(Reuters) -Dell forecast fourth-quarter revenue and profit above Wall Street estimates on Tuesday, as increasing investments in data centers to support artificial intelligence applications boost demand for its servers.

Shares of the company rose around 3% in extended trading.

The company, which raised its annual revenue and profit expectations, offers AI-optimized severs equipped with Nvidia's ( NVDA ) powerful chips.

Its strong forecasts could ease investor concerns about the margin hit due to intense competition in the AI server market from rivals such as Super Micro Computer ( SMCI ) and the high costs of building the products.

Dell now expects $25 billion in fiscal 2026 revenue from AI server shipments, up from its prior view of $20 billion. The company had previously raised the forecast in August.

Having secured deals with the U.S. Department of Energy and Abu Dhabi's AI firm G42, the company also counts Elon Musk's AI startup xAI and CoreWeave ( CRWV ) among its customers.

Dell expects fourth-quarter revenue between $31.0 billion and $32 billion, above analysts' average estimate of $27.59 billion, according to data compiled by LSEG.

Adjusted profit forecast of $3.50 per share was also above estimates of $3.21.

The company raised its annual revenue forecast to between $111.2 billion and $112.2 billion from its earlier expectations of $105 billion to $109 billion. It expects adjusted earnings per share of $9.92, up from its prior projection of $9.55.

"AI momentum is accelerating in the second half of the year, leading to record AI server orders of $12.3 billion and an unprecedented $30 billion in orders year to date," Chief Operating Officer Jeff Clarke said in a statement.

Third-quarter revenue of $27.01 billion slightly missed estimates of $27.13 billion.

Dell's revenue for infrastructure solutions group, which includes its storage, software and server offerings, rose 24% to $14.11 billion, while that of the client solutions group - home to PCs - rose 3% to $12.48 billion.

Adjusted profit for the quarter ended October 31 was $2.59 per share, above estimates of $2.47.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Arun Koyyur)