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Hewlett Packard Enterprise (HPE) stock has been on a roll with a rally of 178.4% in the last 52-weeks. Strong demand for AI infrastructure, server modernization, and networking upgrades, has triggered the rally.
Further, HPE has witnessed significant growth acceleration, cash flow upside, and a strong backlog. As revenue visibility increases coupled with an improving credit profile, HPE is well positioned to create value.
The flow of good news continues with HPE recently announcing an expanded relationship with “eight companies to integrate high performance computing (HPC) and quantum computing systems.” These companies include Intel (INTC), IQM, Qblow, Quantinuum (QNT), QuEra Computing, Quantum Machines, Rigetti (RGTI), and Riverlane.
With a hybrid platform of supercomputing and quantum technology, HPE intends to “accelerate the transition” from research to real-world application. These collaborations are further likely to boost the company’s growth visibility.
About HPE Stock
Headquartered in Spring, Texas, Hewlett Packard is focused on developing intelligent solutions to capture, analyze, and act upon data seamlessly from edge to cloud. The company’s business segments include Server, Hybrid Cloud, Networking, Financial Services, and Corporate Investments and Other.
For FY25, HPE reported 14% year-over-year (YOY) growth in revenue to $34.3 billion. Further, FY25 free cash flow was robust at $986 million. The company’s growth momentum has accelerated with Q2 FY26 revenue growth of 40% on a YOY basis to $10.7 billion.
The key growth driver for the company in Q2 was the networking segment with YOY growth of 148%. Further, the cloud and AI segment delivered growth of 23%. Amid the robust growth trajectory coupled with a strong guidance, HPE stock has surged 106.94% in the last six months.
Robust Guidance to Support Stock Upside
For FY26, HPE has guided for revenue growth in the range of 29% to 33%. Further, GAAP operating profit growth is expected in the range of 885% to 930%. Notably, HPE has also guided for free cash flow of $3.5 billion in comparison to FY25 FCF of $986 million. Clearly, with a record AI backlog, HPE is positioned for robust growth. Even beyond FY26, HPE expects the positive momentum to sustain with FY27 FCF guided at $4.5 billion.
An important point from a credit perspective is that HPE ended Q3 FY25 with a net-debt-to-adjusted-EBITDA of 3.1x. With strong cash flows, leverage is expected to decline to 2.0x by the end of FY26. Considering the FCF guidance for FY27, further improvement in credit metrics is in the cards. HPE also reported a strong liquidity buffer of $5.3 billion as of Q2 FY26.
Credit metrics are important as HPE has pursued inorganic growth. With a strong balance sheet, the company is positioned for opportunistic acquisitions and an increase in shareholder returns. In FY27, HPE expects to return 75% of FCF to shareholders.
What Do Analysts Say About HPE Stock?
Based on 20 analysts with coverage, HPE stock has a consensus “Moderate Buy” rating. While 10 analysts have a “Strong Buy” rating for HPE stock, one has a “Moderate Buy,” and nine have a “Hold” rating.
The mean price target of $68.65 represents a potential upside of 40.5% from current levels. Further, the most bullish price target of $80 suggests that HPE could climb as much as 63.8% from here.
Concluding Views
Even after a big rally in the last few quarters, HPE stock trades at a forward price-to-earnings ratio of 17.0 times. Considering FY26 and FY27 earnings growth estimate of 87.01% and 23.61%, respectively, the price-earnings-to-growth ratio is 0.53. This is indicative of undervaluation and with the possibility of robust growth beyond FY27, HPE stock is attractive.
Overall, the bullish view on HPE stock is underpinned by a record order backlog, cash flow upside visibility, and tailwinds on the back of strong demand for AI infrastructure. These factors are likely to ensure that HPE remains in an uptrend.
