Hewlett Packard Enterprise reported $6.8 billion in server revenue for its fiscal third quarter, up 35.3% from a year earlier, as demand for AI infrastructure, server upgrades and data-center capacity pushed the company to record quarterly revenue.
HPE reported the results on September 2 for the quarter ended July 31, 2026. Total revenue reached $12.2 billion, up 34% year over year, while the company’s Cloud & AI segment generated $9.0 billion, an increase of 25.4%.
The results were strong enough for HPE to raise its revenue and earnings outlook for both fiscal 2026 and fiscal 2027. But the company is still confronting a constraint familiar across the AI infrastructure market: demand is running ahead of available components.
Cloud & AI Revenue Reaches $9 Billion
Servers accounted for the largest share of HPE’s Cloud & AI business during the quarter. Alongside the $6.8 billion generated by servers, storage revenue increased 10.2% to $1.3 billion. Financial Services revenue within the segment was $0.9 billion, down 0.3% year over year.
Cloud & AI produced an operating profit margin of 17.0%, compared with 7.0% in the prior-year quarter.
+34% year over year
+25.4%
+35.3%
The infrastructure growth extended beyond compute. HPE’s Networking segment reported $2.9 billion in revenue, up 74.9% from the prior-year period. Data Center Networking revenue reached $382 million, more than double the year-earlier figure, while routing revenue rose to $788 million.
Those networking comparisons also reflect HPE’s expanded business following its acquisition of Juniper Networks. HPE completed the Juniper transaction in 2025, making direct year-over-year comparisons for the networking segment less representative of purely organic growth than the headline percentage suggests.
HPE Raises Its 2026 and 2027 Outlook
The company now expects fiscal 2026 revenue to grow between 34% and 37%, compared with its previous forecast of 29% to 33%. HPE also raised its non-GAAP diluted earnings forecast to $3.75 to $3.85 per share.
For fiscal 2027, HPE increased its projected revenue growth range to 13% to 17%, from 8% to 12%. It expects non-GAAP diluted EPS growth of 16% to 20% and free cash flow of at least $5 billion.
| Metric | Previous outlook | New outlook |
|---|---|---|
| FY2026 revenue growth | 29%–33% | 34%–37% |
| FY2026 non-GAAP EPS | $3.35–$3.45 | $3.75–$3.85 |
| FY2027 revenue growth | 8%–12% | 13%–17% |
| FY2027 non-GAAP EPS growth | 12%–16% | 16%–20% |
For the fourth quarter, HPE expects revenue of $13.9 billion to $14.8 billion.
Demand Is Running Ahead of Component Supply
The higher forecast does not mean HPE has eliminated the supply constraints affecting AI and server deployments. CFO Marie Myers told Reuters that memory is currently the company’s main bottleneck, followed by NAND, CPUs and drives. HPE has entered longer-term supply agreements in an effort to secure component availability.
Inventory stood at $11.82 billion at the end of July, up from $7.16 billion a year earlier. Myers said the increase reflected higher component costs as well as targeted purchasing to support increased orders and backlog.
HPE said its order backlog reached a record level during the quarter. That makes supply availability particularly important for the next phase of growth: orders only become reported revenue when systems and infrastructure can actually be delivered.
Why It Matters for Infrastructure
The quarter provides another concrete measure of how AI spending is moving through the physical infrastructure supply chain. HPE’s 35.3% server revenue growth was substantially faster than the growth of its storage business, while data-center networking revenue more than doubled year over year.
For infrastructure operators and suppliers, the immediate signal is two-sided. Enterprise and cloud demand is supporting substantially higher server and networking sales, but memory, processors, storage components and other supply constraints can still determine how quickly vendors convert orders into deployed capacity.
HPE’s next quarter will test that conversion. The company is forecasting as much as $14.8 billion in Q4 revenue while carrying a record backlog and working to secure component supply. How much of that backlog ships will provide a clearer indication of whether AI infrastructure demand can translate into sustained server growth beyond the current investment cycle.
HPE announced its fiscal third-quarter results on September 2, 2026. The reporting period ended July 31, 2026. Forward-looking figures in this article are company guidance and should not be read as reported results.
