HPE Boosts Annual Forecasts as AI, Networking Spur Revenue Growth
Hewlett Packard Enterprise Surpasses Expectations Amid AI-Driven Demand
By Juby Babu
Sept 2 (Reuters) - Hewlett Packard Enterprise 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.
Stock Market Reaction
Shares of the company, however, fell 8% in extended trading.
AI and Networking Fueling Growth
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 Trends
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.
Executive Insights on AI Adoption
"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.
Strategic Partnerships and Supply Chain
Collaboration with Oracle
HPE on Wednesday also announced an expansion to its collaboration with Oracle to help scale the software giant's global AI infrastructure, deploying HPE Juniper Networking equipment across Oracle's AI data centers.
Supply Chain Constraints
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.
Component Shortages
"Demand is far outstripping supply."
Financial Performance and Forecasts
Upgraded Revenue and Earnings Outlook
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.
Fiscal 2027 Projections
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.
Quarterly Results
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.
Industry Context
HPE's results follow strong forecasts from rivals Dell and Super Micro 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)
