By Katherine Hamilton

Hewlett Packard Enterprise raised its earnings outlook as it races to secure enough memory amid a supply shortage.

The server and networking company said Monday that AI and data-center developers are continuing to fuel strong demand for its networking products, prompting it to raise its outlook for the year.

Meanwhile, HPE has taken several measures to secure enough memory to keep up with customer demand, as a supply shortage is sending prices soaring.

HPE increased its outlook for adjusted earnings per share by 5 cents to a range of $2.30 to $2.50.

HPE reaffirmed its overall revenue growth outlook for 2026, and raised its outlook for networking revenue to rise 68% to 73%.

Its shares rose 2% to $22 in after-hours trading Monday. Through the close, the stock was up 45% over the past 12 months.

Demand is stemming from customers' artificial-intelligence deployment, infrastructure modernization and "pooling" of resources amid commodity shortages and price increases, Chief Executive Antonio Neri said during a call with analysts.

The market is facing a tight supply of certain components, most notably DRAM and NAND memory, which is leading to a sharp increase in costs, Neri said. HPE expects elevated prices to persist well into 2027.

To address the long-term shortage, HPE is focusing on securing supply by expanding multiyear agreements with memory partners, Neri said. Management is also adjusting prices across its portfolio to protect margins, he said.

"DRAM and NAND make up over half of the bill of material costs of a traditional server," Neri said. "The share will continue to rise as component costs increase."

In the first quarter, orders came in faster than HPE could deliver them, Neri said.

Profit was $423 million, or 31 cents a share, in the quarter ended Jan. 31, compared with $598 million, or 44 cents a share, a year earlier.

Stripping out certain one-time items, adjusted per-share earnings were 65 cents, ahead of the 59 cents anticipated by analysts, according to FactSet.

Revenue rose 18% to $9.30 billion. Analysts surveyed by FactSet had forecast revenue of $9.35 billion.

Networking sales nearly tripled to $2.7 billion, driven in part by a fivefold increase in data-center networking revenue. AI data-center builders and operators are driving demand for HPE's routing products, which had a more than 20% increase in orders, Neri said.

Cloud and AI revenue fell 2.7% to $6.3 billion, mainly because of a decline in server sales. Neri said that server revenue is being offset by the timing of HPE and AI systems orders.

HPE anticipates a higher average unit price in both its server and storage products due to the memory shortage. Networking is more insulated because memory comprises a much smaller portion of the bill of materials, Neri said.

In the second quarter, HPE expects revenue to be $9.6 billion to $10 billion, with adjusted earnings per share of 51 cents to 55 cents. Analysts polled by FactSet projected $9.57 billion in sales and 53 cents a share in adjusted earnings.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

March 09, 2026 19:44 ET (23:44 GMT)

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