Hewlett Packard Enterprise raises annual profit forecast on AI power by Reuters

(Reuters) – Hewlett Packard Enterprise (NYSE: ) raised its full-year profit forecast on Wednesday as demand for artificial intelligence servers continued to grow due to higher investment in AI infrastructure by companies.

However, HPE shares fell nearly 3 percent in extended trading. Michael Ashley Schulman, chief investment officer at Running Point Capital, attributed the decline in shares to a drop in quarterly revenue from the company’s data analytics and traditional cloud segments.

The company leaving its full-year revenue forecast unchanged also weighed on the stock, he added, as expectations for AI companies remain high.

HPE’s AI server business, however, continues to outperform, as Nvidia (NASDAQ: generative and machine learning.

HPE reported third-quarter server revenue of $4.3 billion, up 35 percent from a year earlier.

The company, however, faces stiff competition from server makers such as Dell Technologies (NYSE: ), which raised its annual profit and revenue forecasts last month on demand for servers.

HPE raised its estimate for annual adjusted earnings per share to a range of $1.92 and $1.97, from $1.85 and $1.95.

For the fourth quarter, the company expects revenue to be between $8.1 billion and $8.4 billion, while analysts were expecting $8.18 billion.

The company said it expects fourth-quarter adjusted EPS to be between 52 and 57 cents per share, compared with estimates of 55 cents, according to LSEG data.

Revenue for the quarter ended July 31 was $7.71 billion, beating estimates of $7.67 billion.

On an adjusted basis, the company earned 50 cents per share, compared with estimates of 47 cents.