Dell Technologies Inc. (DELL) stock plunged around 5% in pre-market trading on Friday, following the company's mixed fourth-quarter results and lower-than-expected guidance for the first quarter of fiscal 2026.

The technology giant reported better-than-expected earnings for the fourth quarter, with adjusted earnings per share of $2.68, beating analysts' estimates of $2.53. However, the company's revenue of $23.9 billion fell short of expectations, and the outlook for the first quarter came in below Wall Street's projections.

Dell forecasted revenue for the first quarter of fiscal 2026 to be in the range of $22.5 billion to $23.5 billion, compared to analysts' average estimate of $23.6 billion. The company also expects its adjusted gross margin rate to decline by approximately 100 basis points in fiscal 2026, citing a higher mix of AI-optimized servers and competitive pressures.

The increasing demand for AI servers, which typically carry lower margins, is expected to weigh on Dell's profitability in the coming year. The company's Chief Operating Officer, Jeff Clarke, acknowledged the competitive landscape, stating, "Blackwell margins are lower than Hopper margins, as deals are large and competitive."

Despite the challenges, Dell remains optimistic about its prospects in the AI market, aiming to ship at least $15 billion worth of AI servers in fiscal 2026. The company believes its ability to provide end-to-end solutions, including engineering, services, and financing capabilities, will help differentiate it from competitors and extract value in the AI server market.