HP is keeping pace with Dell: Accelerating its AI business expansion and raising its revenue growth forecasts for this year and next.

HP Enterprise's quarterly results exceeded expectations, with demand for AI servers and networking businesses continuing to accelerate. This prompted the company to raise its revenue growth guidance for the current and next fiscal year, continuing the strong industry signal following Dell Technologies' better-than-expected performance.

HP reported revenue of $12.2 billion for the fiscal quarter ending in July, a 34% year-over-year increase, exceeding the $12 billion forecast by analysts tracked by FactSet; adjusted earnings per share were $1.11, also significantly higher than the market expectation of 93 cents. Management characterized this performance as "sustainable profit growth momentum."

Looking ahead, HP expects revenue for the next fiscal quarter (ending October) to be between $13.9 billion and $14.8 billion, with the midpoint exceeding the FactSet consensus by approximately $1.3 billion. It also raised its full-year revenue growth forecast for fiscal year 2026 to 34% to 37%, and its revenue growth forecast for fiscal year 2027 (starting November 1st) to 13% to 17%. Following the announcement, HP's stock price fell slightly by about 1% in after-hours trading, but its year-to-date gain is still approximately 116%.

AI demand drives comprehensive growth across multiple business lines.

HP's cloud and AI business saw revenue grow 25% year-over-year to $9 billion this quarter, becoming the core engine of its overall performance. Server revenue grew 35% to $6.8 billion, and storage revenue grew 10% to $1.3 billion. HP manufactures both traditional data center servers and AI-optimized servers, the latter capable of running AI chips such as Nvidia GPUs.

The networking business also performed strongly, with quarterly revenue increasing by 75% year-over-year to $2.9 billion, largely in line with analysts' expectations. Specifically, data center networking revenue was $382 million, a significant year-over-year increase of 112%; campus and branch network revenue was $1.4 billion.

In a media interview, HP CFO Marie Myers stated that enterprise customers are simultaneously pursuing two initiatives: upgrading data centers to meet new workload demands and actively deploying AI applications in their enterprise environments. She also noted that the company achieved over $2 billion in operating profit this quarter, leading to a significant improvement in cash flow.

Focusing on corporate and sovereign clients, the profit structure is more advantageous.

Unlike Dell and Supermicro, which focus on hyperscale data centers, HP's differentiated approach lies in its focus on enterprise and sovereign AI customers. According to HP management, of its approximately $6.3 billion AI order backlog, over two-thirds come from enterprise and sovereign clients.

Deutsche Bank analyst Gianmarco Conti initiated coverage of HP ahead of the earnings release, giving it a buy rating and positioning it as a "contrarian player deliberately pursuing differentiation in the AI server camp." In his research report, Conti pointed out that Dell and Supermicro are deeply mired in "low-margin competition" for supplying hyperscale cloud vendors, while HP's networking and software capabilities in enterprise and sovereign AI "have real monetization value."

HP's CFO Myers corroborated this, stating that enterprise and sovereign customers are the main drivers of demand for AI servers and represent the market where the company believes the profit margin is greatest.

Network services become the core profit engine

Conti described HP's networking product line as the company's "profit engine," with its Juniper and Aruba products giving it a strong position in the campus networking market. HP CEO Antonio Neri stated that as AI evolves into a "multi-year growth driver," HP is poised to "capture this opportunity on a massive scale."

Myers expressed optimism about the current market environment: "We have the right product portfolio at the right time. With demand continuing to grow, the timing has never been better to be in this industry."

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