Hewlett Packard Enterprise HPE has gained 71.7% in the year-to-date period. However, the company has underperformed the Zacks Computer - Integrated Systems industry, which has returned 115.7% in the same time frame.

HPE YTD Performance Chart

Despite the appreciation in the share price, HPE trades at a discount. From a valuation standpoint, HPE trades at a forward price-to-sales ratio of 1.12, below the industry’s 6.18. The discounted valuation is also reflected by the Zacks Value Score of A.

HPE Forward 12-Month (P/S) Valuation Chart

Given these factors, the question arises: Should investors accumulate HPE shares or book profits and exit the investment?

HPE Gains From Traction in Both AI and Traditional Servers

Hewlett Packard Enterprise is benefiting from the modernization of traditional IT infrastructure and huge capex investment in artificial intelligence. HPE’s foray beyond traditional server architecture to accommodate compute, networking, storage, security, private cloud, virtualization, software for AI data centers and AI fabs is enabling it to monetize at a rapid pace.

Simultaneously, the demand for traditional servers, led by the end of the server technology cycle, has emerged as a major growth driver, with orders increasing by triple digits year over year. Enterprises are replacing aging infrastructure while also investing in servers for AI inferencing. These two tailwinds caused a multiplier effect, driving the second quarter of fiscal 2026 revenues to reach $10.7 billion.

Looking ahead, as AI moves into production, millions of enterprises will need infrastructure to run inference close to their proprietary data and applications. HPE is also benefiting directly from AI systems demand, entering the third quarter with $5.9 billion in AI Systems backlog, primarily from enterprise and sovereign customers. Juniper acquisition has also strengthened HPE in campus networking, data-center switching, routing and security.

HPE’s self-driving networking capabilities, powered by agentic AI, further differentiate the portfolio. Campus and Branch orders reached record levels, Wi-Fi 7 sales increased more than sevenfold, data-center switching orders rose nearly 20%, and routing orders increased nearly 30% on a normalized basis. HPE is also benefiting from disruption in virtualization, with VM Essentials customer count increasing 43% during the first half of fiscal 2026.

These demand tailwinds are being amplified by improving economics. Juniper Network’s integration synergies and HPE’s Catalyst cost-saving program are running ahead of schedule, helping operating profit grow faster than revenues. HPE raised fiscal 2026 free-cash-flow guidance to at least $3.5 billion and expects at least $4.5 billion in fiscal 2027. Combined with record backlog, improving margins, lower leverage and reduced interest expense, HPE appears strongly positioned.

HPE Thrives Despite a Competitive Market Landscape

The global AI infrastructure market has attracted companies like Super Micro Computer SMCI, Dell Technologies DELL and Cisco CSCO with their massive capacity to spend. Super Micro Computer is on track to scale rack production capacity to more than 6,000 AI racks per month by the end of fiscal 2026, including 3,000 direct liquid cooling racks monthly. SMCI is already shipping 150kW AI racks in volume and preparing 250kW and 500kW rack solutions to support future high-density AI training and inference workloads.

Dell Technologies is a major supplier of servers and storage systems, with a broad customer base across enterprises and cloud providers. Its scale, established distribution and service offerings give it an edge in winning large contracts. Cisco has also taken $5.3 billion of hyperscaler AI infrastructure orders year to date in fiscal 2026 and raised its full-year order outlook to $9 billion from $5 billion.

However, HPE’s ability to package compute, storage, networking and services into pre-configured solutions can reduce deployment complexity for enterprises and sovereign customers. This gives HPE an edge over its competitors. The company is also able to keep its margin stable. The Zacks Consensus Estimate for HPE’s fiscal 2026 margin reflects a year-over-year growth rate of 75.8%. Estimates have remained unchanged for the past 30 days.

Conclusion: Buy HPE Stock Now

HPE’s strong exposure to the rapidly expanding AI infrastructure market, growing traction in traditional servers and strengthening networking portfolio make a compelling case for investors to accumulate the stock. Despite the competition from Super Micro Computer, Dell Technologies and Cisco, HPE remains well-positioned to benefit from the growing AI infrastructure market due to its broad portfolio. With record backlog, robust AI and traditional server demand, improving margins and rising free cash flow, HPE appears well-positioned to sustain its growth momentum. Considering all these factors, we suggest that investors should accumulate this Zacks Rank #1 (Strong Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report

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