Hewlett Packard Enterprise (NYSE:HPE) delivered record second-quarter results on Monday, prompting the company to bring forward key long-term financial objectives by two years as surging investment in AI data centres drives demand for its server and networking solutions.
The strong performance sent HPE shares up around 28% in premarket trading on Tuesday.
Revenue and Earnings Beat Expectations
The company, which competes with Dell (NYSE:DELL) and Super Micro Computer (NASDAQ:SMCI), reported quarterly revenue of $10.68 billion, representing year-on-year growth of 40% and comfortably exceeding analysts’ consensus forecast of $9.79 billion.
Adjusted earnings came in at 79 cents per share, well ahead of Wall Street expectations of 53 cents per share.
Outlook Upgraded Following Strong Demand
Reflecting continued momentum across its business, HPE increased its fiscal 2026 revenue growth forecast to a range of 29% to 33%, compared with previous guidance of 17% to 22%.
The company also lifted its expectations for annual growth in its networking division, now forecasting expansion of 72% to 75%, versus an earlier range of 68% to 73%.
“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,” said Antonio Neri, president and CEO of HPE.
HPE also raised its fiscal 2026 adjusted earnings-per-share guidance to between $3.35 and $3.45, up from its prior outlook of $2.30 to $2.50. Management noted that its updated targets for adjusted EPS and free cash flow now exceed the levels previously projected for fiscal 2028.
Traditional Server Business Drives Growth
Analysts at Wolfe Research highlighted the strength of HPE’s core server operations as a key contributor to the earnings beat.
“Like Dell last week, HPE beat expectations significantly on Traditional Server sales,” Wolfe Research analysts commented. “We believe customers are rushing to secure supply ahead of memory price hikes (and concerns about availability).”
The company said demand from enterprise customers remained particularly strong, helping to support profitability and cash generation during the quarter.
New 2027 Targets Introduced
Alongside its upgraded near-term outlook, HPE unveiled a new growth framework for fiscal 2027.
The company is targeting revenue growth of between 8% and 12%, adjusted EPS growth of 12% to 16%, and free cash flow of at least $4.5 billion.
Chief Financial Officer Marie Myers said the quarter’s performance was driven largely by the strength of HPE’s traditional enterprise server business.
“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, executive vice president and CFO of HPE.
Analysts Turn More Bullish
Following the results, Bank of America sharply increased its price target on HPE shares, raising it to $80 from $38.
The bank said the latest performance demonstrated a “growth inflection driven by agentic AI.”
“We see potential upside to F27 on topline growth due to the strength of demand, cont. inflation/pricing, and further wins in Networking,” Bank of America analysts wrote.
The upgraded targets and stronger-than-expected results underscore growing investor confidence that HPE is benefiting from the rapid expansion of AI infrastructure spending, positioning the company for sustained growth over the coming years.