HPE Boosts Annual Forecasts on Strong AI Server Demand, Shares Dip

Hewlett Packard Enterprise (HPE) reported third-quarter results that surpassed Wall Street expectations and raised its full-year financial forecasts, citing robust demand for its artificial intelligence servers and networking gear. Despite the strong performance and upgraded outlook, the company's shares fell approximately 8% in extended trading.

Earnings Beat and Upgraded Guidance

HPE announced third-quarter revenue of $12.21 billion, a 33.6% increase year-over-year and ahead of analyst estimates of $11.91 billion, according to the report. Adjusted earnings per share (EPS) came in at $1.11, beating the consensus forecast of 93 cents.

Driven by this momentum, the company significantly lifted its financial outlook for fiscal 2026 and 2027:

• Fiscal 2026 Revenue Growth: Forecast raised to a range of 34% to 37%, up from the previous estimate of 29% to 33%.
• Fiscal 2026 Adjusted EPS: Now projected to be between $3.75 and $3.85, an increase from the prior range of $3.35 to $3.45.
• Fiscal 2027 Revenue Growth: Guidance was increased to 13% to 17%, from 8% to 12%.

AI Serves as Key Growth Driver

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The strong results reflect surging enterprise investment in the high-powered servers required to build and train AI models. In an interview with Reuters, CFO Marie Myers said, "It’s clear to us that the market, the tailwinds in AI, particularly the adoption of AI in the enterprise, is really starting to settle in."

Myers added that HPE expects enterprise AI adoption to fuel growth beyond the current fiscal year. The company's performance follows similar strong forecasts from competitors like Dell and Super Micro, underscoring a broad-based boom in AI infrastructure spending. HPE also announced an expanded partnership with Oracle to deploy its Juniper Networking equipment in Oracle's AI data centers.

Supply Constraints Persist

Despite the strong demand, HPE noted that supply chain issues remain a challenge. "Demand is far outstripping supply," Myers told Reuters, identifying memory as the primary bottleneck, followed by NAND flash storage, CPUs, and drives.

To mitigate these constraints, HPE has reportedly entered into longer-term supply agreements to secure better access to critical components.