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Published on
August 29, 2025
5 min read
Dell Stock Slides on Weak Margins as the Company Raises Q3 Revenue Forecasts
Dell Technologies stock slid after weak margins on August 29, 2025. According to Yahoo Finance, the shares dropped by about 7%. The share price drop was triggered by the high cost of producing AI-optimized servers and intense competition that overshadowed Dell’s forecast for AI infrastructure demand.
Growing AI Server Demand
Rising demand for Dell AI servers that are capable of handling computational workloads remained a bright spot for the company. The company increased its annual revenue forecast from $15 billion to $20 billion following strong orders from companies such as cloud provider CoreWeave and Elon Musk-owned xAI.
In July 2025, CoreWeave supercharged its US AI infrastructure with a $6 billion investment. The company said the investment would enable it to establish an AI data center in Pennsylvania as part of President Donald Trump’s push to drive U.S. competitiveness in the fast growing sector.
Highlighting factors that contributed to Dell’s weak margins, J.P. Morgan analysts said Dell focused more on fulfilling AI server orders as opposed to maintaining margins. The company did this in an environment where shipping costs, supply chain disruptions, and competitive pricing strategies aimed at winning large customer contracts squeezed its profits.
Should Dell’s pre-market stock drop hold, the PC maker could lose up to $5 billion from its $91 billion market capitalization.
Raised Revenue Forecasts
Dell raised its third-quarter revenue forecasts to the range of $26.5 billion and $27.5 billion, up from its previous estimates of $26.05 billion. The company also increased its annual revenue estimates from the previous range of $101 billion to $105 billion to between $105 billion and $109 billion.
Dell’s new revenue forecasts were driven by growing demand for its AI-optimized servers. As the company raised its revenue forecasts, Dell’s Q2 gross margins dropped to 18.7% compared to the previous year.
The company also missed its 19.6% gross margin estimates and expects its profit per share to stand at $2.45 in the third quarter. Dell’s third-quarter EPS forecast is slightly lower than the projected $2.55.
Dell’s Stock Performance
Dell stock has risen by 16.3% since the beginning of 2025, outperforming its biggest competitor Hewlett Packard Enterprise. Dell stocks trade at 13.2 times profit expectations, which is higher than Hewlett Packard’s 10.8.
On August 28, 2025, Hewlett Packard reported quarterly earnings of $0.75 per share compared to $0.83 per share a year ago. The company’s second-quarter revenue stood at $13.93 billion compared to $13.52 for the same period last year. Hewlett Packard’s continued to advance its product offerings, particularly in AI-powered solutions, which now account for 25% of its product mix.
This growth is complemented by strategic shifts in manufacturing and supply chain diversification, positioning Hewlett Packard to better navigate global market dynamics. From the beginning of 2025, HP shares have lost about 17.2%.
In November 2024, Dell sales missed analyst targets following a slowdown in the personal computer market. The company’s third-quarter earnings showed declining revenue as the computer market stagnated. At the time, Q3 revenues for this business dropped by 1% to stand at $12.1 billion, which was lower than the projected estimates.
