Hewlett Packard Enterprise (HPE) shares advanced in after-hours trading on Wednesday, buoyed by a stellar earnings report from rival Dell Technologies. The move underscores the robust demand for AI infrastructure, a theme that has been driving the broader technology sector. HPE climbed roughly 4% to $53.45, building on Tuesday's close of $50, as investors positioned for HPE's own quarterly results due later this month.
Dell's AI server boom lifts sector sentiment
Dell's fiscal second-quarter results, released after the bell, showed revenue surging 58% year-over-year to $47 billion, with the company guiding to $192 billion in annual revenue, a 69% increase. The standout was its AI server business, which booked a record $60.9 billion in orders, recognized $16.4 billion in revenue, and exited the quarter with a $95 billion backlog. Dell's COO highlighted that traditional servers and networking grew 122%, while storage rose 26%.
These figures are particularly relevant for HPE, as the two companies compete directly in enterprise hardware and AI solutions. The strong demand signals that HPE is likely to report similar momentum when it releases its own numbers. In the previous quarter, HPE's revenue jumped 40% to $10.7 billion, with gross margins expanding 750 basis points to 36.9%, driven by a 148% surge in networking revenue and a 23% increase in cloud and AI sales.
Analysts expect strong HPE quarter
Wall Street consensus projects HPE's revenue to rise 30% in the upcoming quarter to $12 billion. Given the industry-wide AI spending spree, there is a reasonable chance the company could beat expectations, as seen with peers like Dell's supply constraints and Broadcom's AI outlook. Investors will be closely watching HPE's backlog and margin trends, which have been expanding as pricing power strengthens. Dell's gross margin, for instance, rose to 20.9% from 18.3% a year earlier.
Valuation remains attractive
HPE's forward price-to-earnings ratio stands at 15, well below the technology sector median of 22 and significantly cheaper than AI leaders like Nvidia and AMD. This valuation gap, combined with the company's growth trajectory, has made HPE a favored pick among value-oriented tech investors. However, the stock has pulled back from its August high of $63.75 to $50.87, presenting a potential entry point for those who believe the AI cycle still has room to run.
Cup-and-handle pattern signals upside
Technically, HPE's daily chart reveals a classic cup-and-handle formation, a pattern often associated with bullish continuations. The cup's depth measures about 37%, and applying the same vertical distance from the cup's upper rim suggests a potential long-term target of $87.56. Confirmation would come on a decisive move above the $63.75 resistance level. This setup mirrors patterns seen in other tech names, such as Nio's wedge formation, though the fundamental drivers differ.
As HPE prepares to report earnings, the combination of strong industry tailwinds, a favorable valuation, and a bullish technical pattern could make it a standout performer in the AI hardware space. Still, investors should remain mindful of potential volatility, as the sector has been sensitive to supply chain issues and macroeconomic headwinds.
This article is for informational purposes only and does not constitute financial advice.
