Hewlett Packard Enterprise (NYSE: HPE) shares jumped 5.09% in pre-market trading on Wednesday following the company's impressive second-quarter results and upbeat outlook, driven by strong artificial intelligence (AI) demand and strategic initiatives.

The server and networking giant reported Q2 revenue of $7.63 billion, up 7% year-over-year and surpassing analysts' expectations of $7.45 billion. Non-GAAP earnings per share came in at $0.38, beating the consensus estimate of $0.33. This outperformance was attributed to lower than anticipated tariff impact and improved operational efficiency.

HPE's AI business showed significant momentum, with $1.1 billion in new AI orders signed during the quarter. The company converted over $1 billion into revenue and exited Q2 with a robust $3.2 billion AI systems backlog. CFO Marie Myers noted that the overall pipeline stands at "multiples of that," indicating strong future growth potential in the AI segment.

Adding to investor optimism, HPE provided an upbeat outlook for the third quarter and raised its full-year guidance. The company expects Q3 revenue between $8.2 billion and $8.5 billion, above analyst estimates of $8.17 billion. For the full fiscal year 2025, HPE tightened its revenue growth forecast to 7-9% and raised the lower end of its non-GAAP EPS guidance to $1.78-$1.90, up from the previous range of $1.70-$1.90.

CEO Antonio Neri highlighted the company's progress in addressing previous execution challenges, particularly in the server segment. HPE implemented new pricing analytics, increased discount scrutiny, and improved inventory management, which are expected to drive margin recovery. The company aims to achieve a 10% operating margin in its server business by the fourth quarter.

Furthermore, HPE's networking business returned to year-over-year growth for the first time in five quarters, benefiting from the ongoing market recovery and demand for Wi-Fi 7 products. The hybrid cloud segment also saw strong performance, with 15% year-over-year revenue growth driven by the company's HPE Alletra MP storage transition and continued adoption of HPE GreenLake cloud subscription services.

Investors are likely encouraged by HPE's strategic cost-cutting initiatives, including a comprehensive program called Catalyst, which aims to accelerate revenue growth while driving structural cost savings. These efforts, combined with the company's strong positioning in the growing AI infrastructure market, appear to be bolstering confidence in HPE's future prospects.