Hewlett Packard Enterprise (HPE) was poised to open more than 25% higher on Tuesday after the server and networking products maker reported record second-quarter earnings, driven 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 server demand 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, where 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 CPU servers because they can run AI locally and securely on-premises. This trend is increasing HPE’s sales and improving its profit margins.
Revenue for the quarter rose 40% to $10.7 billion. Adjusted earnings per share increased 108% to $0.79, beating company expectations.
HPE stock has risen nearly 25% in the past two sessions to a record high after peer Dell’s big earnings last week.
“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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