HPE's Networking Weakness Overshadows AI Growth As 2026 Outlook Disappoints

Tech companies are increasingly under pressure to balance growth expectations with realistic earnings forecasts as market conditions evolve.  While Hewlett Packard Enterprise Co's (NYSE:HPE) TAM (total addressable market) outlook for the next three years highlights mid-teens underlying growth, the fiscal 2026 guidance disappointed investors due to "lower Networking revenue driving a muted earnings outlook," according to JPMorgan.

The Hewlett Packard Enterprise Analyst: Analyst Samik Chatterjee reiterated an Overweight rating and price target of $30.

The Hewlett Packard Enterprise Thesis: The company's earnings guidance of $2.30 per share for fiscal 2026 came in below consensus, with the miss more due to margin mix than to revenue, Chatterjee said in the note.

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He added that HP's newly formed segments are:

• Cloud & AI, which includes Server (Traditional Servers and AI Servers), Storage, Financial Services, and Other.
• Networking, which comprises of Campus & Branch, Datacenter Networking, Security, and Routing.

"The pro-forma revenue performance across Cloud & AI and Networking, including their sub-segments, has been robust year-to-date, with all areas expanding at least in the low double-digit range — except for Data Center Networking, which grew by more than +40% y/y in the nine months of FY25," the analyst wrote.

While the revenue mix remained essentially unchanged, weaker margins on both Traditional and AI Servers resulted in margin headwinds for the Cloud & AI segment, he further stated.

HPE Price Action: Hewlett Packard shares were up 1.66% at $23.89 at the time of publication on Monday, according to Benzinga Pro data.

Hewlett Packard’s market cap of $31.38 billion positions it as a significant player in the technology hardware sector, while its P/E ratio of 27.65 suggests a premium valuation compared to historical averages for the industry.

The stock has shown notable resilience, trading near its 52-week high of $26.44, reflecting investor confidence amid a competitive landscape marked by rapid technological advancements and evolving consumer demands.

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