Dell shares plunge 7% on margin pressure

Dell Technologies Inc. saw its stock drop 7% to $100.54 on Friday, following a mixed earnings report that left investors uneasy. The stock is now down 45% from its record high in May 2024. Despite announcing shareholder-friendly measures — including a $10 billion increase in its stock buyback program and a dividend hike — Dell’s outlook on profit margins raised concerns, reports Business Insider. The primary issue weighing on investor sentiment is the company’s guidance for a one-percentage-point decline in gross profit margin. This dip is largely attributed to the high cost of Nvidia’s Blackwell GPUs, which power Dell’s artificial intelligence servers. Even with a $9 billion product backlog for AI servers and solid revenue guidance, worries over falling profitability dominated market reactions. Margin Pressure and Investor Scrutiny During Dell’s earnings call on Thursday, Wall Street analysts pressed the company’s management on the shrinking margins. Dell acknowledged the cost pressure from Nvidia’s next-generation GPUs but emphasized opportunities to offset lower-margin hardware with higher-margin products like storage. Still, the focus on declining profitability reflects a broader shift among investors in the AI sector. As the AI boom matures, the market’s attention has turned from top-line revenue growth to bottom-line profits. This shift was also evident in Nvidia’s 8% stock decline on Thursday, despite a 78% year-over-year revenue surge. External Headwinds and Future Outlook Adding to investor anxiety are potential tariffs from the Trump administration, which could further impact Dell’s costs and profit margins. As the company navigates these pressures, its ability to maintain growth while protecting profitability will be closely watched. Dell’s solid revenue projections and strong AI product backlog offer optimism, but falling profit margins and geopolitical risks leave investors cautious about its long-term outlook. Earlier, Australia’s banking sector faced a sharp downturn this week, wiping out $26 billion in market value as concerns over profitability mounted.

Mar 7, 2025 - 18:56

Dell shares plunge 7% on margin pressure

Dell Technologies Inc. saw its stock drop 7% to $100.54 on Friday, following a mixed earnings report that left investors uneasy.

The stock is now down 45% from its record high in May 2024. Despite announcing shareholder-friendly measures — including a $10 billion increase in its stock buyback program and a dividend hike — Dell’s outlook on profit margins raised concerns, reports Business Insider.

The primary issue weighing on investor sentiment is the company’s guidance for a one-percentage-point decline in gross profit margin. This dip is largely attributed to the high cost of Nvidia’s Blackwell GPUs, which power Dell’s artificial intelligence servers. Even with a $9 billion product backlog for AI servers and solid revenue guidance, worries over falling profitability dominated market reactions.

Margin Pressure and Investor Scrutiny
During Dell’s earnings call on Thursday, Wall Street analysts pressed the company’s management on the shrinking margins. Dell acknowledged the cost pressure from Nvidia’s next-generation GPUs but emphasized opportunities to offset lower-margin hardware with higher-margin products like storage.

Still, the focus on declining profitability reflects a broader shift among investors in the AI sector. As the AI boom matures, the market’s attention has turned from top-line revenue growth to bottom-line profits. This shift was also evident in Nvidia’s 8% stock decline on Thursday, despite a 78% year-over-year revenue surge.

External Headwinds and Future Outlook
Adding to investor anxiety are potential tariffs from the Trump administration, which could further impact Dell’s costs and profit margins. As the company navigates these pressures, its ability to maintain growth while protecting profitability will be closely watched.

Dell’s solid revenue projections and strong AI product backlog offer optimism, but falling profit margins and geopolitical risks leave investors cautious about its long-term outlook.

Earlier, Australia’s banking sector faced a sharp downturn this week, wiping out $26 billion in market value as concerns over profitability mounted.