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HPE Stock Dips Despite Strong AI Demand
3 Sep
Summary
- AI networking orders reached $700 million in the quarter.
- Company raised fiscal 2026 earnings outlook significantly.
- Supply constraints impact recognized revenue recognition.
Hewlett Packard Enterprise (HPE) saw its stock fall approximately 6%, even as the company presented an enhanced outlook for the upcoming fiscal year. This market reaction occurred despite a notable increase in AI infrastructure orders and a raised earnings forecast.
During the recent quarter, HPE announced operating margin of 16.2% and GAAP earnings per share of $1.06. Networking revenue reached $2.9 billion, with a significant $700 million in orders specifically tied to AI networking. Cloud and AI revenues collectively amounted to $9 billion, including nearly $1.6 billion from AI systems.
Management indicated that customer orders continue to exceed recognized revenue, primarily due to existing constraints in memory components and wafer capacity. To address future growth, HPE lifted its fiscal 2026 earnings per share projection to a range of $3.75 to $3.85, and boosted its free cash flow target to at least $3.75 billion.
Looking ahead to fiscal 2027, HPE now anticipates revenue growth between 13% and 17%, with free cash flow expected to be at least $5 billion. The company also emphasized an expanded collaboration with Oracle, focusing on large-scale AI infrastructure solutions. Despite the optimistic outlook, persistent supply limitations and anticipated margin normalization may lead investors to remain cautious.
