Dell has predicted PC sales will be flat next year, despite the potential of the AI PC and the slow replacement of Windows 10.
“We have not completed the Windows 11 transition,” COO Jeffrey Clarke said during Dell’s Q3 earnings call on Tuesday. “In fact, if you were to look at it relative to the previous OS end of support, we are 10-12 points behind at that point with Windows 11 than we were the previous generation.”
Clarke said that means 500 million PCs can’t run Windows 11, while the same number didn’t need an upgrade to handle Microsoft’s latest desktop OS. The COO therefore predicted the PC market will “flourish”, but then defined the word as meaning “roughly flat” sales despite Dell chalking up mid-to high single digits PC sales growth over the last year.
Dell can survive flat PC growth because its enterprise AI hardware portfolio is booming. The company booked orders for $12.3 billion worth of AI servers in the quarter ended October 31st, and shipped machines valued at $5.6 billion. Revenue from servers and networking kit reached $10.1 billion for the quarter, up 37 percent year-over-year.
“Our five-quarter pipeline continue to grow sequentially across neo-clouds, sovereigns and enterprises, and remains multiples of our backlog, even when accounting for the robust demand we’ve seen,” Clarke told investors on the earnings call. “As expected, AI server profitability improved sequentially,” he added.
Buyers are becoming more interested in traditional servers, too, often to consolidate existing fleets into denser rigs. That means more memory and storage in each system, and a challenge for Dell given the exploding price of RAM and NAND, caused by memory-makers shifting production to the high-margin products needed to support AI workloads and reducing manufacturing capacity for more anodyne kit.
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Clarke said Dell will do “everything we can to minimize the impact,” drawing on extreme supply chain management skills learned during the COVID-19 pandemic and in more recent months coping with Trump administration’s rapidly shifting tariff policies.
“Our model gives us tremendous flexibility, whether that is to reprice, how we set out quotes, whether that’s to reconfigure, redirect to different products, the ability to determine how long price will be in effect, the ability to understand where we’re going to drive demand to and change our demand generation vehicles to drive that,” Clarke said.
Dell reported $27 billion of revenue in the quarter, an eleven percent year-over-year jump, and told investors to expect $31.5 billion in Q4 and $111.7 billion in FY 2026, jumps of 32 percent and 17 percent respectively.
The company thinks servers will be a big part of that improvement, because 70 percent of its customers run 14th generation servers or even older machines. Dell’s current machines are its 17th generation and each one replaces between three and seven older machines – and has a higher average selling price due to the aforementioned increase in memory and storage.
Buyers looking to modernize their servers therefore need Dell to successfully exercise its self-professed supply chain skills, or revisit their budgets. ®
