HPE surges 25% after blowout earnings, pacing for its best day ever

The stock is looking to set a new intraday all-time high.

Artificial intelligence-related demand in its server unit blew away analysts’ expectations for second-quarter earnings. HPE reported adjusted earnings per share of 79 cents, versus 53 cents expected, and overall revenue soared to $10.68 billion versus an expected $9.79 billion.

Server revenue alone, a sub-division of its cloud and AI unit, came in at $5.45 billion, topping the $4.66 billion analysts expected.

In the wake of Dell’s own AI-fueled earnings blowout, some analysts are getting cautious about how sustainable demand might be in the server space, as firms continue to buy and server prices climb.

Bernstein increased their HPE estimates after better projections in the traditional server unit and took their price target to $62 from $35, writing that “a lot of the upside is already in the stock.” The firm kept its rating at Market Perform. Morgan Stanley took their price target from $33 to $71.

“Similar to DELL, HPE is seeing material upside to results from inelastic server demand and share capture, as servers become strategic, and those with supply take price,” Morgan Stanley analysts wrote. “Durability of demand vs. peak earnings risk will be the key debate from here.”