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HPE vs. LITE: Which AI Infrastructure Stock is a Safer Bet Now?
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Key Takeaways
HPE's Cloud & AI revenues climbed 25% to $9 billion, while server revenues rose 35% in Q3 fiscal 2026.
HPE's AI systems backlog reached $6.8B & a $3.5B hyperscaler inferencing deal strengthens its growth outlook.
HPE trades at 1.42X forward sales versus LITE's 9.91X, and carries a Zacks Rank #2.
Hewlett Packard Enterprise (HPE - Free Report) and Lumentum Holdings Inc. (LITE - Free Report) are two prominent AI value chain suppliers benefiting from the expansion of AI infrastructure, but they occupy different parts of the supply chain. While Hewlett Packard Enterprise offers a broad portfolio of rack-scale Total IT Solutions, including complete servers, storage systems, blade servers, subsystems and server management software, Lumentum provides optical and photonic products to Artificial Intelligence/Machine Learning (AI/ML) companies.
With the AI industry growing, both stocks are set to benefit. So, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for HPE Stock
Hewlett Packard Enterprise is benefiting from a broader shift toward AI infrastructure, networking modernization and hybrid cloud. The company is aligning compute, storage and networking with enterprise inferencing, agentic AI and data-intensive workloads. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9 billion, up 25% year over year, with a 17% operating margin.
HPE’s server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems. HPE’s fourth-quarter fiscal 2026 Cloud & AI revenues are expected to grow 60% to 72%. Hewlett Packard Enterprise is integrating compute, storage, networking and cloud management into AI systems and Private Cloud AI solutions for inferencing and agentic workloads.
In the third quarter of fiscal 2026, HPE’s AI systems orders were $2.4 billion, up more than 30% sequentially, while AI systems backlog rose 14% sequentially to $6.8 billion. Private Cloud AI orders increased triple digits year over year, showing wider adoption of HPE’s on-premises AI factory approach. HPE was also awarded a $3.5 billion inferencing deal with a hyperscaler customer.
Hewlett Packard Enterprise is expanding its hybrid cloud operating model through GreenLake, which lets customers manage infrastructure and software across on-premises and cloud environments with consumption-based economics. In the third quarter of fiscal 2026, GreenLake customers increased 18% year over year to 52,000 from 44,000, while management cited higher net retention as customers broadened usage of software and intelligent cloud services.
HPE is also able to keep its margin stable. The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects year-over-year growth of 97%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
The Case for LITE Stock
Lumentum’s cloud and AI exposure is translating into sustained growth, with fourth-quarter fiscal 2026 revenues of $1.01 billion, up 109.3% year over year and 24.5% sequentially. Non-GAAP gross margin reached 50.4% and operating margin rose to 36.6% as utilization and mix improved. Management expects fiscal first-quarter 2027 revenues of $1.225 billion to $1.275 billion and operating margin of 39.5% to 40.5%. Lumentum also now sees fiscal 2028 earnings of $40 per share, supported in part by higher OCS demand.
LITE’s components revenues reached $649.4 million in fourth-quarter fiscal 2026, up 21.8% sequentially and 102.7% year over year, led by scale-out and scale-across products. Narrow linewidth laser assemblies rose more than 130% year over year, while pump lasers grew more than 80%. The shift from 100G to 200G EMLs roughly doubles ASPs, and management expects more than 50% EML unit growth by the December quarter.
LITE’s premium laser quality also supports customer transceiver yields, reinforcing Lumentum’s differentiation as higher-speed optical links scale. Systems revenues increased to $356.9 million in fourth-quarter fiscal 2026, up 29.7% sequentially and 122.6% year over year, with record cloud transceiver shipments and initial 1.6T volumes. Management expects 1.6T adoption to intensify in first-quarter fiscal 2027 and continue through 2027.
Cloud Light is now running above $200 million in quarterly revenues after improving product quality and time to market, while Lumentum is shipping several 1.6T SKUs ahead of major competitors. Some initial 1.6T products also use internal CW lasers, increasing vertical integration. However, Lumentum continues to face competition across AI infrastructure and optical networking. At 1.6T, management says the company is shipping several SKUs ahead of major module competitors after fixing prior quality and time-to-market issues.
Furthermore, LITE’s capacity expansion remains constrained most by time because equipment installation, internal product qualification and customer qualification all carry long lead times. The Zacks Consensus Estimate for LITE’s fiscal 2027 margin reflects year-over-year growth of 147%. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of HPE & LITE
Shares of HPE and LITE have appreciated 144.5% and 123.3%, respectively, in the year-to-date period.
YTD Performance Chart
Image Source: Zacks Investment Research
HPE is trading at a forward 12-month Price-to-Sales ratio of 1.42X, which is above its median of 0.91X, while LITE is trading at a forward sales multiple of 9.91X, below its median of 11.13X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: HPE vs. LITE
HPE offers a broader AI infrastructure portfolio spanning compute, storage, networking and hybrid cloud through GreenLake. Its Cloud & AI revenues grew 25%, server revenues rose 35%, and AI backlog reached $6.8 billion. Although LITE delivers faster growth, HPE’s integrated solutions and enterprise reach support its compelling long-term investment case. Given these factors, HPE would be a prudent investment choice right now. HPE carries a Zacks Rank #2 (Buy), while LITE has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
HPE vs. LITE: Which AI Infrastructure Stock is a Safer Bet Now?
