By Juby Babu
Sept 2 (Reuters) - Hewlett Packard Enterprise raised its annual forecasts on Wednesday after reporting quarterly results that beat Wall Street expectations, as surging AI-related demand across networking and servers drove growth across its business.
However, the company's shares slipped more than 3% in extended trading, weighed down by persistent supply constraints.
HPE's high-powered servers are in demand as cloud providers and enterprises invest in AI, server upgrades and data-center
capacity.
In an interview with Reuters, CFO Marie Myers noted that supply remained constrained, with memory being the main bottleneck, followed by NAND, CPUs and drives, though HPE has signed longer-term supply agreements to improve access to components.
"Demand is far outstripping supply."
HPE's inventory of $11.82 billion at the end of July was up from $7.16 billion last year. The increase reflects "higher commodity costs and targeted purchases to support increased orders and increased backlog," Myers said.
"It's clear to us that the market, the tailwinds in AI, particularly the adoption of AI in the enterprise, is really starting to settle in," Myers said. HPE expects enterprise adoption of AI to support growth beyond the current fiscal year.
It also announced an expansion of its collaboration with Oracle to help scale the software giant's global AI infrastructure, deploying HPE Juniper Networking equipment across Oracle's AI data centers.
The AI server maker has also issued Oracle warrants to purchase shares of HPE common stock.
HPE raised its fiscal 2026 revenue growth forecast to 34% to 37%, from 29% to 33% previously, and raised its adjusted earnings forecast to between $3.75 and $3.85 per share, from $3.35 and $3.45.
For fiscal 2027, HPE now projects revenue growth of 13% to 17%, up from 8% to 12%, with adjusted EPS growth of 16% to 20%, versus 12% to 16% previously.
Third-quarter revenue rose 33.7% to $12.21 billion, topping the $11.91 billion analysts expected, while adjusted EPS of $1.11 beat estimates of 93 cents.
HPE's results follow strong forecasts from rivals Dell and Super Micro as Big Tech's AI spending is set to exceed $730 billion this year.
(Reporting by Juby Babu in Mexico City; Editing by Shailesh Kuber)
