Hewlett Packard Enterprise's HPE Private Cloud AI business continues to gain momentum as enterprises increasingly deploy AI workloads on their own infrastructure rather than relying solely on public cloud environments. The company's second-quarter fiscal 2026 results indicate that demand remains robust, raising the question of whether this adoption trend can continue over the coming quarters.
Private Cloud AI was one of the standout contributors within HPE's Cloud & AI segment during the quarter. Private Cloud AI orders increased in the second quarter, supported by a growing base of new customer wins. This performance complemented broader strength across the segment, where revenues increased 23% year over year to $7.7 billion, while orders continued to outpace revenues.
Hewlett Packard Enterprise also reported a record AI Systems backlog of $5.9 billion, including $1.8 billion in new AI Systems orders, providing meaningful visibility into future deployments. Customers are increasingly adopting Private Cloud AI alongside investments in the compute infrastructure and unstructured data storage, reflecting growing enterprise preference for secure, on-premises AI environments.
HPE's expanding GreenLake ecosystem further strengthens the Private Cloud AI opportunity. The GreenLake platform now manages more than 6.7 million systems, up from 5.3 million a year earlier, serving approximately 50,000 customers. This growing installed base provides HPE with a large enterprise audience to cross-sell Private Cloud AI solutions as customers modernize their IT environments.
The continuous increases in customer wins across the AI systems backlog, enterprise infrastructure spending and other offerings embedded with Private Cloud features indicate that the company remains on a solid trajectory.
How Competitors Fare Against HPE
Hewlett Packard Enterprise’s closest competitor in this domain is Dell Technologies DELL and Cisco CSCO. Dell AI Factory, combined with NVIDIA, is arguably the most direct alternative for HPE private cloud AI.
Dell provides pre-integrated GPU servers, storage, networking and software for enterprise AI and competes head-to-head with HPE for Fortune 1000 AI deployments. Cisco focuses on AI networking and integrated AI Pods. Cisco has started competing strongly with HPE after acquiring Splunk and through its partnership with NVIDIA.
HPE’s Price Performance, Valuation and Estimates
HPE has gained 90.8% in the year-to-date period. However, the company has underperformed the Zacks Computer - Integrated Systems industry, which has returned 93.2% in the same time frame.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.24, below the industry’s 5.3. The discounted valuation is also reflected by the Zacks Value Score of B.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects year-over-year growth of 75.8%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
HPE currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).