Hewlett Packard Enterprise Company
HPE · NYSE
Next quarter
Expected to report Dec 3, 2026 — estimated from last year’s reporting date.
Consensus is $1.17 EPS for Oct 2026 across 6 estimates, ranging $1.13 to $1.22.
HPE Jul 2026
- 24.39%
- +5.04%
- $0.82
- $1.02
- —
- $12.21B
Reported results
- $12.21B
- $1.39B
- 11.41%
- $1.54B
- $1.06
Highlights
- Record revenue: Q3 FY26 revenue was $12.21 billion, up 33.7% year over year and 14.4% sequentially, with growth across the portfolio.
- EPS beat: GAAP diluted EPS was $1.06, versus $0.21 a year ago, $0.44 in Q2 and HPE's $0.84-$0.89 outlook range; the supplied consensus dataset lists $0.82 consensus, $1.02 reported EPS and a 24.39% surprise.
- Margin expansion: GAAP operating profit rose to $1.39 billion from $247 million a year ago and $747 million in Q2, lifting operating margin to 11.4% from 2.7% year over year and 7.0% sequentially.
- Networking acceleration: Networking revenue increased 74.9% to $2.89 billion, led by Routing revenue up 270.0% to $788 million and Data Center Networking up 112.2% to $382 million.
- Cloud and AI scale: Cloud & AI revenue rose 25.4% to $9.04 billion, including Server growth of 35.3% to $6.77 billion; segment operating margin expanded to 17.0% from 7.0%.
- Outlook raised: FY26 revenue growth guidance increased to 34%-37%, non-GAAP EPS to $3.75-$3.85 and free cash flow to at least $3.75 billion.
- FY27 framework lifted: HPE now expects FY27 revenue growth of 13%-17%, non-GAAP EPS growth of 16%-20%, non-GAAP operating margin of 14%-15% and free cash flow of at least $5.0 billion.
- Cash and inventory: Q3 operating cash flow was $1.64 billion and free cash flow was $958 million, while inventory reached $11.82 billion versus $6.35 billion at October 31, 2025, reflecting supply commitments and longer AI-order acceptance timelines.
- H3C divestiture: HPE recorded a $444 million gain from selling its remaining H3C interests, contributing to quarterly net earnings of $1.54 billion.
Analysis
HPE's fiscal third quarter was a broad-based growth and margin print, with results well above both the prior-year period and the preceding quarter. Revenue reached a record $12.21 billion, up 33.7% year over year and 14.4% sequentially, while GAAP operating profit rose to $1.39 billion from $247 million a year ago and $747 million in Q2. GAAP diluted EPS was $1.06, above HPE's $0.84-$0.89 outlook range and the supplied $0.82 consensus; the provided expectation dataset reports $1.02 EPS and a 24.39% surprise, although the release and filing report $1.06.
The central operational story was demand for networking and AI infrastructure. Networking revenue surged 74.9% to $2.89 billion, while Cloud & AI grew 25.4% to $9.04 billion, led by 35.3% Server growth. Profitability improved sharply: non-GAAP operating margin reached 16.2%, up 770 basis points year over year and 290 basis points sequentially. GAAP earnings also benefited from a $444 million H3C divestiture gain, so the operating result is the cleaner measure of momentum. HPE raised both FY26 and FY27 targets, but supply constraints and advance purchasing pushed inventory to $11.82 billion, making working-capital execution an important counterpoint to the strong demand picture.
Growth and profitability
HPE delivered its strongest consolidated quarter in the reported period. Revenue of $12.21 billion increased 33.7% from $9.14 billion a year ago and 14.4% from $10.68 billion in Q2. GAAP gross margin was 40.1%, up 1,090 basis points year over year and 360 basis points sequentially. GAAP operating profit rose 464% to $1.39 billion, producing an 11.4% operating margin versus 2.7% a year ago and 7.0% in Q2. Non-GAAP operating profit increased to $1.98 billion, with margin expanding to 16.2% from 8.5% a year ago and 13.3% in Q2.
- Earnings: Net earnings attributable to HPE were $1.54 billion, versus $305 million a year ago and $624 million in Q2; diluted GAAP EPS was $1.06 versus $0.21 and $0.44, respectively.
