Hewlett Packard Enterprise Sees AI, Networking Demand Outrun Supply as 2027 Targets Rise

Key Points

• Demand is outpacing supply across networking, cloud and AI infrastructure, with networking orders up 36% and cloud/AI orders up roughly 75% year over year. HPE expects this demand to support fiscal 2027 revenue growth of 13%–17%, EPS growth of 16%–20% and at least $5 billion in cash flow.
• HPE’s Juniper acquisition is progressing ahead of expectations, with the company targeting $600 million in synergies by fiscal 2028. Networking revenue growth is projected to accelerate to 14%–17% in fiscal 2027, while margins are expected to reach the mid- to high-20% range.
• HPE plans to accelerate share repurchases in the fiscal fourth quarter after reaching its below-2-times leverage target early, and intends to return at least 75% of free cash flow to shareholders through buybacks and dividends.

Hewlett Packard Enterprise NYSE: HPE CFO Marie Myers said the company’s recent quarterly results and revised fiscal 2027 framework reflect demand that continues to exceed available supply across networking, cloud and AI infrastructure.

Speaking at Citi’s technology conference, Myers said HPE reported one of its strongest quarters, including a “beat and raise” and higher fiscal 2027 targets. The company is forecasting fiscal 2027 revenue growth of 13% to 17%, earnings-per-share growth of 16% to 20%, and at least $5 billion in cash flow.

Networking and AI Orders Support Outlook

Myers said networking orders increased 36% year over year, supported by a networking refresh cycle and momentum in data-center deployments following HPE’s acquisition of Juniper Networks. Cloud and AI orders rose roughly 75% from the prior year, she said, as customers invest in data-center modernization, power and cooling improvements, and AI workloads.

“Demand is just outstripping supply at levels that were probably unprecedented in the industry,” Myers said.

HPE cited a large enterprise inference deployment disclosed during its quarterly report as evidence that enterprise AI investments are gaining momentum. Myers said the company reviews its backlog for signs of double booking or potential cancellations and remains confident in the quality of its orders.

The company’s fiscal 2027 forecast is based on supply HPE expects to obtain, Myers said. HPE disclosed purchase commitments exceeding $30 billion, including multiyear long-term arrangements for networking as well as cloud and AI products. The commitments provide supply visibility, though they do not necessarily lock in prices.

Myers said additional supply would allow HPE to convert more of its existing order book into revenue.

Juniper Integration and Oracle Agreement

HPE expects the Juniper acquisition to support both revenue growth and margin improvement in networking. Myers said HPE is ahead of expectations in delivering cost synergies and remains on track to achieve $600 million in synergies by the end of fiscal 2028.

The company reported 10% year-over-year networking revenue growth and a 22% operating margin during its fiscal third quarter. HPE expects networking revenue growth to improve from 12% in fiscal fourth-quarter guidance to a range of 14% to 17% in fiscal 2027. Operating margins are projected to reach the mid- to high-20% range in 2027, aided by a full year of Juniper-related synergies.

Myers said the integration of sales organizations, account coverage and product roadmaps has proceeded more smoothly than anticipated. The next phase of the integration will focus heavily on IT systems, including financial systems, during fiscal 2027.

She also highlighted HPE’s recently announced multiyear, gigawatt-scale agreement with Oracle as a proof point for the combined networking portfolio. The agreement includes routing, switching, software, AIOps, services and financing, according to Myers. HPE expects fiscal 2027 to represent the early stages of the revenue ramp and said it plans to provide additional detail at its Sept. 30 Networking Investor Day and during its fourth-quarter earnings report.

Myers said HPE’s liquid-cooling capabilities helped it bring a liquid-cooled Juniper QFX switch to market ahead of competitors. She said the company believes its combined portfolio can help it pursue more large data-center opportunities with cloud providers, sovereign cloud customers and others.

Margins, Helios and Enterprise AI

HPE posted a record 40% gross margin in the fiscal third quarter. Myers attributed the result to pricing discipline, favorable deal mix, lower AI shipment mix during the period and synergy benefits. She expects a higher AI mix in the fiscal fourth quarter and a more moderate pricing environment in fiscal 2027, although HPE still expects pricing increases.

Myers said AMD Helios is not included in HPE’s fiscal 2027 guidance. The platform combines HPE server architecture with a networking tray and is currently in proof-of-concept testing with customers. HPE expects potential orders to emerge after customers evaluate performance on their workloads.

In enterprise AI, Myers said HPE is positioned to benefit from on-premises inference deployments because of its hybrid-cloud heritage and private-cloud AI offerings. HPE built an internal AI factory using its HPE Private Cloud AI architecture and believes it can reduce token costs by as much as 60% compared with cloud alternatives, she said.

Storage is also becoming a larger part of AI deployments. HPE reported 10% year-over-year storage revenue growth and more than 20% order growth. Myers said the company’s Alletra Storage MP X10000 platform has recorded seven consecutive quarters of growth.

Cash Flow and Capital Returns

Myers said HPE’s expected fiscal 2027 cash flow will be supported by earnings growth and lower restructuring costs as synergy programs mature. The company expects elevated inventory levels to persist relative to pre-cycle levels because of higher commodity prices, including memory, though some inventory is expected to ship in the fiscal fourth quarter.

HPE reached a leverage ratio of 1.8 times earlier than planned, Myers said, achieving its below-2-times target more than a year ahead of schedule. As a result, the company plans to begin accelerating share repurchases in the fiscal fourth quarter and intends to return at least 75% of free cash flow to shareholders through buybacks and dividends.

About Hewlett Packard Enterprise (NYSE:HPE)

Hewlett Packard Enterprise Company NYSE: HPE is a global technology company that provides information technology products, services and solutions for businesses and other organizations. Its offerings are designed to support data centers, cloud computing, artificial intelligence, networking and the management of distributed IT environments.

HPE's portfolio includes enterprise servers, data storage systems, networking equipment, high-performance computing and software. Through its HPE GreenLake platform, the company also delivers cloud and as-a-service solutions that allow customers to access computing, storage, data protection and other IT capabilities through a flexible consumption model.

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