HPE’s Record Quarter Comes With a Catch: More AI Orders Than It Can Ship

“Customers are buying everything,” Hewlett Packard Enterprise CEO Antonio Neri told Yahoo Finance after the company posted record quarterly results, pointing to brisk demand for routers and servers.

Revenue for the fiscal third quarter, which ended July 31, rose 34% from a year earlier to $12.2 billion, HPE reported Wednesday. Non-GAAP earnings came to $1.11 a share, above the company’s own outlook range of $0.88 to $0.93. HPE also raised its guidance for both fiscal 2026 and fiscal 2027. Yahoo Finance put the new full-year revenue growth outlook at up to 37% and the fiscal 2027 range at 13% to 17%.

Networking does the heavy lifting

The Juniper Networks deal shows up clearly in the segment numbers. Networking revenue climbed 74.9% to $2.9 billion with a 22% operating margin. Inside that unit, routing revenue jumped 270% to $788 million, and data center networking more than doubled to $382 million. Security grew 75.6% to $281 million.

The larger Cloud & AI segment brought in $9 billion, up 25.4%, and its operating margin rose to 17% from 7% a year earlier. Server revenue reached $6.8 billion, up 35.3%, while storage grew 10.2% to $1.3 billion. Non-GAAP gross margin was 40.4%.

“AI is becoming a multi-year growth driver for HPE, and our differentiated portfolio positions us to capture that opportunity at scale,” Neri said in the earnings release.

Supply is the constraint

Orders grew faster than revenue, and Neri told analysts on the earnings call that HPE booked more orders than in any prior quarter, leaving a record backlog. “Supply constraints continue to affect our ability to fulfill the increased customer demand,” he said, adding that the company is working with partners on more multiyear supply agreements and offering customers alternative product configurations.

CFO Marie Myers said on the call that enterprise AI spending is focused on agentic AI workloads and inferencing, and that orders rose 42% on a normalized basis. She also said gross margin should move back toward historical levels as AI systems make up more of the mix.

The numbers line up with what IDC has been seeing across the server market, where AI buyers have absorbed higher prices to get hardware.

Investors were less excited than Neri. HPE shares dipped after the report as traders took profits, according to Yahoo Finance, after a run of about 109% this year. KeyBanc analyst Brandon Nispel said the raised guidance “looks conservative” and listed accelerating networking, Oracle’s contribution and AMD’s Helios rack-scale systems among the catalysts ahead.