Hewlett Packard Enterprise (HPE) was poised to open more than 35% higher on Tuesday after the server and networking products maker reported record second-quarter earnings, fueled by a boom in corporate investment in AI infrastructure.
The company also brought forward its long-term financial targets by two years while raising its full-year outlook, predicting that demand for its server and networking products will remain strong through 2027.
“Orders for traditional servers increased by triple digits as our customers continue to modernize their computing infrastructure and invest in AI inference,” CEO Antonio Neri said on an earnings call Monday afternoon.
“Orders more than doubled and significantly exceeded revenue, creating a backlog for record companies,” he added.
Unlike the coronavirus, when customers were double-booking, Neri said, “There is nothing like that. There are no cancellations.”
Training artificial intelligence models requires expensive GPUs, but the AI inference that performs the tasks can be run on standard CPUs. [central processing unit] Traditional server.
Management explained that enterprise customers prefer their CPU servers because they can run AI locally and securely on-premises, which is driving HPE’s traditional server sales and significantly improving profit margins.
Revenue for the quarter rose 40% to $10.7 billion. Adjusted earnings per share increased 108% to $0.79, exceeding HPE’s expectations.
HPE stock has risen nearly 25% in the past two sessions as investor enthusiasm grew after last week’s big earnings from rival Dell, showing massive demand for enterprise AI servers.
Broad AI deals are rapidly expanding from semiconductors and memory to CPUs. Retail money flooded into the stock shortly before the announcement Monday afternoon, representing an unprecedented shift in investor sentiment, according to Vanda Research.
“Hewlett-Packard (HPE), a stock that has never appeared on our retail leaderboard before, ended today as the second most bought stock,” a Vanda Research note said after the bell on Monday.
“In fact, retail investors have bought as much HPE in the past two sessions as they have in the last 11 months combined,” the note said.
HPE has soared more than 90% since the beginning of the year.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X @ines_ferre.
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