HPE's AI Backlog Is Exploding. Wall Street Still Hasn't Fully Caught Up.
Retail investors bought as much Hewlett Packard Enterprise in two trading sessions as they had in the prior eleven months combined, and they were still late.
HPE's stock had already gained more than 60% in a single month before this week's earnings dropped and its latest results reinforced growing confidence in the company's AI and infrastructure strategy.
The inference engine running the numbers
HPE makes money selling the hardware that powers AI, but the real margin driver isn't graphics processing units. Corporate customers are choosing central processing unit (CPU)-based servers to run AI locally and securely on-premises, and those traditional server orders grew triple digits in bookings during the quarter.
CEO Antonio Neri noted, "Orders more than doubled, significantly outpacing revenue, resulting in a record company backlog."
Neri also addressed the concern every bull faces, specifically that a surge in orders is just customers double-booking, as happened during COVID. His answer was direct. "We don't see that at all. We have no cancellations."
Revenue for the quarter hit $10.7B, up 40% year-over-year, while the Cloud and AI segment cleared revenue of $7.71B.
The Juniper Networks acquisition, closed in July 2025 after regulatory delays, added a third durable revenue stream.
Server sales alone jumped 33% while networking revenue surged 148% year-over-year, giving HPE stickier enterprise relationships across both compute and connectivity.
Not everyone is climbing aboard
Piper Sandler acknowledged what it called "this tidal wave" but told clients it prefers to be in "other boats." The firm's hesitation points to something real, since HPE is partly riding a broad enterprise IT refresh cycle, and that tailwind doesn't belong to HPE alone.
Supply chain risk is the other pressure point. Server makers, including HPE, have been passing higher costs for supply-constrained memory chips directly to customers.
If that shortage eases, pricing power fades with it, and the margin story gets harder to defend. Piper Sandler's caution isn't wrong. It's just a risk the bulls need to price honestly.
The discount that still makes the case
HPE's 12-month forward price-to-earnings ratio sits at 15.66, well below Dell Technologies' 23.92. At least 12 brokerages raised their price targets after earnings, landing at a median of $65, up from $26.50 before the report, per LSEG data.
That's the market catching up, not getting ahead of itself. The FY2026 adjusted earnings per share guidance of $3.40 blew past Wall Street's $2.43 consensus, and management went further by issuing an early FY2027 revenue growth target of ~10%, against analyst expectations of 5.3%.
Neri said HPE offered that two-year forward look specifically to demonstrate the "durability of this momentum." A company signaling confidence that far out, while trading at a discount to its closest peer, is making a statement the valuation hasn't fully absorbed.
Morgan Stanley framed the setup cleanly, noting that "customers are absorbing materially higher server prices with little evidence of demand destruction." HPE isn't a glamour stock. It never was.
