Hewlett Packard Enterprise Co. saw its shares rise by 16% to hit a record high after reporting better-than-expected revenue in the fiscal second quarter, driven by strong sales of servers designed for artificial intelligence work. The company’s revenue in the period rose 3.3% to $7.2 billion, surpassing Wall Street’s projection of a 2% drop. Earnings stood at 42 cents per share, exceeding analysts’ average estimate of 39 cents.
The strong performance was attributed to the robust server business, which saw revenue of $3.87 billion, well above the estimated $3.45 billion. Sales of AI-oriented systems more than doubled from the previous quarter to over $900 million due to increased demand and improved availability of high-power semiconductors from Nvidia Corp.
Following the positive financial results, HPE’s shares surged 16% to reach a high of $20.43, marking the largest intraday gain since March 2016 and the highest level since the company’s 2015 spinoff of HP Inc. Despite this increase, HPE’s shares have only seen a modest rise compared to competitors Dell Technologies Inc. and Super Micro Computer Inc., whose stocks have significantly outperformed during the last quarter.
HPE’s AI server business is gaining attention, with a current order book of $3.1 billion, as confirmed by Chief Financial Officer Marie Myers. The company anticipates sales between $7.4 billion and $7.8 billion in the upcoming quarter, slightly above analysts’ average projection of $7.45 billion. The adjusted earnings per share are expected to range between 43 cents and 48 cents.
For the full fiscal year, HPE has revised its revenue outlook to show a profit of 1% to 3%, higher than its previous forecast of stable growth to 2%. Analysts noted that while the AI server business is making significant progress, the overall yearly outlook is disappointing, indicating that other segments like networking may be underperforming.
HPE’s Intelligent Edge division, which includes networking, reported revenue of $1.09 billion in the second quarter, below the estimated $1.25 billion. In a bid to strengthen its networking offerings, the company announced the acquisition of Juniper Networks Inc. for $14 billion earlier in the year. CEO Antonio Neri expects an uptick in customer demand in the coming months.
Analysts and investors are keeping a close eye on HPE’s AI server business, cheered by the strong financial results but cautious about the overall yearly outlook. Amid a competitive server market, HPE’s success in the AI segment will be key to driving future growth and investor confidence.
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https://finance.yahoo.com/news/hpe-reports-strong-sales-boost-202353763.html