Hewlett Packard Enterprise reported record results for the second quarter, prompting management to bring forward long-term financial goals by two years as demand for AI-capable data center hardware surged.
Shares reacted strongly to the results, jumping 23% in after-hours trading and finishing the regular session about 9% higher. The company, which competes with Dell and Super Micro Computer in the server and data center equipment market, is benefiting from customers accelerating purchases of servers and networking gear to support generative AI applications amid a constrained memory chip environment.
Management pointed to large-scale spending by major U.S. technology firms as a reinforcing tailwind. Those cloud and internet companies, including Alphabet and Amazon, plan to commit more than $700 billion to AI infrastructure this year, a level of investment that supports suppliers of compute and networking components.
HPE raised its fiscal 2026 revenue growth outlook to a range of 29% to 33%, up from the prior guidance of 17% to 22%. The company also lifted its expected annual revenue growth for the networking segment to 72% to 75%, up from an earlier range of 68% to 73%.
For the quarter, total revenue increased 40% to $10.68 billion, a company record that exceeded the LSEG-compiled analyst consensus of $9.79 billion. Adjusted earnings per share came in at $0.79, outpacing the $0.53 expected by analysts.
CFO Marie Myers said the quarter's strength was largely rooted in HPE's traditional server business focused on enterprise customers, and highlighted a notable shift as enterprises began adopting agentic AI as a core workload.
On its profit and cash flow outlook, HPE said its revised fiscal 2026 ranges for adjusted EPS and free cash flow now exceed the levels it had previously expected to reach by fiscal 2028. The company raised its annual adjusted EPS guidance to $3.35 to $3.45, compared with the earlier projection of $2.30 to $2.50; management had earlier targeted adjusted EPS of at least $3.00 for fiscal 2028.
Looking beyond 2026, HPE introduced a fiscal 2027 growth framework that calls for revenue growth of 8% to 12%, adjusted EPS growth of 12% to 16%, and free cash flow of at least $4.5 billion.
CEO Antonio Neri said customers are continuing to modernize infrastructure and scale AI, reinforcing the secular demand drivers that are lifting HPE's top-line and margin outlooks.
Implications
- Server and data center hardware vendors see near-term demand strength as AI workloads become a core enterprise priority.
- Large cloud providers' significant infrastructure spending materially benefits suppliers of memory, servers, and networking equipment.
- Supply constraints in memory may shape the cadence of shipments and pricing power across the vendor ecosystem.