HP Enterprise Stock Surges as AI Server Demand Fuels Earnings Beat

Hewlett Packard Enterprise (HPE) shares surged more than 14% in pre-market trading Wednesday after the server and storage manufacturer topped Wall Street’s quarterly estimates and boosted its full-year guidance amid growing demand for artificial intelligence (AI) servers.

For the three-month period ending April 30, the company reported adjusted earnings of 42 cents per share, above analysts’ estimates. Revenue in the quarter of $7.2 billion grew 3% from the same period a year ago and also surpassed the $6.8 billion consensus view.

Server revenue in the period grew 18% from a year earlier to $3.9 billion, while AI systems revenue more than doubled on a sequential basis to over $900 million, fueled by growing demand for AI servers. The hardware maker pointed out it had benefited from improving supply of Nvidia’s (NVDA) H100 chips which are housed in HP Enterprise servers.

New AI Server Orders Drive Outlook

The company said it has cumulative AI systems orders of $4.6 billion since the start of fiscal 2023, with CEO Antonio Neri telling Barron’s that the company’s backlog of AI server orders was roughly flat with the January quarter, but its pipeline of new orders was “multiples” higher than its backlog.

Looking ahead, the company expects current-quarter net sales of $7.4 billion to $7.8 billion, with the midpoint of that forecast comfortably surpassing expectations of $7.4 billion. It anticipates adjusted earnings in the same period ranging between 43 cents to 48 cents per share, which compares to 47 cents a share projected by analysts.

For fiscal 2024, HP Enterprise upwardly revised its projected revenue growth to 1% to 3%, up from flat to 2% growth. The company also raised its adjusted earnings forecast to between $1.85 and $1.95 per share, up from its prior guidance of $1.82 to $1.92 a share.

Measured Move Price Target Amid Earnings Strength

Taking a look at the weekly chart, HP Enterprise shares have oscillated within an ascending triangle since January 2022, with the price mostly remaining above the 200-week moving average since that time.

Wednesday’s expected earnings-fueled breakout from the triangle pattern marks a technically significant milestone for the stock, propelling the price to a new all-time high (ATH). Investors can project a potential price target by measuring the widest portion of the triangle and adding that amount to the pattern’s top trendline. For instance, adding $7 to the breakout point at $18 forecasts a price target of $25.

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As of the date this article was written, the author does not own any of the above securities.