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Hewlett Packard Enterprise, a Zacks Rank #1 (Strong Buy), has pulled off one of the more impressive transformations in enterprise technology.
A company long dismissed as a slow-growth legacy hardware vendor has, in the span of about a year, remade itself into a genuine AI infrastructure and networking powerhouse — and the earnings estimates have been racing to catch up ever since.
The market has noticed. Shares have surged roughly 168% year to date, dramatically outpacing the broader technology sector’s return of about 27%. That kind of relative strength, paired with accelerating fundamentals, is precisely what our rating system is built to identify.
A Leading Industry Group
HPE stock is part of the Zacks Computer – Integrated Systems industry group, an 11-stock cohort that currently ranks in the top 31% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics, and are also expected to experience above-average earnings growth – a combination that should lead to higher prices in the future.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Headquartered right outside of Houston, Hewlett Packard Enterprise provides servers, storage, networking, software and services to enterprises, governments and cloud providers worldwide. The business is organized around Networking, Cloud & AI, and Hybrid Cloud, supported by the HPE GreenLake platform that delivers IT as a consumption-based service.
The pivotal event was the Juniper Networks acquisition, which closed roughly a year ago and cleared its final legal hurdle in August when a federal court approved the company’s settlement with the Department of Justice. Juniper transformed the scale and quality of HPE’s networking business — the highest-margin part of the portfolio — and management reports integration is running ahead of schedule, with $600 million in annual run-rate synergies targeted by the end of fiscal 2028.
Alongside that, HPE (HPE - Free Report) has built a credible AI franchise spanning ProLiant servers co-engineered with NVIDIA, turnkey AI Factory deployments and Private Cloud AI solutions.
Earnings Trends and Future Estimates
The fiscal third quarter, reported earlier this month, was outstanding on every line. Revenue reached a record $12.21 billion, up 34% year over year and above the high end of guidance, topping the Zacks Consensus Estimate by 0.99%. Non-GAAP earnings of $1.11 per share crushed the 95-cent consensus by roughly 17% and rose more than 150% from a year ago.
The profitability story is the more remarkable one. Non-GAAP operating profit of $1.98 billion more than doubled, with operating margin expanding 770 basis points to 16.2% and non-GAAP gross margin reaching 40.4% against 29.9% a year earlier.
Free cash flow of nearly $1 billion was the highest third quarter in company history. HPE has now surpassed the Zacks Consensus Estimate in each of the trailing four quarters, averaging a 19.6% surprise.
Demand is outrunning shipments. Orders grew 42%, backlog hit a record, AI systems orders reached $2.4 billion (up more than 30% sequentially) and AI systems backlog climbed to $6.8 billion. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, and it announced an expanded, multiyear collaboration with Oracle to supply routing and switching for a gigawatt-scale AI cloud build-out.
Management responded by raising guidance twice over. Fiscal 2026 revenue growth is now pegged at 34-37% with non-GAAP EPS of $3.75-$3.85 and free cash flow of at least $3.75 billion. The fiscal 2027 framework moved to 13-17% revenue growth, a 14-15% operating margin, EPS of $4.40-$4.60 and free cash flow of at least $5 billion.
Analysts have followed quickly: estimates for the current fiscal year have climbed 11.73% over the past two months. The Zacks Consensus Estimate now stands at $3.81 per share, reflecting better than 96% growth relative to the prior year.
Image Source: Zacks Investment Research
Let’s Get Technical
HPE has been one of the strongest large-cap performers in technology this year. This is exactly the kind of stock we want to include in our portfolio — one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how shares reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, the hallmark of a healthy bull trend, with momentum building steadily throughout 2026.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, HPE has recently witnessed sharp upward revisions. As long as this trend remains intact (and HPE continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Backed by a leading industry group and a flawless record of recent earnings beats, it’s not difficult to see why this transformation story has captured investor attention. Currently, HPE sports the highly coveted Zacks Rank #1 (Strong Buy).
With a record backlog, a $3.5 billion hyperscaler win in hand, and more Juniper synergies still to come, HPE remains one of the best stories in the market. Be sure to put it on your watchlist.
