Hewlett Packard Enterprise Co (NYSE:HPE, XETRA:2HP) beat analyst expectations for its fiscal third quarter and raised its full-year guidance, citing broad-based demand and record orders and backlog as the company positions itself for a surge in agentic AI spending.
Management raised its FY26 EPS guidance to $3.75-$3.85 and forecast free cash flow of at least $3.75 billion.
For FY27, the company now expects revenue growth of 13%-17%, operating-profit growth of 14%-18%, EPS of $4.40-$4.60 and FCF of at least $5 billion.
The improved FY27 outlook comes with a mix shift toward AI revenue, which carries lower gross margins but is being offset by disciplined operating expense control, according to BofA Securities analysts, who reiterated a Buy rating and raised their price objective to $88 from $82.
BofA said it views the guidance as conservative, noting that server upside from agentic AI and AMD Helios is excluded from the networking outlook. Multi-year supply commitments and orders placed ahead of revenue recognition give the analysts confidence that FY27 estimates retain upward bias.
Networking revenue grew 10% on a normalized basis to $2.9 billion, while orders rose 36%, more than three times faster than revenue. Networks-for-AI orders reached $700 million in the quarter, pushing cumulative FY26 orders for that segment to $2.2 billion and prompting HPE to raise its year-end target to $2.5-$3 billion.
A three-year deal with Oracle validated HPE's scale-out switching and scale-across routing technology, the analysts said.
In Cloud & AI, revenue rose 25% to $9 billion, with operating margin expanding 460 basis points quarter-over-quarter to 17%. Server revenue climbed 35%, AI systems orders totaled $2.4 billion and backlog grew 14% quarter-over-quarter.
After the quarter closed, HPE secured a $3.5 billion inference-server award from a hyperscale customer, with more smaller deals reportedly in the pipeline.
HPE shares were down 5.4% at Thursday's open.