On September 3, Deutsche Bank raised its price target on Hewlett Packard Enterprise Company (NYSE:HPE) to $68 from $62 and reiterated its Buy rating on the stock. It pointed to the company’s accelerating AI-driven demand.
The stock has jumped more than 114% year-to-date, and Deutsche Bank’s upgraded target suggests roughly 31% upside from the current price.
The price target increase followed HPE’s fiscal third-quarter results that showed revenue increased 34% year-over-year to $12.21 billion. More importantly, HPE went on to raise its fiscal 2026 revenue-growth outlook to a range of 34% to 37% from the previous 29% to 33%.
The more important question for investors now is whether HPE can turn its rapidly expanding AI backlog into profitable growth.
HPE’s AI Demand Is Running Ahead of Supply
The Hewlett Packard Enterprise Company report shows AI orders reached $3.1 billion in the latest quarter, and AI backlog climbed to $7.6 billion. HPE’s Networking orders increased 36% year-over-year on a normalized basis, roughly 3.5 times the segment’s 10% normalized revenue growth. Management said supply availability is limiting how quickly that demand converts into revenue.
Memory availability stands out as one of the main bottleneck. It means that the pace at which HPE secures components would determine how quickly the demand converts into revenue.
The latest quarterly results show that HPE’s recent AI growth has also come with significant operating leverage. Cloud & AI segment revenue increased 25% year-over-year to $9.04 billion, while the segment’s operating margin more than doubled to 17% from 7% the prior year.
Networking Gives HPE a Second AI Growth Engine
Networking is emerging as a second growth engine as increasingly complex AI clusters require more extensive connectivity. This is extending HPE’s AI opportunity well beyond servers as it enables the company to capture AI infrastructure spending across compute and connectivity markets.
Networking revenue jumped 75% to $2.89 billion, with the segment supported by the integration of Juniper Networks. Data-center networking revenue increased 112%, and routing revenue surged 270%.
HPE’s expanded relationship with Oracle provides another avenue for networking growth. Juniper networking products are set to be deployed across Oracle’s AI data centers.
Can HPE Turn AI Demand Into Durable Growth?
The bull case rests on HPE sustaining the AI-driven growth. The company now expects fiscal 2027 revenue growth between 13% and 17%, up from the previous 8%-12% growth forecast. Adjusted EPS growth is expected at 16%-20%. Potential future contributions from AMD’s Helios platform could provide another source of growth tailwind beyond the current projection.
The bear case is that HPE’s AI backlog could prove easier to accumulate than to monetize at attractive margins. Persistent component shortages could delay shipments and higher component costs could limit profitability. At the same time, HPE shares have already more than doubled this year, a situation that has raised the bar for future execution as continued earnings growth is essential to justify further upside.
Hedge Fund Positioning and Short Interest
Insider Monkey counted 85 hedge funds holding Hewlett Packard Enterprise Company at the end of Q2, up from 58 in Q1. Billionaire Paul Singer’s Elliott Management increased its position by 18% to approximately 32.3 million shares.
Short interest stood at 59.6 million shares as of August 14, representing 4.52% of the float, with 3.3 days to cover. Notably, the bearish positioning has declined 8.61% compared to the previous reading.
HPE’s AI Thesis Now Hinges on Execution
For HPE, the debate is no longer about whether demand exists. Instead, the test for the investment case lies in execution.
If HPE maintains the networking business momentum and secures enough components to convert its backlog while preserving the margin expansion, earnings could grow faster than revenue. But if supply constraints delay backlog conversion and networking momentum fades, the stock’s sharp rise leaves less room for error.
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