HPE Raises Annual Forecasts as Record AI Demand Drives 34% Revenue Growth and $3.1 Billion in Orders

HPE raises annual forecasts as AI, networking demand lifts quarterly revenue

Sept 2 (Reuters) - Hewlett Packard Enterprise (HPE.N), opens new tab raised its annual forecasts on Wednesday after reporting quarterly results that beat Wall Street expectations, as surging AI-related demand across networking and servers drove growth across its business. HPE's high-powered servers, which are essential for building and training AI models, have been in high demand from cloud computing giants and large enterprises. Enterprise IT infrastructure spending is strengthening, driven by continued investment in AI, server refresh cycles and rising demand for data center capacity, Citi analysts have ⁠said. "It's clear to us that the market, the tailwinds in AI, particularly the adoption of AI in the enterprise, is really starting to settle in," CFO Marie Myers told Reuters in an interview. HPE expects enterprise adoption of AI to support growth beyond the current fiscal year, Myers said, after customers spent fiscal 2025 and 2026 testing AI systems and beginning deployments that are showing productivity gains. Myers noted that supply remained constrained, with memory being the main bottleneck, followed ⁠by NAND, CPUs and drives, though HPE has signed longer-term supply agreements to improve access to components. "Demand is far outstripping supply." HPE forecast fiscal 2026 revenue growth of 34% to 37%, up from 29% to 33% previously, and raised its adjusted earnings forecast ⁠to between $3.75 and $3.85 per share, from $3.35 and $3.45. For fiscal 2027, HPE now projects revenue growth of 13% to 17%, up from 8% to 12%, with adjusted EPS growth of 16% ⁠to 20%, versus 12% to 16% forecast previously. Third-quarter revenue grew 33.6% to $12.21 billion, beating estimates of $11.91 billion. HPE earned $1.11 per share on an adjusted basis, ⁠ahead of estimates of 93 cents. HPE's results follow strong forecasts from rivals Dell (DELL.N), opens new tab and Super Micro (SMCI.O), opens new tab as Big Tech's AI spending is set to exceed $730 billion this year. Reporting by Juby Babu in Mexico City; Editing by Shailesh Kuber Our Standards: The Thomson Reuters Trust Principles., opens new tab

Deutsche Bank raises HP Enterprise stock price target on AI demand By Investing.com

Investing.com - Deutsche Bank raised its price target on HP Enterprise stock (NYSE:HPE) to $68 from $62 while maintaining a Buy rating, citing record demand and orders driven by artificial intelligence. The stock currently trades at $51.83, representing potential upside of 31% to the new target, though InvestingPro data suggests the shares are trading above their Fair Value of $48.87, placing HPE on the platform's most overvalued stocks list. The company reported AI orders of $3.1 billion and a backlog of $7.6 billion, with analyst Gianmarco Conti noting that memory availability is the primary supply constraint. HP Enterprise increased its fiscal 2026 guidance to 34-37% revenue growth and non-GAAP diluted net earnings per share of $3.75-$3.85, with free cash flow exceeding $3.75 billion. The company expects Networking revenue to grow 73-74% and Cloud and AI revenue to grow in the mid to high 20% range. HP Enterprise also raised its fiscal 2027 revenue framework to 13-17% from a previous 8-12%. Orders are coming in 3.5 times faster than revenue, indicating the guidance reflects supply-side constraints rather than demand limitations. The guidance does not assume any ramp of the AMD Helios platform, which is expected to begin within the next year. HP Enterprise won a $3.5 billion hyperscaler deal this quarter for internal inferencing workloads and announced a partnership with Oracle to deploy Juniper routers and switches for a gigawatt-scale AI infrastructure buildout. Despite recent volatility, the stock has delivered a 132% return over the past year. For deeper insights into HPE's valuation and growth prospects, investors can access the comprehensive Pro Research Report, one of 1,400+ available for US equities. In other recent news, Hewlett Packard Enterprise (HPE) reported stronger-than-expected fiscal third-quarter 2026 results. The company achieved adjusted earnings of $1.11 per share on revenue of $12.2 billion, surpassing Wall Street's estimates of $0.92 per share and $11.93 billion in revenue. This marks a 34% increase in revenue from the previous year, with non-GAAP earnings per share exceeding $1 for the first time in a single quarter. HPE also reported record quarterly revenue, profit, gross margin, and free cash flow. Despite these positive results, shares fell after hours, indicating investor concerns about future outlook and margin mix. The company's performance has been noted by analysts, but no upgrades or downgrades were mentioned in the recent reports. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

