Against the backdrop of surging artificial intelligence demand, major global AI server manufacturers are facing a common challenge: despite significant revenue growth, profit margins continue to narrow.

As companies including Hewlett Packard Enterprise (HPE), Dell, and Super Micro Computer have released their financial results, a stark reality has emerged: while AI server orders are surging, the high costs of NVIDIA chips and intense market competition are making hardware manufacturers' profit margins exceptionally thin.

HPE's third-quarter earnings released Wednesday showed revenue increased 18% year-over-year to $9.14 billion, with earnings per share of $0.44, both exceeding analyst expectations. However, its server division's operating margin fell from 10.8% in the same period last year to 6.4%.

Facing investor concerns, HPE CEO Antonio Neri urgently reassured the market during the analyst call, promising that margins would recover to approximately 10% by the end of this fiscal quarter. This statement temporarily stabilized the stock price, with HPE shares rising 1.5% in after-hours trading.

This trend is spreading across the industry, with the fundamental cause being that the core of AI servers—high-performance GPU chips—are almost monopolized by NVIDIA. These expensive chips account for most of the server costs, leaving the vast majority of value in the upstream supply chain.

The "Growing Revenue, Not Profits" Dilemma

For server original equipment manufacturers (OEMs), the current AI market presents an embarrassing situation of "growing revenue without growing profits."

Besides HPE, whose profit margins have been nearly "halved," another server giant Super Micro Computer faces the same challenge. Despite its fourth-quarter 2025 revenue soaring 46.59% year-over-year, gross margins have declined to 9.7%.

Dell faces a similar situation, with its second-quarter 2026 gross margin falling from 22% in the same period last year to 18.7%, which the company attributed to pricing pressure from AI servers.

This "high revenue, low profit" phenomenon is becoming a common predicament for AI hardware manufacturers. In stark contrast to server manufacturers' meager profits is chip giant NVIDIA's remarkable profitability.

NVIDIA, with its 98% share in the data center GPU market, holds absolute pricing power. Its second-quarter 2026 financial results showed a non-GAAP gross margin of 72.7%, several times that of server manufacturers. Further data shows that its latest Blackwell GPU platform can achieve profit margins of 77.6% in AI inference workloads.

This disparate profit distribution clearly demonstrates the current state of the AI value chain:

NVIDIA: Gross margins exceeding 70% Dell: Gross margins around 18.7% HPE: Server division operating margins fluctuating between 6.4% and 10% Super Micro Computer: Gross margins down to 9.7%

Behind the Margin Pressure

Server manufacturers face continued margin pressure primarily due to three structural factors.

First is the high component costs. The core of AI servers is NVIDIA's GPUs, which are expensive and in tight supply, giving OEM manufacturers virtually no bargaining power. One report even noted that in the cloud service provider sector, hardware OEM manufacturers might lose $1 for every $7.9 of AI hardware revenue they earn, highlighting the asymmetric cost structure.

Second is intense market competition. To capture market share, server manufacturers have engaged in fierce price wars. The practice of using substantial discounts to secure large customer orders further erodes already thin profits. For example, Dell's Infrastructure Solutions Group operating margin has fallen to 8.8%.

Finally, there's complex supply chain management. To meet urgent delivery demands for AI components, manufacturers must bear additional logistics costs, while inventory management challenges further increase operational costs and profitability pressure.

For investors, the growth story of AI server manufacturers is becoming increasingly complex. While these companies have very optimistic revenue forecasts, sustainability faces severe challenges. Analysts warn that maintaining profit margins at 10-11% levels like Super Micro Computer will be insufficient to support long-term technological innovation or provide attractive returns to shareholders.

In this AI chess game, hardware assemblers play more of a "logistics" role, while NVIDIA is the true "big winner."