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Can HPE Sustain Its AI Infrastructure Momentum Amid the Capex Cycle?
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Key Takeaways
HPE's AI Systems backlog climbed 14% to $6.8 billion, with orders up more than 30% sequentially.
Networking orders rose 36%, while Networks-for-AI orders reached $700 million in the quarter.
HPE raised its fiscal 2026 Networks-for-AI target to $2.5-$3 billion amid a $7.6 billion AI backlog.
Hewlett Packard Enterprise (HPE - Free Report) is increasingly positioning itself as a key beneficiary of enterprise AI infrastructure spending, with strong demand across AI systems, networking and hybrid cloud solutions. The company’s expanding backlog and rising networking orders indicate that AI-related demand remains ahead of its ability to convert orders into shipments.
HPE’s AI infrastructure portfolio spans servers, storage, networking and private cloud capabilities, allowing customers to deploy AI workloads across data centers and hybrid environments. In the third quarter of fiscal 2026, Cloud & AI revenues rose 25.4% year over year to $9.04 billion, while server revenues increased 35.3%.
HPE’s AI Systems orders reached $2.4 billion, up more than 30% sequentially, and AI Systems backlog climbed 14% to $6.8 billion. HPE also secured a $3.5 billion inferencing deal with a hyperscaler after quarter-end, highlighting the increasing scale of enterprise AI deployments.
Networking is emerging as another important AI growth engine. HPE has expanded its exposure to data center switching, routing, campus and branch networking, as well as security. Networking revenues reached $2.89 billion in the third quarter, while normalized orders increased 36%, materially faster than revenue growth.
Networks-for-AI orders totaled $700 million during the quarter and $2.2 billion cumulatively, prompting management to raise its fiscal 2026 target to $2.5-$3 billion. These factors have led HPE to report a record total AI backlog of $7.6 billion exiting the quarter, while management indicated that its broader pipeline remains multiples of backlog.
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. Dell Technologies is a major supplier of servers and storage systems, with a broad customer base across enterprises and cloud providers.
Dell provides pre-integrated GPU servers, storage, networking and software for enterprise AI and competes head-to-head with HPE for Fortune 1000 AI deployments. DELL’s scale, established distribution and service offerings make it a formidable competitor.
HPE’s Price Performance, Valuation and Estimates
Hewlett Packard Enterprise shares have rallied 129.9% year to date, outperforming the Zacks Computer - Integrated Systems industry’s growth of 110.6%.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
Despite the appreciation in the share price, HPE trades at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.41, below the industry’s 4.72.
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 of 98.4%. Estimates have been revised upward in the past seven days.
View the Zacks #1 Rank List
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Can HPE Sustain Its AI Infrastructure Momentum Amid the Capex Cycle?
Key Takeaways
Hewlett Packard Enterprise (HPE - Free Report) is increasingly positioning itself as a key beneficiary of enterprise AI infrastructure spending, with strong demand across AI systems, networking and hybrid cloud solutions. The company’s expanding backlog and rising networking orders indicate that AI-related demand remains ahead of its ability to convert orders into shipments.
HPE’s AI infrastructure portfolio spans servers, storage, networking and private cloud capabilities, allowing customers to deploy AI workloads across data centers and hybrid environments. In the third quarter of fiscal 2026, Cloud & AI revenues rose 25.4% year over year to $9.04 billion, while server revenues increased 35.3%.
HPE’s AI Systems orders reached $2.4 billion, up more than 30% sequentially, and AI Systems backlog climbed 14% to $6.8 billion. HPE also secured a $3.5 billion inferencing deal with a hyperscaler after quarter-end, highlighting the increasing scale of enterprise AI deployments.
Networking is emerging as another important AI growth engine. HPE has expanded its exposure to data center switching, routing, campus and branch networking, as well as security. Networking revenues reached $2.89 billion in the third quarter, while normalized orders increased 36%, materially faster than revenue growth.
Networks-for-AI orders totaled $700 million during the quarter and $2.2 billion cumulatively, prompting management to raise its fiscal 2026 target to $2.5-$3 billion. These factors have led HPE to report a record total AI backlog of $7.6 billion exiting the quarter, while management indicated that its broader pipeline remains multiples of backlog.
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. Dell Technologies is a major supplier of servers and storage systems, with a broad customer base across enterprises and cloud providers.
Dell provides pre-integrated GPU servers, storage, networking and software for enterprise AI and competes head-to-head with HPE for Fortune 1000 AI deployments. DELL’s scale, established distribution and service offerings make it a formidable competitor.
HPE’s Price Performance, Valuation and Estimates
Hewlett Packard Enterprise shares have rallied 129.9% year to date, outperforming the Zacks Computer - Integrated Systems industry’s growth of 110.6%.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
Despite the appreciation in the share price, HPE trades at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.41, below the industry’s 4.72.
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 of 98.4%. Estimates have been revised upward in the past seven 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.