Key Takeaways
Hewlett Packard Enterprise (HPE - Free Report) and Lumentum Holdings Inc. (LITE - Free Report) are two prominent AI value chain suppliers benefiting from the expansion of AI infrastructure, but they occupy different parts of the supply chain. While Hewlett Packard Enterprise offers a broad portfolio of rack-scale Total IT Solutions, including complete servers, storage systems, blade servers, subsystems and server management software, Lumentum provides optical and photonic products to Artificial Intelligence/Machine Learning (AI/ML) companies.
With the AI industry growing, both stocks are set to benefit. So, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for HPE Stock
Hewlett Packard Enterprise is benefiting from a broader shift toward AI infrastructure, networking modernization and hybrid cloud. The company is aligning compute, storage and networking with enterprise inferencing, agentic AI and data-intensive workloads. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9 billion, up 25% year over year, with a 17% operating margin.
HPE’s server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems. HPE’s fourth-quarter fiscal 2026 Cloud & AI revenues are expected to grow 60% to 72%. Hewlett Packard Enterprise is integrating compute, storage, networking and cloud management into AI systems and Private Cloud AI solutions for inferencing and agentic workloads.
In the third quarter of fiscal 2026, HPE’s AI systems orders were $2.4 billion, up more than 30% sequentially, while AI systems backlog rose 14% sequentially to $6.8 billion. Private Cloud AI orders increased triple digits year over year, showing wider adoption of HPE’s on-premises AI factory approach. HPE was also awarded a $3.5 billion inferencing deal with a hyperscaler customer.
Hewlett Packard Enterprise is expanding its hybrid cloud operating model through GreenLake, which lets customers manage infrastructure and software across on-premises and cloud environments with consumption-based economics. In the third quarter of fiscal 2026, GreenLake customers increased 18% year over year to 52,000 from 44,000, while management cited higher net retention as customers broadened usage of software and intelligent cloud services.
HPE is also able to keep its margin stable. The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects year-over-year growth of 97%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
The Case for LITE Stock
Lumentum’s cloud and AI exposure is translating into sustained growth, with fourth-quarter fiscal 2026 revenues of $1.01 billion, up 109.3% year over year and 24.5% sequentially. Non-GAAP gross margin reached 50.4% and operating margin rose to 36.6% as utilization and mix improved. Management expects fiscal first-quarter 2027 revenues of $1.225 billion to $1.275 billion and operating margin of 39.5% to 40.5%. Lumentum also now sees fiscal 2028 earnings of $40 per share, supported in part by higher OCS demand.
LITE’s components revenues reached $649.4 million in fourth-quarter fiscal 2026, up 21.8% sequentially and 102.7% year over year, led by scale-out and scale-across products. Narrow linewidth laser assemblies rose more than 130% year over year, while pump lasers grew more than 80%. The shift from 100G to 200G EMLs roughly doubles ASPs, and management expects more than 50% EML unit growth by the December quarter.
LITE’s premium laser quality also supports customer transceiver yields, reinforcing Lumentum’s differentiation as higher-speed optical links scale. Systems revenues increased to $356.9 million in fourth-quarter fiscal 2026, up 29.7% sequentially and 122.6% year over year, with record cloud transceiver shipments and initial 1.6T volumes. Management expects 1.6T adoption to intensify in first-quarter fiscal 2027 and continue through 2027.
Cloud Light is now running above $200 million in quarterly revenues after improving product quality and time to market, while Lumentum is shipping several 1.6T SKUs ahead of major competitors. Some initial 1.6T products also use internal CW lasers, increasing vertical integration. However, Lumentum continues to face competition across AI infrastructure and optical networking. At 1.6T, management says the company is shipping several SKUs ahead of major module competitors after fixing prior quality and time-to-market issues.
Furthermore, LITE’s capacity expansion remains constrained most by time because equipment installation, internal product qualification and customer qualification all carry long lead times. The Zacks Consensus Estimate for LITE’s fiscal 2027 margin reflects year-over-year growth of 147%. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of HPE & LITE
Shares of HPE and LITE have appreciated 144.5% and 123.3%, respectively, in the year-to-date period.
YTD Performance Chart
Image Source: Zacks Investment Research
HPE is trading at a forward 12-month Price-to-Sales ratio of 1.42X, which is above its median of 0.91X, while LITE is trading at a forward sales multiple of 9.91X, below its median of 11.13X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: HPE vs. LITE
HPE offers a broader AI infrastructure portfolio spanning compute, storage, networking and hybrid cloud through GreenLake. Its Cloud & AI revenues grew 25%, server revenues rose 35%, and AI backlog reached $6.8 billion. Although LITE delivers faster growth, HPE’s integrated solutions and enterprise reach support its compelling long-term investment case. Given these factors, HPE would be a prudent investment choice right now. HPE carries a Zacks Rank #2 (Buy), while LITE has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.