Dell Technologies Inc. (DELL) reports third-quarter earnings Tuesday after the close, and if history is any guide, shareholders might want to brace themselves. The stock has an unfortunate habit of selling off after earnings lately, dropping after five of the last six reports with an average decline of 9.1%. Not exactly the kind of pattern you want to see heading into results.

The big question this time around: Will growth in AI PCs and server infrastructure be enough to overcome mounting concerns about margins and memory costs?

What Wall Street Expects

Analysts are looking for third-quarter revenue of $27.13 billion, up from $24.13 billion in last year's third quarter. On the earnings front, the Street expects $2.47 per share, compared to $2.15 a year ago.

Dell has a decent track record of beating estimates, topping revenue forecasts in seven of the past 10 quarters, including the last two. Earnings per share have also beaten in seven of the past 10 quarters, including the most recent second quarter.

The company's own guidance calls for revenue between $26.5 billion and $27.5 billion, with earnings per share in the $2.45 to $2.55 range. So we're talking about results that should land right in line with expectations, assuming nothing goes sideways.

The Margin Problem Nobody Wants to Talk About

Here's where things get interesting. Bank of America analyst Wamsi Mohan expects a mostly in-line quarter but has concerns about what's happening under the hood. He recently lowered his price target from $170 to $160 while maintaining a Buy rating.

"The key focus for investors will be margin resilience heading into C26 given immense increase in memory costs," Mohan said.

Translation: Memory prices are going through the roof, and that's a problem for a hardware company. Mohan thinks Dell will likely slash operating expenses to offset those rising memory costs, which should help keep guidance stable. He also noted that "we are in early stages of AI adoption and tailwinds from PC refresh and AI PCs."

Morgan Stanley's Erik Woodring is even less optimistic. He recently double downgraded Dell from Overweight all the way to Underweight, dropping his price target from $144 to $110. His worry? Rising DRAM and NAND memory costs could hammer margins and make the current valuation look stretched.

Freedom Capital Markets Chief Market Strategist Jay Woods pointed out that this double downgrade might be weighing on the stock heading into the report. He highlighted that concerning pattern: "Shares have traded lower after five of the last six reports, including four consecutively." Woods called Dell's current position a "very interesting pivot point" technically.

The AI Story: Dell's Saving Grace?

Despite the margin worries, Dell's AI business is absolutely booming. After second-quarter results, Vice Chairman Jeff Clarke revealed that the company had shipped $10 billion of AI solutions in just the first half of fiscal 2026, surpassing all shipments from the entire previous fiscal year.

Clarke said demand for AI solutions was "exceptional" and helped drive 69% year-over-year revenue growth in the Servers and Networking segment during the second quarter. That's the good news. The not-so-good news? Commercial Client revenue only grew 2% year-over-year, showing a massive gap between the company's two biggest segments.

Dell raised its AI server shipment guidance for the fiscal year after those second-quarter results, along with overall revenue and earnings guidance. Investors will be watching closely to see if the company raises guidance again or if margin pressure forces a more cautious outlook.

Project Maverick Delay

One wild card: Reports emerged that Dell has postponed the launch of "Project Maverick," an AI infrastructure initiative. The first phase, originally scheduled for February 2026, has been pushed to May 2026. Expect questions about this on the earnings call, and Dell will need to explain whether this signals broader problems or just normal project timeline adjustments.

What Happens Next

With AI PCs representing a potentially huge growth opportunity and server demand staying strong, Dell has a compelling story to tell. But the margin pressure from memory costs is real, and Wall Street is clearly nervous about whether the company can maintain profitability while navigating those headwinds.

Dell stock was up 11.06% to $127.99 on Monday, trading within its 52-week range of $66.25 to $168.08. Shares are up 11.06% year-to-date in 2025, though that recent run-up means expectations might be even higher heading into the print.

Given the stock's tendency to sell off after earnings and the margin concerns swirling around, this quarter's results could be particularly telling. Dell needs to show that its AI momentum can overcome rising costs, or that unfortunate post-earnings pattern might continue.