HPE's AI Systems Revenues Hit $1.6B: Is it the Next Growth Catalyst?

Hewlett Packard Enterprise’s HPE AI Systems revenues hit $1.6 billion in the third quarter of fiscal 2025, which was also the all-time high since its introduction. The AI Systems revenues were propelled by the deployment of the GB200 System on a large scale.

Furthermore, HPE discussed on its earnings call that the order for its AI systems scaled approximately 100% sequentially, driven by both sovereign and enterprise orders. Notably, HPE has been able to grow its enterprise AI orders year over year in each quarter since early fiscal 2024.

HPE also reported that it signed $2.1 billion in net new orders for AI systems. This traction in AI systems was driven by robust growth in sovereign net new orders, which increased by triple digits both year over year and quarter over quarter. HPE’s enterprise and sovereign accounted for more than 50% of its cumulative AI orders since the first quarter of fiscal 2023.

Hewlett Packard Enterprise is continuously expanding its AI offerings. In this direction, the company recently extended its partnership with NVIDIA to build an enterprise computing solution that will help organizations adopt generative AI applications faster. The acquisition of Juniper Networks has brought in the latter’s prowess in AI-native networks and significantly amplified HPE's networking arm.

How Competitors Fare Against HPE

Dell Technologies DELL is capitalizing on the strong demand for AI servers across industries, driven primarily by ongoing digital transformation and the adoption of generative AI applications. DELL has experienced sequential growth in server adoption for the consecutive five quarters in AI servers and six quarters in traditional servers.

Super Micro Computer SMCI is another server provider that is massively growing on the back of artificial intelligence (AI) workloads. As data centers are expanding their capacity and new data centers are being created, the demand for Super Micro Computer’s high-performance, energy-efficient servers is ramping up.  

Given the proliferation of AI and its massive workload demand, the growth in server-supported data center business is likely to rise in the future, driving all three giants, including HPE, DELL and SMCI, with ample opportunities to grow.

HPE’s Price Performance, Valuation and Estimates

Shares of Hewlett Packard Enterprise have gained 16.7% year to date compared with the Zacks Computer - Integrated Systems industry’s growth of 65.4%.

From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 0.83, below the industry’s 4.44.

The Zacks Consensus Estimate for HPE’s fiscal 2025 earnings is pegged at $1.91 per share, which implies a decrease of 4% year over year. The consensus mark for fiscal 2026 is pegged at $2.34 per share, indicating a year-over-year increase of 22.7%. HPE's fiscal 2025 and 2026 earnings were revised upward in the past 30 days.

HPE stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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