Truist Securities has raised its price target on Hewlett Packard Enterprise (HPE) from $70 to $75, while keeping its Buy rating. The firm believes the company's networking business is accelerating its integration and unlocking synergies, while cloud and AI demand continues to drive server growth, factors that are improving HPE's earnings outlook over the coming years. Truist analyst Matthew Niknam noted that the market still underappreciates the value of HPE's networking business. As the scale of that business grows, synergies are realized, and margins improve, HPE is transforming from a traditional hardware company into a more balanced portfolio of networking, servers, and AI infrastructure.

Networking Business Becomes a New Valuation Anchor

Truist's biggest emphasis is on the changes in HPE's networking business. As integration advances, the scale of the networking segment, its margins, and its synergies with other enterprise infrastructure businesses are strengthening. Compared with traditional server hardware, networking typically carries higher margins and better revenue quality, so a rising share of it should improve HPE's overall earnings structure. Truist argues the market still values HPE largely as a traditional hardware company and has not fully reflected the importance of networking in the future profit mix. That is why the firm believes HPE's current valuation still has room for further re-rating.

AI and Cloud Demand Continue to Support Server Growth

Beyond networking, cloud and AI infrastructure demand remains a key growth driver for HPE's server business. Truist pointed out that the rapid increase in AI and cloud workloads is pushing enterprises and data centers to continue expanding server purchases. In HPE's previously reported fiscal 2026 third-quarter results, Cloud & AI revenue and margins both beat expectations, further validating this trend. As a result, HPE is not relying on a single business for growth but is benefiting simultaneously from networking integration, server demand, and AI infrastructure investment. This business structure also makes the company's future earnings growth more balanced.

Truist Expects 22% EPS Growth in Fiscal 2027

Truist forecasts HPE's earnings per share will grow 22% in fiscal 2027, with EPS still expected to compound at a mid-teens rate thereafter. This projection implies the company's current earnings improvement is not just a one-off cyclical rebound but is likely to extend over a longer period. Drivers include improving networking margins, growing AI server demand, and a business mix tilting toward higher-margin segments. At the same time, HPE recently raised its guidance for fiscal 2026 and 2027, further strengthening Truist's confidence in earnings growth.

Free Cash Flow Returns Are Also Strengthening

Truist also expects HPE to return more than 75% of free cash flow to shareholders starting in the fiscal 2026 fourth quarter. This means that as business integration gradually stabilizes, the company may have more room for capital returns such as dividends and share buybacks. For HPE, which has already seen a significant rally, a higher cash return ratio can also provide additional support for its valuation.

Valuation Sits Between Traditional Hardware and Networking Companies

Truist currently values HPE at 11 times calendar year 2028 earnings per share. The firm noted that pure hardware companies typically trade at about 8 to 15 times 2028 earnings, while networking companies generally sit in the 15 to 25 times range. HPE is gradually transitioning from a traditional hardware model to a networking and infrastructure platform, so Truist believes its fair valuation should also move from the pure hardware range toward the networking range. The 11 times valuation assumption remains at the lower end of both categories, which is why the firm thinks the $75 price target is not overly aggressive.

Market Disagreement Still Centers on Valuation and Revenue Conversion

Other institutions, however, remain notably divided on HPE. Goldman Sachs previously maintained a Buy rating and a $75 price target, citing strong Cloud & AI performance and margins. By contrast, Wells Fargo cut its price target from $67 to $54 and kept a Hold rating due to concerns about the pace of revenue conversion. Evercore ISI downgraded HPE from Outperform to In Line after the sharp share price rally, mainly because the valuation had already expanded significantly. Therefore, the core debate around HPE is no longer whether AI and networking businesses are growing, but whether that growth can ultimately convert into revenue, profit, and cash flow fast enough to justify a higher valuation multiple. Truist's judgment is that networking synergies, AI server demand, and higher shareholder returns are simultaneously improving HPE's earnings quality, so the company is no longer suited to being valued simply as a traditional hardware company.