HPE Q3 FY26 slides: record AI demand drives 34% revenue surge By Investing.com

Hewlett Packard Enterprise (NYSE:HPE) presented fiscal third-quarter 2026 results on September 2, 2026, showcasing what the company described as "record quarterly financial results driven by record demand" across its networking and AI infrastructure portfolio. The presentation highlighted revenue of $12.2 billion, up 34% year-over-year, alongside record profitability metrics and a rapidly expanding AI backlog. Despite the strong headline numbers, HPE shares fell 4.07% in after-hours trading to $49.67 from the regular session close of $51.83, suggesting investor caution about the sustainability of margin expansion and the timeline for converting a record order backlog into revenue amid ongoing supply constraints. Quarterly Performance Highlights As shown in the following summary of HPE's third-quarter fiscal 2026 performance, the company achieved record results across multiple financial metrics: The company reported net revenue of $12.2 billion, representing a 34% year-over-year increase that exceeded guidance. Non-GAAP diluted net earnings per share reached $1.11, up 152% year-over-year and marking the first time HPE surpassed $1 in quarterly EPS. Free cash flow hit $958 million, an increase of $168 million compared to the prior-year period, while normalized orders growth accelerated to 42%. The following detailed financial breakdown illustrates the breadth of HPE's record-setting quarter: Non-GAAP gross margin expanded to 40.4%, up 10.5 percentage points year-over-year, driven by what the company described as "pricing discipline and favorable mix." Non-GAAP operating profit reached $2.0 billion, up 155% year-over-year and nearly 40% sequentially, translating to a 16.2% operating margin. Based on these results, HPE raised its fiscal 2026 non-GAAP diluted net EPS guidance by $0.40 to a range of $3.75 to $3.85. Segment Performance Analysis HPE's performance was driven by strength across both major business segments, as illustrated in the following segment breakdown: The Networking segment generated $2.9 billion in revenue, representing a 75% year-over-year increase on an as-reported basis, though growth was 10% on a normalized basis that accounts for the Juniper Networks acquisition. The segment achieved a 22% operating margin with $0.6 billion in operating profit. Orders in the segment increased 36% year-over-year on a normalized basis, significantly outpacing revenue growth. The following detailed view of Networking performance shows acceleration across product categories and customer segments: Data Center Switching and Routing orders grew at high double-digit rates year-over-year, while Campus and Branch orders increased in the low teens. The company highlighted a significant milestone with Networks for AI, booking $0.7 billion in new orders during Q3 and reaching $2.2 billion in cumulative orders. HPE raised its guidance for cumulative Networks for AI orders to a range of $2.5 billion to $3.0 billion by the end of fiscal 2026. The company also announced a gigawatt-scale deal with Oracle for what it described as "one of the industry's largest AI cloud infrastructure buildouts." The Cloud & AI segment demonstrated equally strong performance, as shown in this segment detail: Cloud & AI revenue reached $9.0 billion, up 25% year-over-year, with operating profit of $1.5 billion and a 17% operating margin -- all records for the segment. The company attributed the results to "significant increase in demand for inferencing and agentic AI workloads." AI Systems orders totaled $2.4 billion in the quarter, bringing backlog to $6.8 billion. Traditional server orders surged 75% year-over-year, driven by AI-ready configurations and higher average selling prices. HPE also noted that post-quarter, it was awarded a $3.5 billion inferencing deal with a hyperscaler customer. AI Infrastructure Momentum The company's AI business showed particularly strong momentum, as illustrated in these trend charts tracking orders and backlog over time: AI orders reached a record $3.1 billion in Q3 FY26, with $2.4 billion from AI Systems and $0.7 billion from Networks for AI. Year-to-date AI orders exiting Q3 totaled a record $6.7 billion. More significantly, AI backlog climbed to a record $7.6 billion, comprising $6.8 billion in AI Systems and $0.8 billion in Networks for AI. The company noted that 59% of cumulative AI orders came from sovereign and enterprise customers, indicating diversification beyond hyperscale cloud providers. Strategic Positioning HPE positioned itself at what it described as "the intersection of networking, cloud, and AI," as shown in this strategic framework: The company outlined three core pillars: secure AI-native networking