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

Hewlett Packard Enterprise (HPE) announced on Wednesday that it has raised its annual forecasts following a quarter that exceeded Wall Street expectations. The company's growth was driven by robust demand for AI-related products across networking and servers. HPE's high-powered servers, crucial for constructing and training AI models, have been highly sought after by major cloud computing firms and large enterprises.

Enterprise IT infrastructure spending has been bolstered by ongoing investment in AI, server upgrades, and the growing need for data center space, according to Citi analysts. HPE CFO Marie Myers told Reuters that the market benefits from AI tailwinds, particularly the adoption of AI in businesses, are becoming more evident. She added that HPE expects enterprise adoption of AI to drive growth beyond the current fiscal year, as customers have been testing AI systems and initiating deployments that are yielding productivity improvements during fiscal years 2025 and 2026.

HPE also revealed on Wednesday that it is expanding its partnership with Oracle to help scale the software giant's global AI infrastructure, incorporating HPE Juniper Networking equipment into Oracle's AI data centers. CFO Myers noted that supply chains remain constrained, with memory being the primary bottleneck followed by NAND, CPUs, and drives.

However, HPE has secured longer-term supply agreements to enhance access to components. HPE forecasted fiscal 2026 revenue growth of 34% to 37%, an increase from its previous projection of 29% to 33%, and raised its adjusted earnings forecast to between $3.75 and $3.85 per share, up from $3.35 and $3.45. For fiscal 2027, HPE now anticipates revenue growth of 13% to 17%, an increase from its earlier estimate of 8% to 12%, with adjusted EPS growth of 16% to 20%, compared to the previous forecast of 12% to 16%.

HPE's third-quarter revenue grew by 33.6% to $12.21 billion, surpassing analysts' expectations of $11.91 billion. HPE's impressive results align with strong forecasts from competitors Dell and Super Micro, as Big Tech's AI spending is projected to surpass $730 billion this year.