Hewlett Packard Enterprise HPE is benefiting from demand for artificial intelligence (AI) workloads across Agentic AI, Enterprise AI, Private Cloud AI, AI fabs and hyperscalers, leading to multiyear revenue growth and record backlogs.
In the third quarter of fiscal 2026, HPE’s Cloud & AI revenues reached $9 billion, up 25% year over year, with a 17% operating margin. Server revenues rose 35%, while traditional server orders increased 75% as customers favored AI-ready configurations and higher-value systems. HPE’s fourth-quarter fiscal 2026 Cloud & AI revenues are expected to grow 60% to 72%.
In the third quarter of fiscal 2026, AI systems orders were $2.4 billion, up more than 30% sequentially, while AI systems backlog rose 14% sequentially to $6.8 billion. Private Cloud AI orders increased triple digits year over year, showing wider adoption of HPE’s on-premises AI factory approach.
HPE was also awarded a $3.5 billion inferencing deal with a hyperscaler customer, adding evidence that enterprise AI deployments are moving beyond pilots. Supporting its AI infrastructure, Hewlett Packard Enterprise is expanding its hybrid cloud operating model through GreenLake, which lets customers manage infrastructure and software across on-premises and cloud environments with consumption-based economics.
Hewlett Packard Enterprise has used acquisitions to add networking, cloud management, security and data-management capabilities around its hybrid IT model. These factors will support HPE’s capabilities and long-term growth outlook.
How Competitors Fare Against HPE
Hewlett Packard Enterprise’s closest competitors in this domain are 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
Shares of Hewlett Packard Enterprise have skyrocketed 152.3% year to date, outperforming the Zacks Computer - Integrated Systems industry and the Zacks Computer and Technology sector’s appreciation of 109.9% and 16.6%, respectively.
HPE YTD Performance Chart
Image Source: Zacks Investment Research
Despite the appreciation in the share price, HPE trades at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.48, below the industry’s 4.13.
HPE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPE’s fiscal 2026 margin suggests year-over-year growth rate of 96.4%. Estimates have been revised upward in the past 60 days.
Image Source: Zacks Investment Research
HPE currently carries a Zacks Rank #2 (Buy). 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).