Hewlett Packard Enterprise

HPE just posted its biggest quarter ever, with revenue up 34 percent from a year earlier to 12.2 billion dollars. Profit grew even faster than sales, with operating profit up 464 percent. Management raised its outlook for both this year and next, and now expects full-year revenue growth of 34 to 37 percent.

The Juniper deal is paying off fast. Networking sales jumped 75 percent to 2.9 billion dollars, with the routing business alone up 270 percent and data center networking up 112 percent. That part of the business earns much fatter margins than plain servers, which is why company-wide profit margins widened by nearly 11 percentage points.

Expectations are now enormous. HPE is guiding to as much as 14.8 billion dollars in revenue next quarter, and growth is expected to slow to 13 to 17 percent next year. When a stock has run this hard, even a small miss against those numbers can knock the shares down quickly.

To buy Juniper, HPE took on a lot of debt and still owes billions more than it holds in cash. It is generating real money now, with at least 3.75 billion dollars of free cash expected this year, but a chunk of profit still goes toward interest instead of growth, and big AI orders can be lumpy from quarter to quarter.