HPE Faces AI Backlog Due to Memory Supply Constraints
Hewlett Packard Enterprise (NYSE: HPE) reported record third-quarter results, with revenue rising 34% year-over-year and adjusted earnings increasing by 152%. The company raised its full-year outlook due in part to strong demand for AI infrastructure. However, a $7.6 billion backlog of AI orders is being held up by ongoing memory supply shortages. CEO Antonio Neri noted that the tight supply situation has persisted throughout the year and will likely continue into 2027, affecting costs and pricing dynamics. While server revenue grew significantly due to higher average selling prices, actual product shipments remain constrained. HPE expects some improvement in Q4 as it works through long-term agreements for memory capacity. The company's networking segment is performing well with high-margin contracts, including a multi-gigawatt deployment for Oracle and potential deals with AMD. Despite margin pressures from AI systems, the stock remains attractive at 12 times forward earnings.
Topics: AI Revenue Growth Server Demand Supply Chain Constraints