Good morning. A $1.2 billion order from cloud provider Vultr gives Hewlett Packard Enterprise an early commercial win for its new AMD AI system and tests whether AI networking can become a faster-growing, higher-margin business.
The order, announced Wednesday as HPE’s Networking Investor Day took place, is the company’s first for the AMD Helios platform and includes HPE Networking scale-up switching and software. HPE raised its fiscal 2027 networking revenue-growth outlook to the high-teens to low-20% range, from 14% to 17%. Shares closed about 4% higher.
The question is whether HPE can turn AI-infrastructure demand into durable revenue growth and margin expansion following its Juniper Networks acquisition. The immediate test is converting orders into shipments, revenue, and cash flow.
Rami Rahim, HPE’s executive vice president, president and general manager of networking, said at the event that orders grew 3.5 times faster than revenue in the third quarter, suggesting that supply availability, rather than demand, was constraining sales. HPE doubled its networking supply-purchase commitments in the latest quarter to secure capacity and convert backlog into revenue. For the Vultr order, HPE has not disclosed the $1.2 billion split among networking, compute, software, services and other components.
“Based on continued strength and demand, we now expect our fiscal 2026 networks for AI cumulative orders to exceed $3 billion,” Rahim said. That exceeds HPE’s prior $2.5 billion to $3 billion estimate, communicated by CEO Antonio Neri and CFO Marie Myers on the third-quarter earnings call, he said.
HPE reported on Sept. 2 record fiscal Q3 2026 networking revenue of $2.9 billion, up 74.9% year over year. “We expect networks for AI to be a meaningful growth engine for the company,” Myers said on the earnings call. “Demand is continuing to outpace supply,” she told Yahoo Finance on Wednesday. Myers added, “The tailwinds that we see around AI aren’t changing anytime soon.”
HPE (No. 133 on the Fortune 500) expects integration and transformation synergies and operating leverage to lift networking operating margins to the mid- to high-20% range in fiscal 2027, from the low-20% range expected in fiscal 2026. It projects a high-teens networking revenue CAGR through fiscal 2029, with margins remaining in that range.
The Vultr order is an early proof point for HPE’s Helios strategy, but execution will determine the payoff.
Sheryl Estrada
[email protected]
Leaderboard
John Vandemore was appointed EVP and CFO of Levi Strauss & Co. (NYSE: LEVI), effective Nov. 1. Vandemore succeeds Harmit Singh, who announced plans to retire in April and will remain chief financial and growth officer until Vandemore joins. Singh will then serve as a special advisor through Nov. 30 to support the transition. Vandemore joins Levi’s from Skechers U.S.A., where he spent the past nine years as CFO, overseeing the global finance organization as well as operations functions. Earlier, Vandemore was EVP and CFO of global brands and commercial sales at Mattel, CFO and treasurer of International Game Technology, and held finance and operating leadership roles at The Walt Disney Company, including CFO of Walt Disney Imagineering. He also held earlier roles at AlixPartners, Goldman Sachs, Deloitte, and PwC.
Trent Ziegler was appointed CFO-designate of Cars.com, effective Oct. 19, and will formally succeed Sonia Jain as CFO on Nov. 6. Jain will remain an executive advisor through March 31, 2027, to support the transition. Ziegler joins Cars.com from fintech holding company FairSquare, where he was CFO. Before that, he spent more than a decade at online lending marketplace LendingTree, including three years as CFO and seven years leading investor relations and treasury. He began his career at Ally Financial.
Big Deal
Private-sector employers added 90,000 jobs in September, accelerating from a downwardly revised gain of 36,000 in August and topping economists’ expectations of roughly 70,000, according to ADP’s National Employment Report, produced with the Stanford Digital Economy Lab.
Hiring was led by education and health services, which added 55,000 jobs, while manufacturing and construction added 17,000 and 15,000 jobs, respectively; financial activities and professional and business services were among the sectors that lost jobs. Wage growth remained relatively steady, with job-stayers’ base pay up 3.2% year over year and gross pay up 4.7%.
The report, based on anonymized payroll data covering more than 26 million U.S. private-sector workers, marked the first acceleration in private hiring since May.
Going deeper
According to FactSet, Wall Street analysts project the S&P 500 will rise 20.4% over the next 12 months, based on the aggregation of company-level median price targets. The index’s bottom-up target price stood at 9,275.04 on Sept. 24, compared with a closing level of 7,704.13. All 11 S&P 500 sectors are expected to gain at least 10%, with utilities (28.0%), consumer discretionary (26.0%), and industrials (25.1%) showing the greatest implied upside. Energy (10.6%) and health care (11.7%) have the lowest projected gains.
Overheard
Giving young people the understanding and choice to decide where tech belongs in their lives, and enough agency to shape what comes next, is a reason to have hope.
—Susan Gouijnstook, CEO of Girls Who Code, writes in a Fortune opinion piece.
