HPE Earnings, Shares Surge on AI and Networking Demand

HPE shares surged after the company reported stronger-than-expected fiscal second-quarter results, powered by booming demand for artificial intelligence infrastructure, networking equipment, and servers.

HPE beats Q2 expectations

The company reported revenue of $10.7 billion for the quarter ended April 30, a 40% increase from a year earlier and well ahead of Wall Street expectations. Adjusted earnings came in at 79 cents per share, easily topping analyst forecasts of 53 cents.

According to CNBC, the performance marked HPE’s largest earnings-per-share beat since 2018. The results helped drive the stock up nearly 30% as investors reacted to the company’s stronger outlook and accelerating growth.

“HPE delivered an exceptional quarter with record-breaking revenue, higher-than-anticipated profitability, and increased free cash flow, reflecting strong execution and healthy demand across the business,” HPE President and CEO Antonio Neri said in the company’s earnings release.

Networking revenue surges after Juniper acquisition

One of the standout areas of the quarter was HPE’s networking division, which benefited from the company’s acquisition of Juniper Networks and growing demand for AI-related infrastructure.

Networking revenue climbed 148.2% year over year to $2.7 billion. Within that segment, data center networking revenue surged 233.3% to $320 million, while campus and branch networking revenue rose 50.2% to $1.3 billion. 

Neri said, “Customers continue to invest in modernizing their infrastructure and scaling AI, and our performance shows the strength of our combined networking portfolio and the value we are delivering to our shareholders.”

Cloud and AI revenue also posted strong gains, rising 22.9% to $7.7 billion. Server sales accounted for the largest portion of that business, increasing 32.7% to $5.5 billion.

AI and server demand drive growth

Executives pointed to sustained customer spending on AI infrastructure as a key driver behind the results.

Speaking to CNBC, Neri said traditional server bookings have risen by triple digits and that the company is carrying the largest backlog in its history. Industry analysts also noted strength in HPE’s traditional server business.

“Like Dell last week, HPE beat expectations significantly on Traditional Server sales,” Wolfe Research analysts wrote, according to Investing. The analysts added that customers may be accelerating purchases amid concerns about memory costs and supply availability.

HPE raises fiscal 2026 guidance

The strong quarter prompted HPE to significantly raise its expectations for the rest of fiscal 2026.

The company now expects annual revenue growth between 29% and 33%, up from its previous forecast of 17% to 22%. HPE also raised its adjusted earnings outlook to a range of $3.35 to $3.45 per share, compared with its earlier forecast of $2.30 to $2.50. 

The company said the updated projections now exceed the financial targets it previously expected to reach in fiscal 2028.

“We drove high profitability and cash generation this quarter through continued operational discipline as well as executing ahead of schedule against Juniper Networks and Catalyst cost synergies,” said Marie Myers, HPE’s executive vice president and chief financial officer.

Fiscal 2027 framework signals continued momentum

HPE also introduced a fiscal 2027 growth framework, forecasting revenue growth of 8% to 12%, adjusted earnings growth of 12% to 16%, and free cash flow of at least $4.5 billion.

With record revenue, stronger profitability, and rising AI-related demand, HPE is entering the second half of fiscal 2026 with growing momentum.

The company expects third-quarter revenue between $11.5 billion and $12.1 billion, above analyst expectations, while continuing to benefit from customer investments in AI systems, networking infrastructure, and enterprise servers.