Hewlett Packard Enterprise (HPE) was once the kind of legacy tech company investors bought for stability, not excitement. But that has changed fast. This old-school server and enterprise infrastructure business has transformed into a broader bet on AI infrastructure, with networking, AI servers, and rack-scale systems now driving growth.
HPE stock has performed dramatically this year, rising 200% year-to-date (YTD) as investors have started to see HPE differently now. Nonetheless, analysts believe there is still much more upside, with Citi, Barclays, and Wells Fargo raising the price target.
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www.barchart.com The AI Story is Bigger Than HPE’s Servers
HPE is no longer a traditional server company. Its business now stretches across compute, networking, storage, and software, giving customers more of the infrastructure needed to build and operate AI systems. In the third quarter of fiscal 2026, HPE generated $9 billion of Cloud & AI revenue, up 25.4% year-over-year (YoY). Server revenue reached $6.8 billion, increasing 35.3%, while the segment’s operating margin climbed to 17%, compared with 7% a year earlier. AI systems revenue was nearly $1.6 billion, while AI systems orders reached $2.4 billion, more than 30% higher sequentially, boosting the backlog by 14%.
To further boost its AI business, the company has been focusing more on high-speed networking, which it knows is a critical part of AI infrastructure. Last year, HPE acquired Juniper Networks, effectively doubling the size of its networking business and giving the company a much broader portfolio spanning data center networking, routing, security, and campus networking.
The result was networking revenue jumping almost 75% YoY to $2.9 billion in Q3. Data center networking revenue more than doubled to $382 million, while routing revenue surged 270% to $788 million. Plus, orders for its Networks for AI portfolio rose 36% to $700 million, bringing the cumulative AI-networking orders to $2.2 billion.
This order momentum is one reason the company is becoming more interesting for investors as an AI infrastructure play.
AMD and Nvidia Give HPE Another AI Weapon
HPE is being smart by taking a deliberately broad approach to AI infrastructure rather than tying its future to a single chipmaker. In September, HPE announced a $1.2 billion order from Vultr for its AMD (AMD) Helios AI Rack systems. Each rack combines AMD's Instinct MI455X GPUs and EPYC “Venice” CPUs with AMD networking technology, while HPE contributes purpose-built Juniper Networking switches, liquid cooling, and rack-scale engineering.
HPE believes Helios could create more than $1 billion of networking opportunity over the next two years, with networking trade orders already exceeding $200 million. With the Juniper acquisition, the company is effectively using its networking capabilities to capture additional value whenever customers deploy these large AI racks.
Separately, Nvidia (NVDA) gives HPE another, much larger ecosystem to work with. HPE's AI Factory with Nvidia combines HPE's servers, networking, storage, and services with Nvidia’s accelerated computing and networking technologies. In June, HPE expanded the partnership to include Nvidia Vera CPUs, the Nvidia Agent Toolkit, and Nvidia Confidential Computing as it pushes further into enterprise deployments of agentic AI.
Essentially, AMD and Nvidia provide the underlying compute platforms, while HPE can package those technologies with its own servers, networking, storage, cooling, and services.
Management raised the fiscal 2026 revenue growth forecast to 34% to 37%, while fiscal 2027 revenue expectations are around 13% to 17%. The company also raised its fiscal 2027 adjusted EPS growth outlook to 16%-20%, as it expects AI infrastructure demand and the Juniper integration to translate into earnings growth rather than simply pushing revenue higher. However, HPE has also acknowledged supply constraints and the timing of backlog conversion.
Analysts also expect its earnings to increase by 97% to $3.83 in fiscal 2027, followed by another 23.07% in fiscal 2028. HPE stock is currently trading at 18x forward earnings. The valuation does not look stretched relative to the earnings growth Wall Street expects.
Why Wall Street Sees More Upside for HPE Stock
HPE is no longer an overlooked enterprise hardware stock. It has changed what it sells, who it sells to, and where its growth is coming from. Its Cloud & AI business is expanding, its networking business has been transformed by Juniper, AI system orders have reached billions of dollars, and management has raised its growth expectations for both 2026 and 2027.
The challenge for investors going forward will be to see if HPE can continue to convert this extraordinary demand into revenue, margins, and free cash flow fast enough to justify the expectations built into a stock that has already tripled this year.
While the rally may suggest investors have missed their chance, Citi has assigned the high price target of $92, representing roughly 27% upside from current levels. Overall, Wall Street is moderately bullish about HPE stock, with 11 analysts of the 21 covering it rating it a “Strong Buy,” two rating it a “Moderate Buy,” and eight saying it is a “Hold.”
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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