San Jose, California – Hewlett Packard Enterprise Co. experienced a significant surge in its shares, which rose by as much as 16% to reach a record high after the company announced better-than-expected revenue driven by robust sales of servers designed for artificial intelligence applications.
The company’s fiscal second-quarter revenue saw a 3.3% increase to $7.2 billion, surpassing Wall Street’s projection of a 2% decline to $6.82 billion. Earnings per share, excluding certain items, were reported at 42 cents for the quarter ending on April 30, higher than the average analyst estimate of 39 cents.
HPE attributed its strong financial performance to its server business, which generated $3.87 billion in revenue, surpassing the analysts’ average estimate of $3.45 billion. Sales of AI-oriented systems more than doubled from the first quarter, exceeding $900 million, driven by increased demand and improved availability of high-powered semiconductors from Nvidia Corp., according to CEO Antonio Neri.
Following the positive earnings report, HPE’s shares increased by 16% to reach a high of $20.43 on Wednesday after closing at $17.60 in New York. This marks the largest intraday gain since March 2016 and the highest trading level since the company’s 2015 split from HP Inc.
HPE’s current backlog for AI systems stands at $3.1 billion, as revealed by Chief Financial Officer Marie Myers in a conference call after the financial results were made public. Simon Leopold, an analyst at Raymond James, noted that this is the first time HPE has reported AI server revenue separately, a move likely well-received by investors.
Additionally, HPE raised its revenue outlook for the fiscal year, expecting a gain of 1% to 3%, up from the previous forecast of flat to 2% growth. The company also adjusted its profit projection to around $1.90 per share at the mid-point of its range, compared to a previous estimate of $1.87 per share.
Despite the positive momentum surrounding HPE’s AI server business, analyst Woo Jin Ho from Bloomberg Intelligence highlighted concerns about the underwhelming full-year forecast, suggesting that other business segments, such as networking, might be dragging down the overall results. The Intelligent Edge segment, which includes networking, reported $1.09 billion in revenue for the second quarter, falling short of the average estimate of $1.25 billion.
In January, HPE made a significant move by agreeing to acquire Juniper Networks Inc. for $14 billion, aiming to strengthen its networking capabilities. Neri expressed optimism about an improvement in customer demand as the year progresses, indicating a potential turnaround in networking business performance for HPE.