Shares of Hewlett Packard Enterprise (HPE 0.35%), or HPE, charged sharply higher Wednesday, soaring as much as 16.1%. As of 1:46 p.m. ET, the stock was still up 12.9%.
The catalyst that sent the server and cloud software specialist higher was its strong financial report, which held a few surprises.
NYSE: HPE
Key Data Points
Investors let out a collective cheer
For its fiscal second quarter (ended April 30), HPE generated revenue of $7.2 billion, up 3% year over year. This resulted in adjusted earnings per share (EPS) of $0.42, down 19%. Fueling the robust top-line growth was artificial intelligence (AI) systems revenue, which doubled quarter over quarter.
While that might not seem like much to celebrate, the results sailed past management's forecast and easily surpassed analysts' consensus estimates, which called for revenue of $6.82 billion and adjusted EPS of $0.39.
CEO Antonio Neri noted that the accelerating adoption of AI helped fuel the results. "Our deep expertise in designing, manufacturing, and running AI systems at scale, fueled growth of cumulative AI systems orders to $4.6 billion dollars, with enterprise AI orders representing more than 15%," he said. He went on to say that the company was seeing stronger AI order conversion. That, combined with "prudent cost discipline and higher-than-expected free cash flow" set the stage for future success.
In the wake of the robust results, management increased its full-year guidance and now expects revenue growth in a range of 1% to 3%, while lifting its EPS guidance to a range of $1.85 to $1.95, up from a range of $1.82 to $1.92.
Wall Street is much more bullish
On the heels of HPE's strong results, Wall Street scrambled to revise its models, with nine analysts boosting their price targets. Evercore ISI analyst Amit Daryanani increased his price target to $22, up from $18, and seemed to adequately capture Wall Street's more bullish sentiment. The analyst noted that while investors had relegated HPE stock to the "show-me" pile, the results "proved that the company has a significant presence and a competitive offering in the AI market."
Some uncertainty remains, but HPE is staking its claim in the AI revolution, and at less than 14 times earnings, the stock is selling for a significant discount to its peers.
