(Reuters) -Hewlett Packard Enterprise rose more than 12% on Wednesday after the company forecast third-quarter revenue above Wall Street estimates, helped by growing demand for its AI-optimized servers.
Server makers are benefiting from robust demand for AI systems provided by companies including HPE, which support power-hungry data centers amid growing investments in generative AI technology.
The company's lead times - the duration between starting and completing a process - to deliver Nvidia (NASDAQ:NVDA)'s AI-powered chips is now between six weeks and 12 weeks, CEO Antonio Neri said in a post-earnings call.
Analysts at Bernstein said this suggests potential for HPE and peer Dell Technologies (NYSE:DELL) to have "very strong shipments over the next quarter or two as they deliver on backlog", but it depends upon customers being willing to take deliveries earlier.
The Texas-based company is set to add more than $2 billion to its market value based on its current price of $19.84, after it impressed investors with upbeat quarterly results.
At least eight analysts have raised their price targets on the stock to between $19 and $23 after the results. Hewlett Packard trades at 8.9 times its 12-month forward earnings estimates, compared with 16.5 for Dell and 23.1 for Super Micro Computer (NASDAQ:SMCI).
The company forecast third-quarter revenue of $7.4 billion to $7.8 billion, compared with analysts' estimate of $7.46 billion, according to LSEG data.
Its server revenue rose 18% from a year earlier, to $3.9 billion in the second quarter ended April 30. Its AI-server revenue more than doubled sequentially to $900 million, and order backlog was $3.1 billion.
"We also view AI servers as dilutive to HPE's margin," Morningstar analyst William Kerwin said in a note.
Separately, Dell forecast current-quarter profit below analysts' estimates last week, signaling that higher costs to build AI servers would dent its annual margins.