Hewlett Packard Enterprise Co. Technology (HPE.US) performance sparks disagreements on Wall Street: Morgan Stanley is concerned about profit pressure, while Evercore and JP Morgan remain bullish.

On Friday, Hewlett Packard Enterprise Co. (HPE.US) once again became the focus of the market due to its mixed fourth quarter results and guidance. Morgan Stanley analyst Erik Woodring pointed out that rising commodity costs remain a major concern. Although management expressed confidence in passing on cost increases to customers, he emphasized that this is extremely challenging. He wrote in a research report that although HPE has secured memory supply, it has not locked in prices, so demand elasticity still needs to be "observed." Woodring said, "In our view, it's difficult for hardware manufacturers to raise prices while maintaining profit margins smoothly and without affecting demand." He predicts that the company's profit margin will face more pressure in the 2026 fiscal year. He also mentioned that the pace of the company's AI server business will be "more uneven" than market expectations. HPE's server business fell short of expectations this quarter, primarily due to delays in AI server deliveries and weak US government orders. Two-thirds of the setbacks came from delayed AI servers and one-third from weak federal business. HPE expects these delays to revenue for the next fiscal quarter, but the company still provides guidance for the full year that relies more on growth in the second half of the year, implying that some sovereign and enterprise clients' AI construction needs may be delayed until the 2027 fiscal year. In contrast, Evercore ISI analyst Amit Daryanani is more optimistic. He maintains an "outperform" rating and a $28 target price, believing that investors should "ignore short-term noise." He points out that although revenue fell short of expectations, his forecasts for HPE over the next few years were hardly impacted. Factors such as AI server delays and pressure on third-party storage businesses created volatility, but he emphasized that the networking business contributed approximately 50% of the company's EBIT (earnings before interest and taxes), providing HPE with stronger profit stability in this cycle. However, the sustainability of supply still needs to be monitored. J.P. Morgan analyst Samik Chatterjee also expressed a similar sentiment. He believes that although the pace of the AI server business appears to be volatile, the progress in the networking business may be underestimated by the market. He affirmed the management's ability to execute guidance and noted that despite significant price increases across multiple product lines, the company maintained its revenue forecast for the 2026 fiscal year, indicating that HPE is assuming that higher average selling prices will offset some decreases in shipments. He wrote that this is different from customer behavior during past supply tightness periods (such as during the COVID-19 pandemic) and shows management's confidence in the profitability boost from the networking business. Chatterjee maintains an "outperform" rating and gives a $30 target price. He believes that in a backdrop of profit margin pressure and a slowdown in the conversion speed of AI orders, the company's upward revision of profit and cash flow outlook is a positive signal of management's confidence.