Dive Brief:
- Hewlett Packard Enterprise’s networking revenue jumped 151.5% year over year to $2.7 billion in its first quarter of 2026 amid a surge in enterprise AI adoption. The company’s networking segment — representing nearly 30% of HPE’s total revenues — includes HPE’s former Intelligent Edge segment and Juniper Networks, which HPE acquired in July 2025. The company’s total Q1 revenue reached $9.3 billion, up 18% year over year.
- HPE’s overall cloud and AI revenue, a new segment for fiscal year 2026 that includes its server, storage and financial services businesses, was down 2.7% year over year. But the company also reported a push in agentic AI investments and entered Q2 with an AI systems backlog of $5 billion, including enterprise orders, CEO and President Antonio Neri said during the Monday earnings call. “We are seeing more enterprises adopting agentic AI into their company’s business workflows,” he said.
- Along with the industry as a whole, HPE is navigating significant commodity shortages and inflated costs, Neri said during the call. “The IT market is facing a sharp acceleration in supply tightness and increasing component costs, most notably in DRAM and NAND,” he said. “We expect elevated prices to persist well into 2027.”
Dive Insight:
HPE is taking steps to address shortages and rising costs, including securing supply.
The company is expanding multiyear agreements with its critical silicon and memory partners to ensure it can meet customer demand, Neri said. HPE has also adopted an “agile pricing posture,” making price adjustments across its portfolio to accommodate commodity cost increases and building in an ability to reprice orders between quoting and shipment to offset any cost increases.
DRAM and NAND memory chips now make up more than half of the materials cost for a traditional server, which Neri only expects to grow as the costs of components increases. HPE anticipates higher average unit prices in its server and storage products as a result, he added.
“Q1 server orders grew low double digits, driven by higher demand for traditional servers as customers expand AI deployments, modernize infrastructure and accelerate orders due to industry supply challenges,” Neri said.
HPE’s server revenue reached $4.2 billion in Q1, down 2.7% from the prior year period. While HPE anticipates an increase in AI server revenue, it’s anticipating the “majority of AI deals to ship in the second half of the year,” Marie Myers, EVP and CFO of HPE, said during the earnings call.
The company is also monitoring its business operations in the Middle East, “which remains highly fluid,” Myers said.
The IT industry could face supply chain disruptions due to the ongoing conflict between the U.S., Israel and Iran. CIOs should prepare for procurement delays due to shipping reroutes around conflict areas, Christie Struckman, VP analyst at Gartner, previously told CIO Dive.
