that the pipeline of Dell’s AI “is now slightly below $20 billion.”