HPE: Networking Growth And Supercomputing Partnerships Will Drive Outlook Amid Merger Scrutiny

Hewlett Packard Enterprise's analyst price target has shifted slightly to $26.50 from $26.51, as analysts factor in higher input costs and evolving hardware demand trends into their assessments.

Analyst Commentary

Recent analyst activity around Hewlett Packard Enterprise (HPE) reflects an evolving landscape of both optimism and caution as market dynamics and company-specific developments inform revised expectations.

• Bullish analysts have increased HPE's price targets in response to higher confidence in the company’s Networking growth prospects, notably following its acquisition of Juniper and expanding momentum in data center switching.
• The business outlook for fiscal year 2026 is expected to feature revenue growth of 5% to 7% and earnings per share in the range of $2.30 to $2.40, supporting a higher valuation multiple.
• Upward estimate revisions incorporate contributions from recent acquisitions, particularly Juniper, which has been a driver of upside in recent quarterly results.
• Improving hardware demand trends and ongoing expansion of artificial intelligence technologies are expected to create a larger addressable market over the long term and help to support HPE’s growth story.

• Bearish analysts highlight downside risks tied to the current memory cycle, with heightened input costs and weaker demand for non-artificial intelligence hardware potentially leading to lower gross margins and earnings revisions.
• Concerns persist over soft core margins in some segments. The expectation is that improvement may be moderate and gradual rather than immediate.
• Valuation pressures stem from sector-wide uncertainty and potential compression of multiples if hardware demand does not meet optimistic forecasts.

What's in the News

• A federal judge ruled that state attorneys general may seek more information about the Justice Department's antitrust settlement related to HPE's $14 billion acquisition of Juniper Networks. This could pause further integration while the review takes place (Bloomberg).
• HPE is part of a $1 billion partnership with AMD, Oracle, and Oak Ridge National Laboratory to build two next-generation supercomputers for scientific research in the U.S. The first system, Lux, is expected to come online in the next six months (Reuters).
• HPE announced advancements to its Cray supercomputing portfolio, including new direct liquid-cooled compute blades and DAOS-based storage innovations. These are designed to support large-scale AI deployments and enhance performance for scientific research.
• HPE, together with other industry leaders, launched the Quantum Scaling Alliance. The initiative aims to accelerate scalable quantum computing solutions through global collaboration across multiple technology fields.
• The University of Utah selected HPE and NVIDIA for a sovereign AI factory deployment. This project will triple the university's computing capacity to advance medical research, enhance regional economic development, and strengthen data sovereignty.

Valuation Changes

• The consensus analyst price target has edged down marginally to $26.50 from $26.51.
• The discount rate has risen slightly, moving from 10.28% to 10.55%.
• The revenue growth projection has increased modestly to 10.49% from 10.41%.
• The net profit margin has decreased fractionally, now at 6.50% compared to 6.52% previously.
• The future P/E ratio has ticked up to 16.43x from 16.31x.