infrastructure powering edge, cloud, and AI deployments; AI-driven cloud infrastructure enabling enterprises to run inferencing and agentic AI applications; and AI infrastructure buildout through networking, compute, and storage at scale for model builders and neo-cloud customers. HPE also highlighted progress on two key strategic initiatives aimed at improving operational efficiency. The Juniper Networks integration remains on track to achieve $600 million in annualized run-rate cost synergies by the end of fiscal 2028, ahead of plan. The company's Catalyst transformation program, described as creating "a leaner, more efficient AI-enabled HPE," is accelerating deployment of agentic AI on HPE's Private Cloud AI platform to drive lower token costs and improved utilization. The company featured its Private Cloud AI solution as a key differentiator, marketing it as a turnkey enterprise-grade AI inferencing platform co-engineered with NVIDIA that delivers up to 60% lower token costs versus public cloud alternatives while maintaining full data sovereignty through the HPE GreenLake cloud experience. Financial Health and Capital Allocation HPE demonstrated strong cash generation and improved financial flexibility, as shown in these cash flow metrics: Cash flow from operations in Q3 reached $1.6 billion, generating $1.0 billion in free cash flow. Year-to-date free cash flow totaled $2.6 billion, supporting the company's raised full-year guidance of at least $3.75 billion. HPE returned over $1 billion to common shareholders year-to-date through $447 million in dividend payments and $568 million in share repurchases. The company's de-leveraging progress exceeded expectations, as illustrated in this leverage ratio trend: HPE's net debt to adjusted EBITDA ratio improved to 1.8x in Q3 FY26 on a trailing twelve-month basis, down from 2.3x in Q2 FY26 and 3.1x in the prior-year period. This achievement surpassed the company's 2.0x target more than one year ahead of its original plan. Operating company net debt declined to $3.2 billion, with total net debt of $14.0 billion and cash and cash equivalents of $6.2 billion. Forward-Looking Guidance HPE provided updated guidance for fiscal 2026 and introduced a framework for fiscal 2027, as detailed in this outlook: For the fourth quarter of fiscal 2026, HPE expects revenue of $13.9 billion to $14.8 billion and non-GAAP diluted net EPS of $1.20 to $1.30. For the full fiscal year 2026, the company projects revenue growth of 34% to 37% (21% to 23% on a normalized basis) and raised non-GAAP diluted net EPS guidance to $3.75 to $3.85. Free cash flow is expected to reach at least $3.75 billion. The company also outlined its fiscal 2027 framework, as shown here: For fiscal 2027, HPE expects consolidated revenue growth of 13% to 17%, with Networking growing 14% to 17% and Cloud & AI expanding 14% to 18%. Non-GAAP diluted net EPS is projected to grow 16% to 20%, while free cash flow is anticipated to reach at least $5.0 billion, up from at least $3.75 billion in fiscal 2026. The company noted this framework is "grounded in record backlog and durable demand" but does not include potential upside from opportunities such as the AMD Helios program. Challenges and Market Realities While the presentation emphasized record results and strong demand, the company acknowledged ongoing challenges that help explain the after-hours stock decline. Supply constraints in DDR5, DDR4, NAND, and wafer capacity continue to limit HPE's ability to convert its record order backlog into revenue, creating a gap between order growth of 42% and revenue growth of 34%. Management also indicated that operating margins may moderate in the fourth quarter due to a higher mix of AI systems and pricing dynamics, a factor that likely contributed to investor caution despite the strong third-quarter beat. The company's inventory increased to support anticipated demand, which could pressure cash conversion if supply and demand timing shifts. The integration of Juniper Networks while simultaneously scaling AI infrastructure sales increases operational complexity and execution risk. Additionally, large AI and inferencing deals may take time to convert into revenue, potentially creating quarter-to-quarter volatility in results. Despite these near-term challenges, HPE's presentation emphasized a multi-year AI infrastructure buildout cycle, positioning the company's current backlog and pipeline as indicators of sustained growth potential rather than a one-time demand spike. The diversification of AI orders across sovereign, enterprise, and hyperscale customers suggests broader market adoption beyond initial training infrastructure deployments. Full presentation: This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.