Hewlett Packard Enterprise (HPE) soars as demand for AI servers drives impressive outcomes

Hewlett Packard Enterprise (HPE) soars as demand for AI servers drives impressive outcomes
Hewlett Packard Enterprise (HPE) soars as demand for AI servers drives impressive outcomes

Hewlett-Packard Enterprise (HPE) announced a more than 12% increase in sales as the business exceeded Wall Street forecasts for third-quarter revenue.

Hewlett-Packard Enterprise (HPE.N), which unveiled a new page on Wednesday, reported a boost in sales of more than 12% as the company predicted revenue for the third quarter exceeding Wall Street estimates.

This was due to the growing demand for its AI-optimized servers. Server manufacturers are benefiting from the robust demand for AI systems from companies like HPE, which support power-hungry data centers amid growing investments in generative AI technology. During a post-earnings call, CEO Antonio Neri revealed that the lead times, or the duration between starting and completing a process, for Nvidia’s (NVDA.O.) new tab AI-powered chips are now between six and twelve weeks.

According to Bernstein analysts, this points to the possibility of “very strong shipments over the next quarter or two as they deliver on backlog” for HPE and rival Dell Technologies (DELL.N), which opens a new tab, provided that clients are ready to accept deliveries early. Based on its current price of $19.84, the Texas-based company is expected to increase its market worth by more than $2 billion after impressing investors with its quarterly results.

Following the report, at least eight analysts increased their price targets for the company to between $19 and $23. In comparison to Dell at 16.5 and Super Micro Computer (SMCI.O.) at 23.1, Hewlett-Packard trades at 8.9 times its 12-month future earnings forecasts. LSEG data shows that the company predicted third-quarter revenue of $7.4 billion to $7.8 billion, compared with analysts’ estimates of $7.46 billion.

Its server revenue for the second quarter ended April 30 reached $3.9 billion, up 18% from the same period last year. With a $3.1 billion order backlog, its revenue from AI servers more than doubled to $900 million in a sequential fashion. William Kerwin, an analyst, stated in a note, “We also view AI servers as dilutive to HPE’s margin.” Separately, Dell said last week that increased expenses to produce AI servers will reduce its yearly margins by projecting current-quarter earnings below analysts’ projections.

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