Toward the end of the lightning round on September 14, when a caller inquired about Hewlett Packard Enterprise Company (NYSE:HPE), Mad Money host Jim Cramer said:
Neri’s good. Neri’s good… I didn’t think they had the horses. They do have the horses. The fact is that I’m just a Dell fan, I guess, in the end. I just like Michael Dell, and I like his company very much. No offense to Mr. Neri.
HPE Gains Ground in AI as Dell Operates at Greater Scale
Hewlett Packard Enterprise Company’s fiscal third-quarter revenue rose 33.7% year over year to $12.2 billion, while Cloud & AI revenue increased 25.4% to $9 billion. Server revenue rose 35.3% to $6.8 billion, and Networking revenue increased on a reported basis to $2.9 billion, or about 10% on a normalized basis. Cloud & AI operating margin reached 17%, compared with 7% a year earlier. HPE’s AI-systems orders increased more than 30% sequentially to $2.4 billion, and the company said its AI-systems backlog rose 14% sequentially. HPE management also said on September 10 that demand was “absolutely not a problem,” with the focus on fulfilling customer orders.
Meanwhile, Dell Technologies Inc.’s (NYSE:DELL) fiscal second-quarter 2027 revenue rose 58% to $47 billion. AI-optimized server revenue doubled to $16.4 billion, up 100% year over year, while AI-optimized server orders reached $60.9 billion and the backlog stood at $95 billion. The company also raised its fiscal 2027 revenue outlook by $25 billion to $192 billion and its AI-optimized server revenue outlook to $74 billion.
Bear Case is About Capital and Margins
Hewlett Packard Enterprise Company’s rapid growth is accompanied by substantial commitments. The company had $30.4 billion of unconditional purchase obligations at July 31, while total short- and long-term debt was $20.2 billion, including $17.3 billion of long-term debt. Its days of inventory supply had also increased to 145 from 89 at October 31. On the other hand, Dell Technologies Inc. faces pressure from the mix of AI-optimized servers. Its gross-margin percentage for the first six months of fiscal 2027 fell 10 basis points to 19.4%, mainly because of the shift toward AI-optimized servers, although disciplined pricing largely offset the effect. The company also had $34.7 billion of debt principal and $34.8 billion of purchase obligations at July 31, including $24.6 billion payable within 12 months.
Michael Dell said on September 9 that the semiconductor market had a “structural shortage” that was “probably worse in ’27 than in ’26.” He also said Dell was watching for “double ordering or things that are not being utilized,” adding that “we don’t see that.”
Hedge Funds Increased Exposure to Both Stocks
According to Insider Monkey’s tracking of more than 1,000 hedge funds, 85 funds held HPE in the second quarter, up from 58 in the first quarter. Dell had 77 hedge fund holders, compared with 72 in the first quarter. Short interest for both is below 5% of float, with HPE’s around 4.2% and Dell’s around 3.8% to 4.9%.
Hewlett Packard Enterprise Company is dealing with higher purchase commitments and inventory levels as it expands its AI business, while Dell Technologies Inc. is contending with AI-server mix and component-cost pressures. Cramer highlighted HPE’s progress but said he remains a Dell fan.
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