Hewlett Packard Enterprise beat Wall Street estimates for third-quarter revenue on Wednesday, driven by strong demand in its server and networking segments.

Demand for AI servers has surged as big tech companies and startups race to deploy generative AI services, such as ChatGPT, which require immense computing power.

The surge in GenAI has boosted demand for HPE's AI-optimized servers, powered by Nvidia NVDA.O processors, which can run complex applications. HPE integrated Nvidia's latest GPUs into its server portfolio in 2025.

"Customer demand stretched broadly across our portfolio and was particularly strong in our Server and Networking segments," CEO Antonio Neri said.

HPE's acquisition of Juniper expands its networking business, a segment that generally grows faster compared to traditional hardware. HPE completed the $14 billion acquisition in early July.

The company added veteran tech industry executive Robert Calderoni to its board in July, reaching a truce with activist investor Elliott Investment Management, one of HPE's biggest shareholders with a stake exceeding $1.5 billion.

For the third quarter ended July 31, HPE reported revenue of $9.14 billion, ahead of analysts' average estimate of $8.53 billion, according to data compiled by LSEG.

Server revenue increased by 16% year-over-year to $4.9 billion, while networking revenue surged 54% to $1.7 billion during the quarter.

The server maker projects fourth-quarter revenue between $9.7 billion and $10.1 billion, exceeding analysts' expectations of $9.54 billion.

HPE now expects revenue growth of 14% to 16% in fiscal year 2025, compared with its prior forecast of growth of 7% to 9%.