Hewlett Packard Enterprise reported fiscal second-quarter earnings and revenue that beat estimates amid lowered expectations on Wall Street. HPE stock edged up on Wednesday.
The maker of computer servers, networking equipment and data storage systems reported fiscal Q2 earnings after the market close on Tuesday.
For the April quarter, HPE earnings fell 10% to 38 cents on an adjusted basis. The company's core computer server business has struggled with margin pressures. April quarter revenue rose 6% to $7.6 billion, the company said.
Analysts expected HPE earnings of 33 cents a share on sales of $7.45 billion.
AI Server Sales Growth, Margins
Wall Street analysts have been focused on artificial intelligence-related server revenue growth in HPE's data center business. Competition has heated up with Dell Technologies in AI servers.
HPE said fiscal Q2 revenue from AI servers rose to $1 billion from $900 million in the previous quarter.
"HPE's AI backlog strengthened sequentially to $3.2 billion," said Goldman Sachs analyst Michael Ng in a report. "According to the company, strength in AI systems was driven by both sovereign and enterprise, with enterprise customers representing one-third of new AI orders. On a forward basis, HPE sees its AI server pipeline as multiples of its current backlog, and expects AI systems revenue to grow double-digits year-over-year in fiscal Q3 due to the completion of a large deal. In addition, the company believes it should benefit from its more disciplined approach to the AI server business, where it has primarily focused on higher-margin enterprise and sovereign customer segments."
Another growing business has been HPE's Greenlake cloud computing platform.
HPE Stock Earnings: Guidance Tops Views
For the current quarter ending in July, the company forecast adjusted EPS in a range of 40 cents to 45 cents per share versus estimates of 41 cent profit. HPE said it expects revenue of $8.35 billion vs. estimates of $8.22 billion.
On the stock market today, HPE stock edged up a fraction to 17.77 in morning action. Shares were down 17% in 2025 prior to the HPE earnings report.
At Raymond James, analyst Simon Leopold maintained a buy rating on HPE stock.
"HPE has prioritized profits, particularly in the AI market, and this contrasts with its closest competitors (Dell)," he said in a report. "We consider this a smart strategy that can play into its strength with enterprises and high performance computing."
The Department of Justice in January filed a lawsuit to block HPE's $14 billion acquisition of Juniper Networks. The DOJ said that the companies' proposed transaction would reduce competition, resulting in higher prices, reduced innovation and fewer choices for companies and consumers.
HPE has told analysts it still expects the deal to close.
HPE and Juniper compete in the wireless LAN market versus Cisco Systems.
Heading into the HPE earnings report, the tech stock had a Composite Rating of 67 out of a best-possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
