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Can HPE's AI Infrastructure Strength Fuel Its Future Growth?
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Key Takeaways
HPE is benefiting from AI infrastructure demand and triple-digit server order growth.
HPE entered Q3 with a $5.9 billion AI Systems backlog led by enterprise and sovereign customers.
HPE is strengthening AI infrastructure with Juniper and record campus networking demand.
Hewlett Packard Enterprise (HPE - Free Report) is benefiting from the modernization of traditional IT infrastructure and huge capex investment in artificial intelligence. HPE’s foray beyond traditional server architecture to accommodate compute, networking, storage, security, private cloud, virtualization, software for AI data centers and AI fabs is enabling it to monetize at a rapid pace.
Simultaneously, the demand for traditional servers, led by the end of the server technology cycle, has emerged as a major growth driver, with orders increasing by triple digits year over year. Enterprises are replacing aging infrastructure while also investing in servers for AI inferencing. These two tailwinds caused a multiplier effect, driving the second quarter of fiscal 2026 revenues to reach $10.7 billion.
Looking ahead, as AI moves into production, millions of enterprises will need infrastructure to run inference close to their proprietary data and applications. HPE is also benefiting directly from AI systems demand, entering the third quarter with $5.9 billion in AI Systems backlog, primarily from enterprise and sovereign customers. Juniper acquisition has also strengthened HPE in campus networking, data-center switching, routing and security.
HPE is uniquely positioned as it is one of the few companies that provide networking solutions as part of a wider AI infrastructure support. HPE’s self-driving networking capabilities, powered by agentic AI, further differentiate the portfolio.
Furthermore, HPE’s Campus and Branch orders reached record levels, Wi-Fi 7 sales increased more than sevenfold, data-center switching orders rose nearly 20%, and routing orders increased nearly 30% on a normalized basis in the second quarter of fiscal 2026. HPE is also benefiting from disruption in virtualization, with VM Essentials customer count increasing 43% during the first half of fiscal 2026.
How Competitors Fare Against HPE Stock
HPE competes with Super Micro Computer (SMCI - Free Report) and Dell Technologies (DELL - Free Report) in the AI infrastructure market. However, HPE’s ability to package compute, storage, networking and services into pre-configured solutions can reduce deployment complexity for enterprises and sovereign customers while giving it an edge over its competitors.
Super Micro Computer is on track to scale rack production capacity to more than 6,000 AI racks per month by the end of fiscal 2026, including 3,000 direct liquid cooling racks monthly. SMCI is already shipping 150kW AI racks in volume and preparing 250kW and 500kW rack solutions to support future high-density AI training and inference workloads. Dell Technologies is a major supplier of servers and storage systems, with a broad customer base across enterprises and cloud providers. Its scale, established distribution and service offerings give it an edge in winning large contracts.
HPE’s Price Performance, Valuation and Estimates
HPE has gained 106.4% in the year-to-date period. However, the company has underperformed the Zacks Computer - Integrated Systems industry, which has returned 115.4% in the same time frame.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.35, below the industry’s 6.08. The discounted valuation is also reflected by the Zacks Value Score of A.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin indicates year-over-year growth rate of 75.8%. Estimates have remained unchanged for the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Can HPE's AI Infrastructure Strength Fuel Its Future Growth?
Key Takeaways
Hewlett Packard Enterprise (HPE - Free Report) is benefiting from the modernization of traditional IT infrastructure and huge capex investment in artificial intelligence. HPE’s foray beyond traditional server architecture to accommodate compute, networking, storage, security, private cloud, virtualization, software for AI data centers and AI fabs is enabling it to monetize at a rapid pace.
Simultaneously, the demand for traditional servers, led by the end of the server technology cycle, has emerged as a major growth driver, with orders increasing by triple digits year over year. Enterprises are replacing aging infrastructure while also investing in servers for AI inferencing. These two tailwinds caused a multiplier effect, driving the second quarter of fiscal 2026 revenues to reach $10.7 billion.
Looking ahead, as AI moves into production, millions of enterprises will need infrastructure to run inference close to their proprietary data and applications. HPE is also benefiting directly from AI systems demand, entering the third quarter with $5.9 billion in AI Systems backlog, primarily from enterprise and sovereign customers. Juniper acquisition has also strengthened HPE in campus networking, data-center switching, routing and security.
HPE is uniquely positioned as it is one of the few companies that provide networking solutions as part of a wider AI infrastructure support. HPE’s self-driving networking capabilities, powered by agentic AI, further differentiate the portfolio.
Furthermore, HPE’s Campus and Branch orders reached record levels, Wi-Fi 7 sales increased more than sevenfold, data-center switching orders rose nearly 20%, and routing orders increased nearly 30% on a normalized basis in the second quarter of fiscal 2026. HPE is also benefiting from disruption in virtualization, with VM Essentials customer count increasing 43% during the first half of fiscal 2026.
How Competitors Fare Against HPE Stock
HPE competes with Super Micro Computer (SMCI - Free Report) and Dell Technologies (DELL - Free Report) in the AI infrastructure market. However, HPE’s ability to package compute, storage, networking and services into pre-configured solutions can reduce deployment complexity for enterprises and sovereign customers while giving it an edge over its competitors.
Super Micro Computer is on track to scale rack production capacity to more than 6,000 AI racks per month by the end of fiscal 2026, including 3,000 direct liquid cooling racks monthly. SMCI is already shipping 150kW AI racks in volume and preparing 250kW and 500kW rack solutions to support future high-density AI training and inference workloads. Dell Technologies is a major supplier of servers and storage systems, with a broad customer base across enterprises and cloud providers. Its scale, established distribution and service offerings give it an edge in winning large contracts.
HPE’s Price Performance, Valuation and Estimates
HPE has gained 106.4% in the year-to-date period. However, the company has underperformed the Zacks Computer - Integrated Systems industry, which has returned 115.4% in the same time frame.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.35, below the industry’s 6.08. The discounted valuation is also reflected by the Zacks Value Score of A.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin indicates year-over-year growth rate of 75.8%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
HPE currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.