Spending on artificial intelligence (AI) is not slowing down. Companies that are addressing the growing demand for computing hardware and software are reporting strong revenue and earnings.
Three companies that recently delivered strong earnings results — Hewlett Packard Enterprise (HPE 1.68%), Micron Technology (MU +8.80%), and Palantir Technologies (PLTR 1.65%) — all exceeded Wall Street expectations. Let’s take a look at what is driving their growth and whether the momentum makes them solid buys for a long-term investor.
Image source: Getty Images.
Hewlett Packard Enterprise (HPE)
Investment is pouring into AI-optimized data centers to support mission-critical workloads across training and inferencing. These data centers need fast networking equipment to connect and transmit data between thousands of chips. This is opening up a new growth avenue for HPE, one of the leaders in enterprise services and technology infrastructure.
Its latest quarter showed accelerating demand. Revenue grew 40% year over year, up from 18% in the previous quarter. Strong revenue drove a massive earnings beat, with adjusted earnings per share of $0.79 — above analyst estimates of $0.53. After orders more than doubled, management now expects to hit its 2028 earnings target two years early.
HPE’s recent acquisition of Juniper Networks strengthens its competitive position. Juniper’s advanced networking and AI-driven automation capabilities will complement HPE’s servers and storage business, creating a full-stack AI infrastructure offering. Management indicated that cross-selling products is already leading to larger deals.
Given these trends and management’s raised outlook for the year, HPE stock may have room to run. It trades at a forward price-to-earnings multiple of 14, which looks cheap relative to analysts’ estimates calling for earnings to grow at an annualized rate of 29% over the next several years.
Hewlett Packard Enterprise
Today’s Change
(-1.68%) $-0.81
Current Price
$47.39
Key Data Points
Market Cap
$63B
Day’s Range
$46.94 – $49.56
52wk Range
$17.49 – $64.25
Volume
1.1M
Avg Vol
25.1M
Gross Margin
31.36%
Dividend Yield
1.45%
Micron Technology
Micron has been one of the hottest stocks in the market this year, driven by a severe memory bottleneck for AI workloads. Memory demand has historically been highly cyclical, but investors are betting that AI is creating a more sustainable long-term growth trajectory.
The chipmaker’s February-ended quarter showed revenue nearly tripling year over year to $24 billion. Demand was strong across all memory products, including DRAM, NAND, and high-bandwidth memory (HBM). The sharp increase in selling prices for these products boosted the company’s earnings per share to $12.20, far exceeding analyst estimates of $9.
This is a highly competitive market, with Samsung and SK Hynix also experiencing demand for their memory products. But Micron has gained share in the data center storage market for four straight years. The insatiable demand for memory across multiple markets, including on-device AI processing in consumer devices, has management optimistic about its multiyear prospects.
Today’s Change
(8.80%) $91.81
Current Price
$1135.00
Key Data Points
Market Cap
$1.3T
Day’s Range
$1092.99 – $1149.21
52wk Range
$103.38 – $1149.43
Volume
1.8M
Avg Vol
51.3M
Gross Margin
58.54%
Dividend Yield
0.04%
However, I’m less bullish on Micron stock the higher it climbs. With the stock’s forward earnings multiple now at 17, it is almost trading in line with Nvidia‘s valuation. Yet memory is still a cyclical market, where additional manufacturing capacity or a slowdown in AI infrastructure spending could weigh on Micron’s profits and share price. At these valuation levels, I would rather consider more durable chip companies, such as Nvidia or Taiwan Semiconductor Manufacturing.
Palantir Technologies
Palantir is a fast-growing supplier of enterprise and government AI software platforms. It creates a digital copy of a company’s operations from its data and workflows, seamlessly integrated with Palantir’s Artificial Intelligence Platform (AIP). This effectively allows businesses to quickly spot areas to cut costs and improve efficiency.
The proof of Palantir’s value to organizations is in the numbers. Total revenue grew 85% year over year in the first quarter, reaching $1.63 billion — beating estimates of $1.54 billion. This performance marked Palantir’s fastest growth rate yet as a public company.
The company ended the quarter with 1,007 customers, up 31% over the year-ago quarter. Lower growth relative to revenue indicates that existing customers continue to spend more, thereby widening the company’s competitive moat. The more customers integrate Palantir into their operations, the stickier it becomes.
Today’s Change
(-1.65%) $-2.16
Current Price
$128.47
Key Data Points
Market Cap
$308B
Day’s Range
$125.01 – $131.43
52wk Range
$122.68 – $207.52
Volume
55.3M
Avg Vol
44.3M
Gross Margin
84.07%
This is a highly profitable business, generating an impressive 44% profit margin, and it’s still early in its growth story. This is why the stock commands a premium valuation of 89 times forward earnings. It’s expensive, but this multiple aligns with its current growth and analyst projections for 51% annualized earnings growth in the coming years. If it delivers on those expectations, the stock could still outperform.
Leave a comment