(Feb 28): Dell Technologies Inc gave a strong outlook for sales of servers optimised for artificial intelligence (AI), though investors remained concerned about the profitability of these products.

For the year ending in January 2026, Dell expects to ship US$15 billion (RM67 billion) worth of AI servers. That’s roughly a 50% jump over the US$9.8 billion it shipped in the fiscal year that ended Jan 31.

The need for computing to run AI tools has led to a boom for makers of high-powered servers like Dell, Super Micro Computer Inc and Hewlett Packard Enterprise Co. Dell’s backlog for AI servers jumped to US$9 billion after the end of the fourth quarter after deals with Elon Musk’s xAI and other customers, chief operating officer Jeff Clarke said Thursday in a statement. Earlier this month, Bloomberg reported that Dell was securing a massive US$5 billion server order with Musk’s startup.

Still, Dell said its gross margin in the fiscal year will decline one percentage point from a year earlier. AI hardware has squeezed the company’s profitability, largely due to the need for expensive chips from Nvidia Corp.

On a call with analysts Thursday, Dell executives were asked multiple questions about how AI servers impact the company’s profit margins. While server deployments with Nvidia’s newest Blackwell chips are lower-margin, Dell will be able to sell higher-margin products such as storage along with the servers, Clarke said during the call.

The shares initially jumped as much as 6.6% in extended trading when the results were released before giving up those gains and falling about 3%. The stock closed at US$107.83 in New York and has declined 6.4% this year.

Total earnings, excluding some items, will be about US$9.30 a share on sales of US$101 billion to US$105 billion in the fiscal year ending in January 2026, the Texas-based company said in the statement. Analysts, on average, projected profit of US$9.24 a share on revenue of US$103 billion.

“We’re well positioned to capture growth across every segment of our business,” Clarke said. “Our prospects for AI are strong, as we extend AI from the largest cloud service providers, into the enterprise at-scale, and out to the edge with the PC.”

In the fiscal fourth quarter, sales jumped 7.2% to US$23.9 billion. Analysts, on average, estimated US$24.6 billion. Profit, excluding some items, was US$2.68 a share in the period, which ended Jan 31.

Dell’s infrastructure unit generated US$11.4 billion, compared with the average estimate of US$11.8 billion. Of that, US$2.1 billion came from the shipment of AI servers, while Wall Street expected US$2.77 billion.

Dell’s computer business increased 1% to US$11.9 billion, fuelled by a 12% drop in consumer PC sales. Business-oriented PC sales rose 5% to US$10 billion.

A recovery in the long-ailing personal computer market has started to materialise in recent quarters. PC shipments ticked up 1.8% in the fourth quarter of 2024, according to IDC, an industry research firm.

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