HPE stock forms cup-and-handle after Dell earnings

HPE shares rose 4% in after-hours trading to $53.45 after Dell posted strong quarterly results. The HPE stock has formed a cup-and-handle pattern ahead of the company’s upcoming earnings report.

Dell reported second-quarter revenue of $47 billion, up 58% year over year, and raised its annual revenue outlook to about $192 billion, a 69% increase. Dell’s chief operating officer noted: “That’s clearest in our AI server business, where we booked a record $60.9 billion in orders, recognized a record $16.4 billion in revenue and exited the quarter with a record $95 billion backlog. We’re seeing broader revenue growth as well, with traditional servers and networking up 122% and storage up 26%.”

HPE’s most recent quarter showed revenue of $10.7 billion, a 40% increase year over year, and a gross margin of 36.9%, a 750-basis-point rise. Networking revenue climbed 148% to $2.7 billion and cloud and AI revenue increased 23%. Analysts polled before HPE’s next report expect revenue near $12 billion, about a 30% rise.

Market observers will focus on HPE’s revenue backlog and margin trends when the company reports, after Dell’s gross margin widened to 20.9% from 18.3% year over year. HPE’s forward price-to-earnings ratio is near 15, below the technology sector median of about 22 and lower than some peers.

On technical charts, HPE shares pulled back from a high of $63.75 in August to about $50.87 on Tuesday and appear to have formed a cup-and-handle pattern, currently trading in the handle. The cup’s depth measures about 37%; measuring the same distance from the cup rim at $63.75 implies a long-term target near $87.56 if the stock breaks above the rim. Traders watch a move above $63.75 as a confirmation signal.

HPE’s upcoming earnings report will include details on sales into AI and cloud infrastructure, backlog levels and margin performance.