Shares in Hewlett Packard Enterprise popped Wednesday on fiscal second-quarter earnings that fell from a year earlier but topped expectations. Strong computer server sales boosted revenue growth for HPE stock above expectations amid customer investments in artificial intelligence infrastructure.
The maker of computer servers, networking equipment and data storage systems reported earnings after the market close on Tuesday. For the April quarter, HPE earnings were 42 cents a share, down 19% from a year earlier.
Revenue rose 3% to $7.2 billion, the company said.
HPE Stock: AI System Revenue Doubles
Analysts expected HPE earnings of 39 cents a share on sales of $6.82 billion for the period ended April 30. A year earlier, HPE earnings were 52 cents a share on sales of $6.97 billion.
"AI systems revenue more than doubled from the prior quarter, driven by our strong order book and better conversion from our supply chain," Chief Executive Antonio Neri said in the earnings release. "Our deep expertise in designing, manufacturing, and running AI systems at scale fueled growth of cumulative AI systems orders to $4.6 billion, with enterprise AI orders representing more than 15%."
On the stock market today, HPE stock popped 14.9% to 20.23 in early trading. Shares were up 5% in 2024 prior to the HPE earnings report.
"HPE has managed to mitigate margin headwinds better than their peers, citing cost discipline and strong services attachment with AI system sales," said Raymond James analyst Simon Leopold in a report.
He added: "Management disclosed AI systems revenue for the first time and investors likely welcome the increased disclosure. AI server revenue doubled to $900 million in fiscal Q2, following four consecutive quarters of flattish AI server revenue of $300 million to $400 million."
Heading into the HPE earnings report, the tech stock had a Relative Strength Rating of 62 out of a best-possible 99, according to IBD Stock Checkup.
HPE stock owned an entry point of 18.76 from a double-bottom base.
In early 2024, HPE agreed to buy Juniper Networks for $14 billion in cash.
HPE expects the deal to be earnings and free-cash-flow accretive in the first year post-close. The deal is expected to close in late 2024 or early 2025.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