View the Zacks #1 Rank List
Bull of the Day: Hewlett Packard Enterprise (HPE)
Hewlett Packard Enterprise, a Zacks Rank #1 (Strong Buy), has pulled off one of the more impressive transformations in enterprise technology.
A company long dismissed as a slow-growth legacy hardware vendor has, in the span of about a year, remade itself into a genuine AI infrastructure and networking powerhouse — and the earnings estimates have been racing to catch up ever since.
The market has noticed. Shares have surged roughly 168% year to date, dramatically outpacing the broader technology sector’s return of about 27%. That kind of relative strength, paired with accelerating fundamentals, is precisely what our rating system is built to identify.
A Leading Industry Group
HPE stock is part of the Zacks Computer – Integrated Systems industry group, an 11-stock cohort that currently ranks in the top 31% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics, and are also expected to experience above-average earnings growth – a combination that should lead to higher prices in the future.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Headquartered right outside of Houston, Hewlett Packard Enterprise provides servers, storage, networking, software and services to enterprises, governments and cloud providers worldwide. The business is organized around Networking, Cloud & AI, and Hybrid Cloud, supported by the HPE GreenLake platform that delivers IT as a consumption-based service.
The pivotal event was the Juniper Networks acquisition, which closed roughly a year ago and cleared its final legal hurdle in August when a federal court approved the company’s settlement with the Department of Justice. Juniper transformed the scale and quality of HPE’s networking business — the highest-margin part of the portfolio — and management reports integration is running ahead of schedule, with $600 million in annual run-rate synergies targeted by the end of fiscal 2028.
Alongside that, HPE (HPE - Free Report) has built a credible AI franchise spanning ProLiant servers co-engineered with NVIDIA, turnkey AI Factory deployments and Private Cloud AI solutions.
Earnings Trends and Future Estimates
The fiscal third quarter, reported earlier this month, was outstanding on every line. Revenue reached a record $12.21 billion, up 34% year over year and above the high end of guidance, topping the Zacks Consensus Estimate by 0.99%. Non-GAAP earnings of $1.11 per share crushed the 95-cent consensus by roughly 17% and rose more than 150% from a year ago.
The profitability story is the more remarkable one. Non-GAAP operating profit of $1.98 billion more than doubled, with operating margin expanding 770 basis points to 16.2% and non-GAAP gross margin reaching 40.4% against 29.9% a year earlier.
Free cash flow of nearly $1 billion was the highest third quarter in company history. HPE has now surpassed the Zacks Consensus Estimate in each of the trailing four quarters, averaging a 19.6% surprise.
Demand is outrunning shipments. Orders grew 42%, backlog hit a record, AI systems orders reached $2.4 billion (up more than 30% sequentially) and AI systems backlog climbed to $6.8 billion. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, and it announced an expanded, multiyear collaboration with Oracle to supply routing and switching for a gigawatt-scale AI cloud build-out.
Management responded by raising guidance twice over. Fiscal 2026 revenue growth is now pegged at 34-37% with non-GAAP EPS of $3.75-$3.85 and free cash flow of at least $3.75 billion. The fiscal 2027 framework moved to 13-17% revenue growth, a 14-15% operating margin, EPS of $4.40-$4.60 and free cash flow of at least $5 billion.
Analysts have followed quickly: estimates for the current fiscal year have climbed 11.73% over the past two months. The Zacks Consensus Estimate now stands at $3.81 per share, reflecting better than 96% growth relative to the prior year.
Image Source: Zacks Investment Research
Let’s Get Technical
HPE has been one of the strongest large-cap performers in technology this year. This is exactly the kind of stock we want to include in our portfolio — one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how shares reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, the hallmark of a healthy bull trend, with momentum building steadily throughout 2026.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, HPE has recently witnessed sharp upward revisions. As long as this trend remains intact (and HPE continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Backed by a leading industry group and a flawless record of recent earnings beats, it’s not difficult to see why this transformation story has captured investor attention. Currently, HPE sports the highly coveted Zacks Rank #1 (Strong Buy).
With a record backlog, a $3.5 billion hyperscaler win in hand, and more Juniper synergies still to come, HPE remains one of the best stories in the market. Be sure to put it on your watchlist.