Core Insights - Hewlett Packard Enterprise's (HPE) server business experienced a growth of 5.6% in Q2 of fiscal 2025, with expectations for mid-teens sequential revenue growth in Q3 and low double-digit growth for the fiscal year, primarily driven by large AI deals and growth in AI systems [1][4]. Company Performance - HPE's AI server business is significantly bolstered by enterprises investing in compute-heavy infrastructure, resulting in over $1.1 billion in net new order value and a backlog of $3.2 billion in AI systems during Q2 of fiscal 2025 [2]. - The introduction of the ProLiant Gen 12 server platform enhances performance, security, and incorporates direct liquid cooling technology, positioning HPE competitively in the server market [3]. - Despite a slowdown in traditional server sales, HPE's growth in AI server sales is offsetting this decline, with a Zacks Consensus Estimate for HPE's 2025 revenues at $34.5 billion, reflecting a year-over-year growth of 14.2% [4]. Competitive Landscape - Dell Technologies is leveraging strong demand for AI servers, benefiting from ongoing digital transformation and the adoption of generative AI applications, with consecutive growth in server adoption for five quarters in AI servers and six quarters in traditional servers [5]. - Super Micro Computer is also experiencing significant growth due to the increasing demand for high-performance, energy-efficient servers as data centers expand and new ones are established [6]. - The overall growth in server-supported data center business is anticipated to rise, providing ample opportunities for HPE, Dell, and Super Micro Computer [7]. Valuation and Estimates - HPE's shares have increased by 5.7% year to date, compared to a 25.4% growth in the Zacks Computer - Integrated Systems industry [8]. - HPE trades at a forward price-to-sales ratio of 0.76, significantly lower than the industry's ratio of 3.46 [10]. - The Zacks Consensus Estimate for HPE's fiscal 2025 earnings is $1.89 per share, indicating a 5% decrease year-over-year, while the estimate for fiscal 2026 is $2.39 per share, reflecting a 26.5% increase year-over-year [11].