By Jaspreet Singh
March 9 (Reuters) – Hewlett Packard Enterprise on Monday forecast second-quarter earnings above Wall Street estimates, betting on growing demand for its network equipment as the company prioritizes more high-margin orders.
The company, which also provides artificial intelligence-oriented servers equipped with Nvidia chips, raised its fiscal 2026 forecasts for adjusted earnings per share and networking segment revenue growth.
Companies that make AI servers, such as HPE, Dell and Super Microcomputer, typically face pressure on margins due to expensive manufacturing and a rapid transition to more powerful chips in a highly competitive market.
“Given supply dynamics, our strategy for the remainder of the year prioritizes higher-margin product orders, which may impact our AI systems revenue growth,” CFO Marie Myers said in a post-earnings call.
Big tech companies such as Alphabet, Microsoft, Amazon and Meta are expected to spend at least $630 billion this year to build AI infrastructure, which will boost demand for server and data center equipment.
“Demand for our products and solutions was very strong, with orders doubling year-over-year across all segments,” HPE CEO Antonio Neri said in a statement.
Shares of the company rose about 1.3% in extended trading on Monday. The stock is down about 9% so far this year, underperforming rival Dell’s 16.4% gain.
HPE is clashing with Dell and Super Microcomputer in a highly competitive market as they drive up memory chip costs due to the development of AI infrastructure, forcing companies to raise prices to ease cost pressures.
Neary said HPE has adopted a more flexible approach by shortening the pricing cycle and maintaining the ability to adjust pricing between delivery and shipping to account for rising costs.
The company acknowledged that it does not have enough supply to meet current demand and said higher prices will continue until 2027.
HPE said its AI backlog exceeded $5 billion in the first quarter, representing 64% of the total order mix with enterprise and standalone customers.
The company expects quarterly revenue to be between $9.6 billion and $10.0 billion, above analysts’ average estimate of $9.58 billion, according to data compiled by LSEG.
Revenue rose about 18% to $9.30 billion in the quarter ended Jan. 31, missing estimates of $9.33 billion. Its adjusted EPS of 65 cents exceeded estimates of 59 cents.
HPE raised its fiscal 2026 adjusted EPS forecast to $2.30 to $2.50, compared to its prior estimate of $2.25 to $2.45.
