HPE surges 15% after earnings, pacing for one of its best days ever

shares Hewlett Packard Enterprise It rose 15% on Tuesday, heading for one of its best days ever, as the company posted its biggest gains since 2018.

CEO Antonio Neri told CNBC’s “Squawk on the Street” on Tuesday that the company is “uniquely positioned” to catch disruptions caused by artificial intelligence.

“We have the best portfolio we’ve ever had in this company,” he said.

AI-related demand in the server unit beat analysts’ second-quarter earnings expectations. HPE reported adjusted earnings per share of 79 cents compared to the expected 53 cents, and total revenue rose to $10.68 billion compared to the expected $9.79 billion.

Server revenue alone, a subdivision of its cloud and artificial intelligence unit, came in at $5.45 billion, above the $4.66 billion analysts expected.

Neri called that unit’s revenue growth “phenomenal” and told analysts on Monday’s earnings call that agency AI is “a key driver of demand acceleration.”

“Traditional server orders have reached triple digits as customers continue to modernize their computing infrastructures and invest in AI inference,” Neri said.

Following Dell’s AI-driven earnings boom, some analysts are cautious about how sustainable demand in the server space might be as companies continue to buy and server prices rise.

Bernstein boosted HPE estimates following better forecasts in its traditional server unit, raising its price target to $62 from $35, writing that “most of the upside is already in stock.” The company maintained its rating in Market Perform. Morgan Stanley raised its price target to $71 from $33.

“HPE, similar to DELL, is seeing a significant uptick in results from inelastic server demand and stock acquisition as servers become strategic and those with supply take price,” Morgan Stanley analysts wrote. “The durability of demand and the risk of peak earnings will be the key debate here.”

CNBC’s Katie Tarasov, Kristina Partsinevelos and Chris Eudaily contributed to this report.