Hewlett Packard Enterprise (HPE) is seeing stronger-than-expected server pricing and demand, driven by tight supply and rising AI and infrastructure spending, a trend Morgan Stanley said is driving higher earnings expectations for 2026 and 2027.
The investment firm said in a Tuesday note that both traditional and AI server segments are driving upside. Orders are accelerating and pricing remains strong as enterprises and cloud providers pull forward demand to secure supply. The trend is also helping build backlog visibility into 2027.
Customers also continue to absorb higher DRAM- and NAND-related server pricing amid supply constraints, according to the note.
Morgan Stanley raised its earnings expectations for 2026 and 2027 and now forecasts 2027 earnings per share of $4.16. The firm cited stronger margins and server execution, as well as sustained pricing power and operating leverage despite elevated input costs.
The analyst cautioned that demand beyond 2027 remains uncertain and visibility into 2028 is limited. Networking trends remain stable and cost synergies continue to support margins. However, investors are still debating whether the current strength reflects a multi-year cycle or a shorter AI-driven spending surge, the report added.
Morgan Stanley maintained its equal-weight rating on the stock and raised its price target to $71 from $33.
Shares of Hewlett Packard Enterprise were up 25% in Tuesday trading.
Price: $58.74, Change: $+11.74, Percent Change: +24.98%