HPE’s $1.2 billion order from Vultr puts its AI networking strategy to the test

Hewlett Packard Enterprise (HPE) secured a significant $1.2 billion contract with cloud provider Vultr, marking its first order for the AMD Helios platform. The deal, announced during HPE's Networking Investor Day, comprises HPE Networking scale-up switching and software. The contract signifies HPE's confidence in its AI networking strategy and suggests AI infrastructure demand could become a higher-margin business.

HPE raised its fiscal 2027 networking revenue growth outlook to the high-teens to low-20% range, up from the previous 14% to 17% forecast. The company's executive, Rami Rahim, stated that orders grew 3.5 times faster than revenue in the third quarter, indicating that supply constraints may be limiting sales. HPE doubled its networking supply-purchase commitments to convert backlog into revenue.

The company now anticipates fiscal 2026 networks for AI cumulative orders to exceed $3 billion, surpassing the earlier $2.5 billion to $3 billion estimate. HPE's CEO, Antonio Neri, and CFO, Marie Myers, expect AI-driven networks to be a significant growth engine for the company, with margins expected to reach the mid- to high-20% range in fiscal 2027.