Why Hewlett Packard Enterprise Stock Just Popped
Key Points
HPE stock beat on sales and earnings last night, and raised guidance for next quarter and for the year.
Q2 sales alone surged 40% on rising AI server demand.
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Following a powerful earnings report from Dell (NYSE: DELL) last week, rival Hewlett Packard Enterprise (NYSE: HPE) just released blowout numbers of its own, sending the computer stock up 24.3% through 10 a.m. ET.
Heading into last night's earnings report, analysts expected HPE to earn $0.53 per share on $9.8 billion in quarterly sales. Instead, HPE earned $0.79 per share on $10.7 billion in sales -- and raised guidance.
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HPE Q2 earnings
CEO Antonio Neri boasted of an "exceptional" Q2, featuring "record-breaking revenue, higher-than-anticipated profitability, and increased free cash flow." Boosted by surging demand for AI servers for artificial intelligence data centers, HPE's sales surged 40%, producing powerful profits along the way. Gross profit margins shot up more than eight full percentage points to 36.5%. Non-GAAP earnings beat expectations, while earnings calculated under generally accepted accounting principles (GAAP) nearly tripled to $1.26 per share.
Best of all, whereas a year ago, HPE burned $900 million in cash, this time the company generated $900 million in positive free cash flow.
What's next for HPE
And HPE expects the good times to keep on rolling. Turning to guidance, management forecasts fiscal Q3 2026 sales of $11.5 billion to $12.1 billion will produce GAAP profits of $0.84 to $0.89 per share.
For the full year, HPE says sales could range from $44.2 billion to $45.6 billion -- 29% to 33% growth -- with GAAP per-share profits from $2.42 to $2.52 and non-GAAP profits from $3.35 to $3.45. All these numbers exceed analyst forecasts, which have HPE generating sales below $41 billion, and pro forma profits closer to $2.43 per share.
At 44 times trailing earnings, HPE stock may not be cheap, but it sure is beating expectations!
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise. The Motley Fool has a disclosure policy.
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