By Jaspreet Singh
June 1 (Reuters) – Hewlett Packard Enterprise posted record second-quarter results on Monday, prompting it to accelerate its long-term financial goals by two years, as expansion of AI data centers boosts demand, sending its shares up 36% in extended trading.
HPE, which competes with Dell and Super Micro Computer, is benefiting as customers increasingly buy its servers and networking products to power AI applications such as ChatGPT, amid higher memory chip prices.
CFO Marie Myers told Reuters that HPE is managing the dynamic pricing environment through a combination of factors, including long-term agreements that extend into 2027.
She said the company has been “agile” in passing on cost increases to customers, having started some price adjustments late last year.
U.S. tech giants including Alphabet and Amazon plan to spend over $700 billion on AI infrastructure this year, which would bolster demand for suppliers such as HPE.
That helped HPE to raise fiscal 2026 revenue growth outlook to between 29% and 33%, up from its prior expectations of 17% to 22%. It now expects annual networking segment revenue growth of 72% to 75%, a sharp increase from 68% to 73%.
HPE reported record revenue growth of 40% to $10.68 billion, beating LSEG-compiled analysts’ average estimate of $9.79 billion. The adjusted earnings per share of 79 cents topped expectations of 53 cents.
“The strength of the quarter was largely driven by the performance of our traditional server business, which is really focused on enterprise customers,” Myers said. She said the key difference this quarter was the anticipated shift where enterprises significantly adopted agentic AI as a core workload.
HPE said its revised fiscal 2026 ranges for adjusted EPS and free cash flow are higher than what it projected the company would achieve by fiscal 2028.
It raised annual adjusted EPS in the range of $3.35 to $3.45, compared with an earlier projection of $2.30 to $2.50. It had anticipated adjusted EPS of at least $3.00 for fiscal 2028.
The company reported more than $6.3 billion in total AI backlog, with 61% of this mix secured from government and large business clients.
“We do expect to ship and convert significantly more AI revenue in the back half of the year. We expect that actually to peak in Q4,” Myers said.
HPE also introduced a fiscal 2027 growth framework, expecting revenue growth of 8% to 12%, above estimates of 5.8%.
Separately, the company said it appointed Elliott Investment Management partner Christopher Hsu to its board on Monday under their cooperation agreement, which was announced in July last year.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shreya Biswas)
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