HPE's Q2 rides AI infrastructure boom

HPE posted its own blowout quarter with revenue growth of 40% in its fiscal second quarter as the AI infrastructure boom continues.

The company reported second quarter earnings of 44 cents a share on revenue of $10.7 billion, up 40% from a year ago. Non-GAAP earnings in the second quarter were 79 cents a share.

Wall Street was looking for HPE to deliver non-GAAP earnings of 53 cents a share on revenue of $9.76 billion.

HPE's quarter follows Dell Technologies results, which were well ahead of expectations. Like Dell, HPE also raised its outlook for fiscal 2026.

Tales from the AI infrastructure boom

• Dell Technologies rides AI boom as revenue surges 88% in Q1
• Nvidia's Vera CPU, DGX Station, Windows PCs all go to the same place: AI agents running locally
• PCs and workstations get their AI inference moment
• Lenovo's hybrid AI pitch: Optimize your token economics
• Nvidia Q1 shines, outlook raised

CEO Antonio Neri said the quarter benefited from customers "modernizing their infrastructure and scaling AI." Neri added that HPE is also seeing networking strength and is now two years ahead of its fiscal 2028 plan.

On a conference call, Neri said:

• "We see significant runway as more customers consolidate networking and security with a single vendor, forcing convergence all the way to the silicon layer of the stack, where HPE will have further differentiation."
• "Customers are choosing HPE because we help them scale in every dimension, scale up by increasing the performance and density of individual platforms for the most demanding AI workloads."
• "HPE is developing a scale up Ethernet switch and software designed specifically for the AMD Helios AI rack scale architecture, which we expect will be introduced in the fall."
• "HPE is the first OEM to productize a (Broadcom) Tomahawk 6 based 100% liquid pool switch with industry leading performance and power efficient for AI infrastructure."
• "We are working very closely with our silicon and memory partners to continue to support supply, which we factor into our new fiscal 2026 guide. We're also engaging customers and channel partners on lead times and configuration options to help them plan effectively."
• "Enterprises want the flexibility of choosing multiple AI models with the governance and control of on premises."

HPE CFO Marie Myers said the company is executing ahead of schedule with the Juniper Networks and Catalyst acquisitions.

By the numbers:

• Networking revenue in the second quarter was $2.7 billion, up 148% from a year ago due to the Juniper purchase. Operating income in the second quarter for networking was $581 million.
• Campus and Branch networking revenue was $1.3 billion and data center networking revenue was $320 million. Routing revenue was $775 million.
• Cloud and AI revenue was $7.7 billion, up 22.9% from a year ago, with operating income of $954 million.
• Server revenue was $5.5 billion, up 32.7% from a year ago.
• Traditional server orders was up triple-digits in the quarter.
• AI systems backlog in the second quarter was $5.9 billion including $1.8 billion in new AI systems orders.
• Storage revenue was $1.2 billion, up 2.4% from a year ago.
• The company had about 50,000 HPE GreenLake customers and manages more than 6.7 million systems, up from 5.3 million a year ago.

As for the outlook, HPE said third quarter revenue will be between $11.5 billion to $12.1 billion with non-GAAP earnings between 88 cents a share to 93 cents a share. For fiscal 2026, HPE is projecting revenue growth of 29% to 33% and non-GAAP earnings of $3.35 a share to $3.45 a share.

For fiscal 2027, HPE is projecting revenue growth of 8% to 12% with non-GAAP earnings growth of 12% to 16%.