As the AI boom gains speed, the number of companies riding the wave of enterprise spending is expanding. Case in point: Hewlett Packard Enterprise has sharply increased its financial outlook after reporting record quarterly results, benefiting from vast enterprise investment in AI infrastructure and networking gear.
The company reported fiscal second-quarter revenue of $10.68 billion, a 40% increase from the prior year and far above analyst expectations. Adjusted earnings reached $0.79 per share, significantly ahead of consensus forecasts. Investors responded enthusiastically, sending HPE shares more than 30% higher in after-hours trading.
The results were strong enough that HPE raised several financial targets beyond levels it had previously expected to achieve by fiscal 2028, effectively moving portions of its long-term plan forward by roughly two years.
On-Premise Compute and Networking
A major driver of the quarter was demand for servers and networking equipment used to support AI deployments. While hyperscalers continue to invest massive sums in AI infrastructure, HPE said enterprise customers are deploying AI workloads within their own environments, particularly applications built around emerging agentic AI systems that extend worker productivity.
The company’s traditional server business delivered particularly strong performance. Server revenue reached approximately $5.45 billion, substantially exceeding analyst estimates.
Networking emerged as another standout segment. Revenue in the division climbed a remarkable 148% year over year to $2.7 billion, aided by contributions from the company’s expanded networking portfolio following the Juniper Networks acquisition. HPE now expects networking revenue growth for fiscal 2026 to reach between 72% and 75%.
Cloud and AI-related revenue increased 23% to $7.7 billion during the quarter, reflecting continued demand for systems designed to support model training, inference, and enterprise AI workloads.
HPE said its AI backlog now exceeds $6.3 billion, with government agencies and large enterprises accounting for the majority of committed business. The company expects a substantial portion of those orders to convert into revenue during the second half of the fiscal year, with shipments accelerating toward the fourth quarter.
A Favorable Backdrop
The broader AI buildout continues to provide an exceptionally favorable backdrop for vendors like HPE. Tech giants such as Google and Microsoft are expected to spend somewhere north of $700 billion on AI-related infrastructure in 2026. This is after 2025’s record-setting $410 billion, which seemed astronomical last year. This gargantuan investment is of course creating great opportunities for suppliers of servers, networking equipment, storage systems, and supporting technologies.
Not that everything is easy: HPE management also highlighted ongoing pressure from elevated memory prices, a challenge facing much of the AI hardware sector. HPE, to its credit, said it has managed the environment through long-term supply agreements and selective pricing adjustments.
For the full fiscal year, HPE raised its adjusted earnings outlook to $3.35 to $3.45 per share, up from a prior range of $2.30 to $2.50. The company also increased its free cash flow forecast to at least $3.5 billion and now expects annual revenue growth of 29% to 33%.
Supporting the financial results, HPE recently introduced a new generation of ProLiant servers built around NVIDIA’s Vera CPU architecture. The systems are designed for demanding AI and data-intensive workloads, including agentic AI applications that require high-performance processing. The New York Stock Exchange is among the organizations planning to deploy the new platform.
Big picture, HPE’s stellar financial results reveal that enterprise AI spending is expanding beyond experimentation and into large-scale infrastructure deployments. For enterprise AI spending, it appears that a rising tide lifts all boats.
