Dell shares fall after company warns AI spending ‘won’t be linear’ (Video)

Dell Technologies (DELL) stock fell as much as 12% on Wednesday after the company took a cautious approach in its investor forecasts, while warning that AI 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 full-year 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 decline, 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 those chips have seen some delays. Last week, Nvidia said that “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 powered by Nvidia AI chips are used by companies including Elon Musk’s xAI and $23 billion cloud provider CoreWeave 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 due “primarily to 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 Dell’s AI “is now slightly below $20 billion.”

Dell CEO Michael Dell said on November 17 that the company has officially shipped its first PowerEdge server using Nvidia’s Blackwell AI chips.

“(We) were the first to bring a GB200 model (a server using Nvidia’s most advanced Blackwell configuration) to the market,” Clarke said on the call. “Blackwell is in production. It will continue to ramp up and we will be ready.”

Overall, Dell’s results for the third quarter ended November 1 were mixed. Its profit of $2.15 per share was higher than the $2.05 expected, but its quarterly revenue of $24.4 billion fell below the $24.6 billion expected, according to consensus data from Bloomberg.

Laura Bratton is a reporter for Yahoo Finance. Follow her on @LauraBratton5.

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