MW HPE's stock rises as the company shows a stronger AI pipeline. Here's one big catalyst.

By Emily Bary

Server company is seeing growth from sovereign customers, with one executive calling out AI momentum in the Middle East

Hewlett Packard Enterprise Co. issued an upbeat outlook for the current quarter Tuesday, while noting that its pipeline is starting to reflect recent artificial-intelligence developments in the Middle East.

While HPE $(HPE)$ makes traditional servers and networking products, it's gotten the most attention recently for its AI server business. The company booked $1.1 billion in net new orders for the fiscal second quarter, with about a third of that coming from enterprise customers.

The company has some "very large deals in the pipeline," Chief Financial Officer Marie Myers told MarketWatch on Tuesday, and HPE is in the middle of ramping one of its larger deployments of GB200s, an Nvidia Corp. $(NVDA)$ product from its new Blackwell lineup.

The AI backlog at HPE is now $3.2 billion, with the company's overall pipeline standing at "multiples of that," according to Myers. The company finished the quarter with a stronger pipeline than it did after the proceeding quarter, Chief Executive Antonio Neri added on the earnings call, "reinforcing that our strategy is the right one."

Shares of HPE were up 3% in Tuesday's extended session.

HPE's momentum with sovereign and enterprise customers partly reflects the company's expertise in direct liquid cooling. That's a technology that helps account for the fact that today's AI chips are so powerful that they get hot as they run.

In all, HPE expects $8.2 billion to $8.5 billion in revenue for its fiscal third quarter, while analysts tracked by FactSet had been modeling about $8.2 billion. The company also models 40 cents to 45 cents in adjusted earnings per share, whereas the FactSet consensus was for 41 cents.

For the fiscal second quarter, which just completed, HPE posted 38 cents in adjusted EPS, down 10% from a year before but ahead of the 33-cent FactSet consensus. Revenue of $7.63 billion rose 6% from a year prior but topped the $7.45 billion consensus view.

Overall server revenue rose 6% in the quarter. In traditional servers, Myers noted that a new generation of product is shipping, and at a higher price point given the richer technological configurations.

Meanwhile, Myers noted that HPE's networking business returned to revenue and profit growth for the first time in five quarters, driven by AI momentum.

The company is looking ahead to July 9, the trial date in HPE's battle with the U.S. Justice Department, which has filed a lawsuit that aims to block HPE's pending deal for Juniper Networks Inc. $(JNPR)$. HPE and Juniper have said that their businesses are complementary and that there are a variety of networking alternatives in the market.

-Emily Bary

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June 03, 2025 17:54 ET (21:54 GMT)

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