HPE Forecasts Revenue Beat as AI Server Backlog Surpasses $5 Billion
Key Takeaways
- Hewlett Packard Enterprise raised its fiscal 2026 outlook and projected second-quarter revenue above Wall Street estimates, driven by surging demand for AI-optimized servers.
- Despite a slight revenue miss in the first quarter, the company’s growing AI backlog and strong enterprise orders signal a pivot toward high-margin infrastructure growth.
Mentioned
Key Intelligence
Key Facts
- 1Q2 revenue forecast set at $9.6B - $10.0B, exceeding the $9.58B analyst estimate
- 2AI server backlog grew to over $5 billion in Q1, up from $4.7 billion in Q4
- 3Enterprise and sovereign customers now account for 64% of the cumulative AI order mix
- 4Adjusted EPS for Q1 was $0.65, beating the consensus estimate of $0.59
- 5Fiscal 2026 adjusted EPS forecast raised to a range of $2.30 to $2.50
- 6Big Tech firms are projected to spend $630 billion on AI infrastructure this year
| Metric | ||
|---|---|---|
| Revenue | $9.30B | $9.33B |
| Adjusted EPS | $0.65 | $0.59 |
| Q2 Revenue Forecast | $9.6B - $10.0B | $9.58B |
Who's Affected
Analysis
Hewlett Packard Enterprise's latest earnings report and forward-looking guidance underscore the intensifying demand for high-performance computing infrastructure as the global AI arms race enters its next phase. By forecasting second-quarter revenue between $9.6 billion and $10.0 billion—comfortably above the $9.58 billion analyst consensus—HPE is signaling that it has successfully navigated the supply chain constraints that previously hampered the delivery of AI-optimized servers. This optimism is further bolstered by the company’s decision to raise its fiscal 2026 adjusted earnings per share (EPS) forecast to a range of $2.30 to $2.50, reflecting a growing confidence in its operational efficiency and the profitability of its networking segment.
The primary engine of this growth is the company's AI server portfolio, which utilizes high-end chips from Nvidia. HPE’s AI backlog has now surpassed the $5 billion milestone, up from $4.7 billion in the previous quarter. Perhaps more significant than the total dollar value is the composition of this backlog: enterprise and sovereign customers now represent 64% of the cumulative order mix. This shift suggests that the demand for AI infrastructure is broadening beyond the hyperscaler tier—composed of giants like Alphabet, Microsoft, Amazon, and Meta—and into the public sector and traditional corporate environments. As nations seek to build sovereign AI capabilities to ensure data privacy and national security, HPE is positioning itself as a preferred partner for these large-scale, high-security deployments.
HPE’s AI backlog has now surpassed the $5 billion milestone, up from $4.7 billion in the previous quarter.
What to Watch
However, the competitive landscape remains fierce. HPE continues to jostle for market share with rivals like Dell and Super Micro Computer, both of whom have also seen significant tailwinds from the AI boom. While HPE’s stock has struggled year-to-date, falling approximately 9% compared to Dell’s 16.4% gain, the latest earnings beat on adjusted EPS ($0.65 versus $0.59 expected) suggests that HPE is managing its margins more effectively than some analysts had feared. The company is currently navigating a complex cost environment characterized by surging prices for memory chips, which are essential for the high-speed data processing required by AI applications. To protect its bottom line, HPE has been forced to implement strategic price increases, a move that appears to be gaining traction given the double-digit order growth reported across all business segments.
Looking ahead, the trajectory of the server market will be heavily influenced by the projected $630 billion in AI infrastructure spending from Big Tech firms this year. For HPE, the challenge will be to convert its $5 billion backlog into realized revenue while managing the volatility of component costs. Investors should closely monitor the performance of the networking segment, which CEO Antonio Neri highlighted as a key area of strength. If HPE can maintain its momentum with enterprise and sovereign clients, it may bridge the valuation gap with its peers and capitalize on the long-term structural shift toward AI-driven data centers. The raised full-year guidance suggests that management believes the current demand cycle is not just a temporary spike, but a sustained re-rating of the enterprise technology landscape.