What Happened?
Shares of enterprise technology company Hewlett Packard Enterprise (NYSE: HPE) jumped 17.7% in the afternoon session after the company reported Q2 FY2026 results that produced its biggest earnings beat since February 2018.
The stock had already gained 9% during the previous session in anticipation, carried by the same AI infrastructure bid that lifted Dell and Nvidia. HPE's AI server orders more than doubled in the quarter, outpacing revenue growth and building a record backlog. Management stated the company is now tracking two years ahead of its own long-term financial plan, and raised its full-year EPS guidance by a full dollar.
Revenue came in at $10.68 billion, up 40% year-over-year, against a $9.79 billion consensus, a nearly $900 million beat. Adjusted EPS of $0.79 surpassed both the $0.53 consensus and the company's own prior guidance of $0.51-$0.55, representing 107% growth year-over-year.
Server revenue of $5.45 billion, up 33%, landed approximately $800 million ahead of estimates, confirming that the AI infrastructure demand Dell validated the previous week is equally present at HPE.
Cloud and AI revenue reached $7.71 billion with an operating margin of 12.4%, nearly double the 6.6% recorded a year earlier. Networking revenue surged 148% to $2.69 billion, driven by the Juniper Networks integration.
Free cash flow hit a record $915 million for a second quarter, an improvement of $1.8 billion year-over-year, while GAAP net income swung to $624 million from a $1.05 billion loss a year ago. Q3 revenue guidance of $11.5-$12.1 billion significantly exceeded the $10.9 billion consensus.
Full-year revenue growth guidance was raised to 29-33% from 17-22%, EPS guidance was lifted to $3.35-$3.45, free cash flow guidance raised to at least $3.5 billion, and the company introduced an FY27 framework targeting free cash flow of at least $4.5 billion. Super Micro Computer climbed 5% on the direct read-through.
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What Is The Market Telling Us
Hewlett Packard Enterprise’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Hewlett Packard Enterprise and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was about 22 hours ago when the stock gained 9.4% on the news that the company benefited from a sector-wide rally in artificial intelligence (AI) server stocks and announced a new server designed for AI workloads.
The positive momentum was partly a ripple effect from Dell Technologies, which reported historic AI server results the previous week, signaling exceptionally strong demand across the sector. This news boosted investor confidence in HPE ahead of its own fiscal second-quarter earnings release.
Adding to the optimism, HPE unveiled its ProLiant Compute DL394 Gen12 server at the COMPUTEX 2026 event. The new server is powered by NVIDIA's Vera CPU and is specifically built for complex tasks like agentic AI and large-scale data processing. Several analysts, including those at JPMorgan and Evercore ISI, also raised their price targets on the stock, citing growing demand for AI infrastructure.
Hewlett Packard Enterprise is up 123% since the beginning of the year, and at $54.04 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Hewlett Packard Enterprise’s shares 5 years ago would now be looking at an investment worth $3,361.
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