Hewlett Packard Enterprise Company (HPE) Earnings & Analysis

Latest quarter

HPE reported Q3 FY2026 revenue of $12.2 billion, compared with the consensus of $12.1 billion. The company reported adjusted EPS of $1.11, compared with the consensus of $0.95. HPE’s filing shows revenue increased 33.7% from Q3 FY2025, while diluted EPS increased 404.8% to $1.06.

The filing attributed the revenue increase primarily to a higher average selling price in Cloud & AI and networking revenue from the Juniper Networks merger. HPE reported that networking revenue increased 74.9%, primarily from Juniper Networks revenue, while Cloud & AI revenue increased 25.4%, led by higher Server revenue and average selling prices. The filing said gross margin rose to 40.1% and operating margin rose to 11.4%, with higher-margin Cloud & AI and Networking revenue contributing to the changes. HPE reported free cash flow of $988.0 million, up 20.6% from the prior-year quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Antonio Neri said demand accelerated across HPE’s business segments, with orders growing faster than revenue, while supply constraints limited the company’s ability to fulfill customer demand. He said HPE was pursuing additional multiyear supply agreements, offering alternative configurations and increasing planning with customers to improve supply visibility.

Neri said networking demand included routers, data-center switching, campus and branch products, and security offerings. He said HPE expected more networking orders to convert into revenue in Q4, although supply availability would remain a constraint. Neri also said HPE announced an expanded collaboration with Oracle under which Oracle would deploy HPE Juniper routers and switches in an AI cloud-infrastructure build-out.

Neri said Cloud & AI demand included traditional servers, AI systems, storage, private-cloud offerings and GreenLake cloud services. He said enterprise customers were moving from AI pilots toward production deployments for agentic AI and inferencing, and that HPE’s pipeline remained multiples of its backlog. Myers said HPE received a multi-billion-dollar server deal after quarter-end from a hyperscaler customer for inferencing.

Myers said HPE’s pricing discipline, revenue scale, transformation programs and deal mix contributed to Q3 margins. She said gross margin was expected to moderate toward historical levels as the mix shifted toward AI systems and traditional-server pricing normalized, partly offset by networking mix. Myers also said HPE expected operating expense to decrease in FY2027 as variable compensation normalized and the company realized transformation efficiencies and Juniper integration synergies.

In response to analyst questions on supply, Neri said DDR5, DDR4, NAND and other components remained constrained, and he expected supply limitations to continue. He said HPE had secured multiyear supply arrangements that supported its outlook, while Myers said networking purchase commitments had more than doubled quarter over quarter. In response to questions on FY2027 margins, Myers said the expected mix of AI transactions and traditional-server deals would affect margins in Q4 and FY2027.

Guidance

HPE raised its FY2026 revenue-growth outlook to 34.0%–37.0%, non-GAAP EPS outlook to $3.75–$3.85, GAAP EPS outlook to $2.93–$3.03 and free-cash-flow outlook to $3.8 billion. HPE also raised its FY2026 Networking revenue-growth outlook to 73.0%–74.0%.

For FY2027, HPE updated its framework to revenue growth of 13.0%–17.0%, non-GAAP operating margin of 14.0%–15.0%, EPS of $4.40–$4.60 and free cash flow of $5.0 billion. HPE said Cloud & AI operating margin is expected to be 13.0% in FY2027.