Nvidia · Google · OpenAI · Fortune Technology
Dell’s AI boom is real, but so is the profit margin hit nobody is pricing
Compiled by KHAO Editorial — aggregated from 1 source. See llms.txt for citation guidance.
◌ Single Source
Michael Dell is having a banner year.
Key facts
- But there’s a quieter story beneath the revenue growth: Dell’s gross margin dropped by 26% since the company first reported AI optimized server revenue at the end of February 2025, even as AI now
- 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’s total revenue, suggesting that AI-optimized servers
- James Fish, a senior research analyst at Piper Sandler covering digital infrastructure, told Fortune that a hit to gross margin only drags down profitability if the growth stops adding gross profit
- 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
Summary
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. But there’s a quieter story beneath the revenue growth: Dell’s 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 consumer revenue of laptops and computers. 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’s total revenue, suggesting that AI-optimized servers have lower gross margins than Dell’s traditional products.
James Fish, a senior research analyst at Piper Sandler covering digital infrastructure, told Fortune that a hit to gross margin only drags down profitability if the growth stops adding gross profit dollars.