Hewlett Packard Enterprise Co. (NYSE:HPE) stock surged in premarket trading Tuesday after the company reported fiscal second-quarter results that easily topped Wall Street expectations and raised its full-year outlook on strong demand for AI infrastructure, servers and networking products.

Hewlett Packard Earnings Beat Driven by AI Demand

Adjusted earnings jumped 108% year over year to 79 cents per share, well ahead of the 53-cent analyst estimate.

Revenue rose 40% to $10.68 billion, topping consensus estimates of $9.79 billion and exceeding the high end of management’s guidance range. The company said total orders more than doubled from a year earlier and continued to grow significantly faster than revenue.

Margins Expand, Cash Flow Strengthens

Gross margin expanded 750 basis points to 36.9%, helped by favorable product mix, pricing actions, Catalyst cost savings and synergies from the Juniper integration.

Operating profit increased to $1.4 billion, resulting in an operating margin of 13.3%, compared with 8.0% a year earlier.

Operating cash flow totaled $1.4 billion, while free cash flow reached $915 million during the quarter.

HPE also received about $1.36 billion in cash proceeds from the sale of its remaining 19% stake in H3C Technologies. Since announcing its exit from the joint venture, the company has generated approximately $3.5 billion in total pre-tax proceeds from the investment.

The company said its Catalyst ...