Hewlett Packard Enterprise accelerated its long-term financial targets by two years after reporting second-quarter results that surpassed Wall Street expectations, as enterprise customers ramped up spending on servers and networking equipment needed to support artificial-intelligence workloads.
The company reported second-quarter revenue of $10.68 billion, a 40% increase year-over-year, well above the $9.8 billion analysts polled by FactSet had expected. Adjusted earnings came in at 79 cents a share, exceeding the 58-cent consensus estimate. HPE posted a profit of $624 million, reversing a year-earlier loss of $1.05 billion.
The results prompted HPE to raise its full-year 2026 outlook significantly. The company now projects free cash flow of at least $3.5 billion and full-year revenue growth between 29% and 33%, up from a prior range of 17% to 22%. Adjusted earnings guidance moved to between $3.35 and $3.45 a share, up from a previous range of $2.30 to $2.50.
The revised guidance puts HPE on track to reach targets it had set for fiscal year 2028 — specifically, at least $3.00 in adjusted earnings per share and $3.5 billion in cash flow — two years ahead of schedule.
Chief Financial Officer Marie Myers attributed the acceleration to rising demand for server capacity to support agentic AI tools, which require more complex and intensive computational workloads than earlier AI applications.
“I think we’ve all been waiting to see that adoption of AI start to take place in the enterprise, and I’d say this is probably the sign that many of us were waiting for, and it certainly kicked in this quarter,” Myers said in an interview with the Wall Street Journal.
HPE’s networking segment reported particularly strong growth, with revenue rising 148% to $2.69 billion. Data center networking revenue more than tripled year-over-year to $320 million. Security revenue within the networking segment rose 155% to $273 million, and routing revenue climbed to $775 million from $1 million a year earlier, largely reflecting the company’s prior acquisition of Juniper Networks.
The company’s cloud and AI revenue rose 23% to $7.71 billion, with server revenue within that segment growing 33% to $5.45 billion.
Myers pointed to rival Dell Technologies’ results from the previous week — Dell reported an 88% increase in first-quarter revenue and lifted its own outlook — as further evidence that AI-driven compute demand is accelerating across the technology sector.
“This is probably one of the most critical inflection points that we’ve ever seen,” Myers said.
HPE also issued initial guidance for fiscal year 2027, projecting 8% to 12% revenue growth and 12% to 16% growth in adjusted per-share earnings. For the current third quarter, the company forecast revenue between $11.5 billion and $12.1 billion, with adjusted earnings of 88 to 93 cents a share. Analysts had expected 58 cents in adjusted earnings on $10.92 billion in revenue.
The company’s shares rose 32% in after-hours trading to $62.16 following the results. HPE’s stock had already closed up 9.2% at $47.00 during the regular session and has nearly doubled in value this year.
HPE also said it was adding Elliott Investment Management partner Chris Hsu to its board pursuant to a 2025 cooperation agreement with the activist investor. Hsu has previously served in leadership roles at HPE.