Hewlett Packard Enterprise (HPE) posted one of the sharpest single-session moves in its history on Tuesday, with shares climbing more than 30% after the company delivered its largest earnings beat in eight years, fuelled by an accelerating wave of AI infrastructure spending.
Second-quarter revenue came in at $10.68 billion, up 40% year-on-year and nearly $900 million ahead of the $9.79 billion consensus, while adjusted EPS of $0.79 beat forecasts of $0.53 by nearly 50%. Free cash flow for the quarter hit $915 million, an improvement of $1.8 billion on the prior year.
Networking was the clear strength in the quarter, generating revenue of $2.7 billion, up 148% year on year, with an operating margin of 21.6%, well above the levels typically seen among commodity server competitors. Cloud and AI revenue also grew 23% to $7.7 billion, supported by triple-digit growth in traditional server orders.
Orders more than doubled in the quarter, pushing HPE’s AI systems backlog to $5.9 billion entering Q3, with total AI backlog reaching $6.3 billion – 61% of which came from government agencies and large enterprises, a customer mix that points to durable rather than cyclical demand. Management said the AI sales pipeline stands at “multiples of backlog.”
CEO Antonio Neri told CNBC’s Squawk on the Street that HPE is “uniquely positioned” to capture the AI disruption, adding that the company now has “the best portfolio we’ve ever had.”
CFO Marie Myers lifted the fiscal 2026 EPS outlook by more than 40%, raising the range to $3.35-$3.45 from a prior guide of $2.30-$2.50, while the free cash flow target moved to at least $3.5 billion.
The most striking detail from the results was the company’s assertion that HPE now expects to reach its fiscal 2028 long term targets two years ahead of schedule. The company set out that three-year plan just eight months ago at its October 2025 Securities Analyst Meeting, targeting $3.00 in non-GAAP EPS by 2028 – a bar it has already cleared for this year.
HPE also unveiled the ProLiant Compute DL394 Gen12 server ahead of the results, a machine targeting agentic AI and reinforcement learning workloads, with availability planned for autumn 2026. Q3 revenue guidance of $11.5 billion to $12.1 billion would comfortably eclipse what markets were pricing before Tuesday’s open.
The stock had already closed Monday’s regular session up 9.2% at $47, carried by the same AI infrastructure momentum that has lifted Dell and Nvidia in recent weeks, before after-hours trading pushed shares toward $60 – setting up what may be HPE’s biggest post-earnings move since it listed as a standalone company.
