Shares of Hewlett Packard Enterprise (HPE -0.04%) have been on a tear. The enterprise-hardware company's stock has nearly doubled over the past month and is up roughly 130% year to date as of this writing, far outpacing the S&P 500.
A record quarter reported on June 1 only fueled the bull case for the stock: revenue jumped 40% year over year to $10.7 billion, and non-GAAP (adjusted) earnings per share more than doubled. Management also lifted its full-year forecast so much that its new fiscal 2026 targets now top what it had previously projected for fiscal 2028.
With the stock surging and the artificial intelligence (AI) build-out front and center, the question is whether HPE's results signal that the AI server trade is heating up or it's become overhyped.
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The server engine behind the surge
HPE's server revenue rose 33% year over year to $5.5 billion in its fiscal second quarter of 2026 (the period ended April 30, 2026), up 29% from the prior quarter. That came alongside $1.8 billion in new AI systems orders during the quarter, which lifted the company's AI systems backlog to $5.9 billion heading into fiscal Q3 -- orders management importantly said skew toward enterprise and sovereign customers rather than just a handful of large cloud deals.
And the demand is broadening even further. HPE said its AI momentum is no longer concentrated in model-training clusters; inference and agentic workloads are now driving traditional server sales alongside purpose-built AI systems. Indeed, at its COMPUTEX showcase, the company rolled out a new ProLiant server built around Nvidia's latest Vera CPU, aimed at exactly those jobs.
But the 40% top-line growth needs context.
A large chunk of its strong top-line growth came from HPE's acquisition of Juniper Networks, which closed last July. Networking revenue surged 148% year over year to $2.7 billion, but when you strip out the deal, networking grew about 10%.
Management's own full-year guidance shows the clear difference in reported revenue growth and HPE's normalized revenue growth. The company guided for revenue to be up 29% to 33% as reported, but only at a high-teens rate on a comparable basis.
NYSE: HPE
Key Data Points
Reasons to be cautious
Further, there are some things to be concerned about.
First, management pointed to supply constraints, especially in memory, that are capping how fast it can turn orders into revenue, and it expects elevated costs to linger into 2027. That is why the backlog keeps building faster than sales.
The business is also a thin-margin one. HPE's cloud and AI segment, which houses the server line, posted a 12.4% operating margin in the quarter -- nearly double the year-ago 6.6%, but well short of the 21.6% its networking segment earned. Selling racks built around someone else's accelerators is high-volume, low-margin work, so a jump in server revenue does less for profit than the top-line figure suggests.
But the deeper question is durability.
"[T]he pipeline remains multiples of the current backlog, which is record-breaking at the company level," said HPE President and CEO Antonio Neri in the company's fiscal second-quarter earnings call.
Neri indicated that the order surge reflects deployment rather than stockpiling, and that HPE sees no sign that customers are pulling orders forward the way they did during the pandemic.
And even after the run-up, the stock doesn't necessarily look expensive, depending on how you view it. HPE trades at a forward price-to-earnings ratio of about 16 based the midpoint of management's fiscal 2026 adjusted earnings-per-share guidance of $3.35 to $3.45. For a company guiding to high-teens comparable revenue growth, that is a modest multiple.
But it can also be argued that it's modest for a reason.
Much of HPE's profit still comes from cyclical, low-margin hardware tied to a single demand wave, and the company is leaning on a debt-funded acquisition to reshape itself.
So, is the AI server trade heating up?
HPE's order book says yes, for now. And the demand looks broad. But the durability of that demand, not this quarter's headline, will decide whether the stock holds its gains. For investors who believe the build-out has years left to run, HPE looks reasonably priced here. But for those who have their doubts about the AI boom, exercising some caution here could make sense.
