Hewlett Packard Enterprise Shares Surge on AI Demand. Is It Too Late to Buy the Stock?

Shares of Hewlett Packard Enterprise (NYSE: HPE) surged higher after the company reported strong second-quarter results.

Not to be confused with former parent HP Inc., ticker symbol HPQ, which sells computers and printers, Hewlett Packard Enterprise is a major player in the enterprise data center and computing market, positioning itself as an edge-to-cloud hybrid infrastructure leader. Like rival Dell, the company is benefiting from a surge in artificial intelligence (AI) infrastructure spending.

With the stock up big, let's take a closer look at its results to see whether or not it's too late to buy the AI stock.

Riding the AI wave

HPE credited its strong growth and outlook to the convergence of networking and security in the data center space, as it helps customers scale their AI infrastructure with secure, high-performance networking. It is seeing particular strength in the enterprise and sovereign spaces, while noting that its customers are investing heavily in agentic AI and inference.

For its fiscal Q2, which ended April 30, the company's revenue surged 40% to $10.7 billion, helped by its acquisition of Juniper Networks. Cloud and AI revenue jumped 23% to $7.7 billion, while networking revenue rose 148%, or 10% on a normalized basis, to $2.7 billion.

It said that networking orders rose much more quickly than revenue in the quarter. Within the segment, normalized campus and branch orders climbed more than 20%, while enterprise data switching orders increased nearly 20%. Routing orders jumped nearly 30%, while security orders climbed by more than 15%.

HPE saw nice margin expansion, with gross margin climbing 810 basis points year over year to 36.5%. As a result, its adjusted earnings per share (EPS) nearly doubled from $0.41 to $0.79. That was well above the company's outlook for adjusted EPS of between $0.51 and $0.55.

The company raised its full-year outlook and now expects revenue growth of 29% to 33%, up from a prior outlook of 17% to 22% growth. Adjusted EPS is now expected to be between $3.35 and $3.45, above its prior $2.30 to $2.50 forecast.

It also introduced fiscal 2027 guidance, projecting revenue to grow by between 8% and 12%. Adjusted EPS is expected to increase by between 12% and 16%.

Image source: Getty Images.

Is the stock a buy?

HPE is riding the AI infrastructure wave, although some Wall Street analysts think the company is seeing a pull-forward in demand as enterprise customers look to get ahead of rising prices. The company said it is not seeing this, but it remains a potential risk.

With the stock trading at a forward P/E of 20 times this fiscal year's estimates, and already having tripled over the past year, I think there are better ways to play the AI infrastructure boom.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HP and Hewlett Packard Enterprise. The Motley Fool has a disclosure policy.