- Non-GAAP EPS: Diluted non-GAAP EPS was $1.11, up from $0.44 a year ago and $0.79 in Q2, above HPE's quarterly outlook range of $0.88-$0.93.
- One-time benefit: The quarter included a $444 million gain on the sale of HPE's remaining H3C equity interest, which was excluded from non-GAAP results.
Networking momentum
Networking was the fastest-growing major business and the clearest incremental contributor to the quarter. Revenue rose 74.9% year over year to $2.89 billion and 7.5% sequentially, while segment operating profit increased to $637 million from $365 million a year ago and $581 million in Q2. The 22.0% segment operating margin was broadly stable year over year and 40 basis points higher sequentially, indicating that the growth did not require material margin sacrifice.
- Routing: Revenue was $788 million, up 270.0% year over year and 1.7% sequentially.
- Data Center Networking: Revenue reached $382 million, up 112.2% year over year and 19.4% sequentially.
- Security and campus: Security revenue increased 75.6% to $281 million, while Campus & Branch grew 31.0% to $1.44 billion.
- Guidance: HPE raised FY26 Networking revenue growth expectations to 73%-74%, supporting the higher company-wide outlook.
Cloud and AI demand
Cloud & AI remained HPE's largest segment, producing $9.04 billion of revenue, up 25.4% year over year and 17.3% sequentially. Server growth was the main driver, while Storage provided a smaller but positive contribution. Segment operating profit more than tripled to $1.54 billion from $504 million a year ago, and operating margin expanded to 17.0% from 7.0%, reflecting stronger mix and execution.
- Server: Revenue increased 35.3% to $6.77 billion and 24.1% sequentially, consistent with sustained AI and compute demand.
- Storage: Revenue rose 10.2% to $1.29 billion, while Financial Services revenue was essentially flat at $883 million, down 0.3% year over year.
- AI supply constraints: HPE cited shortages of GPUs, SSDs and memory components, longer acceptance timelines for AI orders and customer transitions to next-generation GPUs.
- Portfolio transition: The filing notes that the move toward more cloud-native, software-defined storage can defer recognition of higher-margin software and services revenue.
Raised outlook
The strength of the quarter and a record order backlog led HPE to raise its forward framework. The new targets imply that management expects the networking contribution and AI-related infrastructure demand to persist beyond the current fiscal year, while also converting growth into higher cash generation.
- Q4 FY26: Revenue is expected at $13.9-$14.8 billion, with GAAP diluted EPS of $1.12-$1.22 and non-GAAP diluted EPS of $1.20-$1.30.
- FY26: Revenue growth guidance is now 34%-37%; GAAP operating profit growth is expected at 1,070%-1,105%, non-GAAP operating profit growth at 100%-105% and non-GAAP EPS at $3.75-$3.85.
- Cash generation: FY26 free cash flow guidance increased to at least $3.75 billion, and HPE plans to return at least 75% of Q4 free cash flow to shareholders.
- FY27: Revenue growth is expected at 13%-17%, non-GAAP EPS growth at 16%-20%, operating margin at 14%-15% and free cash flow at least $5.0 billion.
Cash and working capital
Cash generation improved year over year, but the balance sheet shows the cost of preparing for AI-related demand. Q3 operating cash flow was $1.64 billion, up from $1.31 billion a year ago, and free cash flow was $958 million versus $790 million. However, inventory rose to $11.82 billion from $6.35 billion at the end of FY25, driven primarily by purchased parts and fabricated assemblies. HPE said it is securing memory and SSD supply ahead of forecast demand, which could keep inventory elevated in the medium term.
- Liquidity: Cash and cash equivalents were $6.22 billion at July 31, 2026, versus $5.77 billion at October 31, 2025.
- Debt: Total notes payable, short-term borrowings and long-term debt declined to $20.24 billion from $22.37 billion at fiscal year-end.
- Shareholder returns: HPE returned $324 million through dividends and repurchases in the quarter; the board declared a $0.1425 quarterly common dividend.
- Repurchases: HPE repurchased 16.5 million shares for $450 million during the first nine months and had approximately $3.2 billion remaining under its authorization.
