{"id":2576,"date":"2026-06-30T21:14:39","date_gmt":"2026-06-30T21:14:39","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=2576"},"modified":"2026-06-30T21:14:39","modified_gmt":"2026-06-30T21:14:39","slug":"dells-ai-boom-is-real-but-so-is-the-profit-margin-hit-nobody-is-pricing-in","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=2576","title":{"rendered":"Dell\u2019s AI boom is real, but so is the profit margin hit nobody is pricing in"},"content":{"rendered":"<div>\n<p>His eponymous company is a key supplier in the data center buildout, selling Nvidia-based servers, racks, cooling and support to CoreWeave and xAI, while working with Nvidia, Google and OpenAI on systems that companies can use to run advanced software. Dell blew past revenue expectations last month, and Michael Dell\u2019s net worth skyrocketed to $217 billion off the back of his company\u2019s surging stock price, making him the fifth-richest person in the world..\u00a0<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=2574\">Gulf\u00a0bond markets\u202fextend their rally despite uncertain outlook<\/a><\/p>\n<p>But there\u2019s a quieter story beneath the revenue growth: Dell\u2019s gross margin dropped by 26% since the company first reported AI optimized server revenue at the end of February 2025, even as AI now brings in 10 times the revenue of laptops and computers.\u00a0<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>The company acknowledged in its most recent earnings call that AI servers drove the 18.1% gross margin now that AI makes up 37% of Dell\u2019s total revenue, suggesting that AI-optimized servers have lower gross margins than Dell\u2019s traditional products. Analysts have been debating whether Dell selling more AI servers will lead to a durable source of profit or whether Dell is taking on a much bigger but lower-margin role as the company that packages expensive Nvidia-based systems for the AI buildout.\u00a0<\/p>\n<p>\u201cNot everything is a red flag, but it is a sign of a changing business model,\u201d Aswath Damodaran, a New York University Stern School of Business finance professor so revered for his equity analysis that he\u2019s been nicknamed \u201cthe dean of valuation,\u201d told <em>Fortune<\/em> over email. \u201cLower gross margins indicate worse unit economics, and to the extent that this is not temporary, it has to be built into Dell\u2019s continuing profitability story.\u201d<\/p>\n<p>Eighteen analysts on the Street have buy ratings on the stock, nevertheless. One gave Fortune a bull case on why this trajectory is sustainable.<\/p>\n<p>James Fish, a senior research analyst at Piper Sandler covering digital infrastructure, told <em>Fortune<\/em> that a hit to gross margin only drags down profitability if the growth stops adding gross profit dollars. He doesn\u2019t see that happening with Dell right now, he added, even if its partner Nvidia captures more profit in the space.\u00a0<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=2571\">AI stocks are in an \u2018air pocket\u2019 and Meta and Microsoft are being traded like \u2018bear market names that cannot be owned,\u2019 top analyst says<\/a><\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cIt becomes a problem if it becomes that we\u2019re really not adding to the bottom line at all,\u201d Fish said, but he noted the compressed gross margin situation is \u201cone of the topics being debated\u201d amid surging growth.<\/p>\n<p>A Dell spokesperson told <em>Fortune <\/em>that its AI business \u201chas grown on top of a very strong core business\u201d and that the company\u2019s goal is \u201cto maintain gross margin rate stability in each of our lines of business.\u201d Dell previously told investors in February 2025 that it expected AI servers to decrease the margin rate.\u00a0<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>Dell is not the first tech hardware company to face margin pressure.<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>Hewlett-Packard Enterprise has also seen AI server demand boost revenue while weighing on gross margins, and Cisco has also seen its product margins squeezed by sales mix and higher memory costs, showing that strong hardware demand can still come with a profit tradeoff. Alternatively, IBM left behind the PC business in the early 2000s, later abandoning hardware almost entirely to focus on high-margin software instead.\u00a0\u00a0<\/p>\n<div>\n<div><\/div>\n<\/div>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cI think over the next few years you do have some pressure on that line from a percentage perspective because of this mixed shift,\u201d Fish said.\u00a0<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=2563\">It\u2019s so hot in Switzerland that yodelers are standing in fountains<\/a><\/p>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The company\u2019s gross margin declined by 26% since Dell first reported AI server revenue over a year ago as servers surpass computers and laptops.<\/p>\n","protected":false},"author":1,"featured_media":2575,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[366],"tags":[],"class_list":["post-2576","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-dell-technologies"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - 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