With eight mentions of AI in two paragraphs of its fiscal Q2 Earnings Release, Hewlett Packard Enterprise (HPE) reminded investors that Nvidia isn’t the only vehicle to consider for those interested in Artificial Intelligence.
Hewlett Packard Enterprise offers enterprise security, analytics and data management, applications development and testing, data center care, cloud consulting, and business process services.
HPE shares rallied more than 10% after the company turned in a very good report card for its fiscal Q2, in which AI was a focal point. CEO Antonio Neri said “HPE delivered very solid results in Q2, exceeding revenue and non-GAAP EPS guidance. AI systems revenue more than doubled from the prior quarter, driven by our strong order book and better conversion from our supply chain.”
He continued, “Our deep expertise in designing, manufacturing, and running AI systems at scale fueled growth of cumulative AI systems orders to $4.6 billion, with enterprise AI orders representing more than 15%. HPE’s AI advantage, increased HPE GreenLake adoption, and leading infrastructure portfolio, as well as an improved supply chain environment, set us up very well to deliver a strong second half.”
HPE CFO Marie Myers added, “Because of our robust AI systems order momentum and disciplined execution across our entire portfolio, we are raising our revenue and non-GAAP EPS guidance for the full year. We are driving profitable growth as we convert customer demand to revenue, particularly for HPE’s AI systems. The long-term trends across hybrid cloud and networking also position us well for the future.”
Management is also excited about the additive products from Juniper Networks (JNPR), a provider of internet infrastructure solutions for ISPs and other telecom service providers, which HPE is slated to acquire by mid-2025. Juniper has historically experienced a high renewal rate with existing customers and its enterprise-geared and AI-driven ‘Mist-ified’ suite is benefitting from substantial customer interest.
Of course, I always care about the fundamental valuation metrics for any stock I own, so I can’t help but like that HPE boasts a P/E ratio of just 10.5 times the mid-point of management’s latest earnings projection. With EPS growth expected to resume next fiscal year (ends October 2025) and the stock sporting a 2.5% dividend yield, which compares quite favorably to most I.T. companies, I think HPE has been overlooked, despite offering a very attractively priced way to play the market’s current wave of AI euphoria.
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