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Can HPE Sustain Growth Amid Evolving AI Market Dynamics?
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Key Takeaways
HPE's Cloud & AI revenues rose 25% to $9 billion, while traditional server orders increased 75% in Q3 FY26.
HPE's Networking revenues grew 10% and GreenLake customers increased 18% to 52,000.
HPE trades at a forward P/S of 1.21X, below the industry's 3.38X.
Hewlett Packard Enterprise (HPE - Free Report) has been a key beneficiary of rising artificial intelligence (AI) infrastructure spending, as hyperscalers and leading technology companies continue to ramp up investments in AI capabilities. However, the growing concentration of AI investments among a handful of hyperscalers and infrastructure providers has raised concerns about the distribution of growth opportunities across the industry.
Against this backdrop, the November 2026 sell-off in AI and semiconductor stocks has heightened investor concerns, raising the question: Can HPE sustain growth amid evolving AI market dynamics? HPE's strongest defense against the AI market correction is its diversified infrastructure portfolio, which allows it to capture spending across multiple technology categories rather than depending exclusively on demand for AI servers.
HPE's diversified portfolio spanning networking, traditional servers, storage, hybrid cloud, GreenLake and financial services could help cushion weakness in AI-related spending. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9 billion, up 25% year over year, with a 17% operating margin. Server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems.
The Juniper acquisition is broadening HPE’s reach across campus and branch, data center switching, routing and security, while integration remains ahead of schedule. In the third quarter of fiscal 2026, Networking revenues were $2.9 billion, up 10% on a normalized basis, and operating margin was 22%. Normalized orders rose 36%, with data center switching and routing orders up high double digits and campus and branch orders up low teens.
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. The platform is reinforced by Morpheus for multi-cloud orchestration and OpsRamp for monitoring and observability. Given these factors, HPE's diversified portfolio, expanding networking business and growing GreenLake adoption provide multiple growth drivers beyond AI servers. However, sustained growth will depend on execution, demand resilience and profitability.
How Competitors Fare Against HPE
Hewlett Packard Enterprise’s closest competitors in this domain are Dell Technologies (DELL - Free Report) and Cisco (CSCO - Free Report) . Dell AI Factory combined with NVIDIA is arguably the most direct alternative for HPE private cloud AI.
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. Cisco focuses on AI networking and integrated AI Pods. Cisco has started competing strongly with HPE after acquiring Splunk and through its partnership with NVIDIA.
HPE’s Price Performance, Valuation and Estimates
Hewlett Packard Enterprise shares have skyrocketed 109.2% year to date, outperforming the Zacks Computer - Integrated Systems industry’s growth of 79.1% and the Zacks Computer and Technology sector’s return of 6.3%.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
The recent decline in share price has led HPE to trade at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.21, below the industry’s 3.38.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects year-over-year growth of 97.4%. Estimates have been revised upward in the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Can HPE Sustain Growth Amid Evolving AI Market Dynamics?
Key Takeaways
Hewlett Packard Enterprise (HPE - Free Report) has been a key beneficiary of rising artificial intelligence (AI) infrastructure spending, as hyperscalers and leading technology companies continue to ramp up investments in AI capabilities. However, the growing concentration of AI investments among a handful of hyperscalers and infrastructure providers has raised concerns about the distribution of growth opportunities across the industry.
Against this backdrop, the November 2026 sell-off in AI and semiconductor stocks has heightened investor concerns, raising the question: Can HPE sustain growth amid evolving AI market dynamics? HPE's strongest defense against the AI market correction is its diversified infrastructure portfolio, which allows it to capture spending across multiple technology categories rather than depending exclusively on demand for AI servers.
HPE's diversified portfolio spanning networking, traditional servers, storage, hybrid cloud, GreenLake and financial services could help cushion weakness in AI-related spending. In the third quarter of fiscal 2026, Cloud & AI revenues reached $9 billion, up 25% year over year, with a 17% operating margin. Server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems.
The Juniper acquisition is broadening HPE’s reach across campus and branch, data center switching, routing and security, while integration remains ahead of schedule. In the third quarter of fiscal 2026, Networking revenues were $2.9 billion, up 10% on a normalized basis, and operating margin was 22%. Normalized orders rose 36%, with data center switching and routing orders up high double digits and campus and branch orders up low teens.
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. The platform is reinforced by Morpheus for multi-cloud orchestration and OpsRamp for monitoring and observability. Given these factors, HPE's diversified portfolio, expanding networking business and growing GreenLake adoption provide multiple growth drivers beyond AI servers. However, sustained growth will depend on execution, demand resilience and profitability.
How Competitors Fare Against HPE
Hewlett Packard Enterprise’s closest competitors in this domain are Dell Technologies (DELL - Free Report) and Cisco (CSCO - Free Report) . Dell AI Factory combined with NVIDIA is arguably the most direct alternative for HPE private cloud AI.
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. Cisco focuses on AI networking and integrated AI Pods. Cisco has started competing strongly with HPE after acquiring Splunk and through its partnership with NVIDIA.
HPE’s Price Performance, Valuation and Estimates
Hewlett Packard Enterprise shares have skyrocketed 109.2% year to date, outperforming the Zacks Computer - Integrated Systems industry’s growth of 79.1% and the Zacks Computer and Technology sector’s return of 6.3%.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
The recent decline in share price has led HPE to trade at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.21, below the industry’s 3.38.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects year-over-year growth of 97.4%. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
HPE currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.