HPE: Fiscal 2Q26 Financial Results

HPE announced financial results for the second quarter ended April 30, 2026.“HPE delivered an exceptional quarter with record-breaking revenue, higher-than-anticipated profitability, and increased free cash flow, reflecting strong execution and healthy demand across the business,” said Antonio Neri, president and CEO, HPE. “Customers continue to invest in modernizing their infrastructure and scaling AI, and our performance shows the strength of our combined networking portfolio and the value we are delivering to our shareholders.”

“We drove high profitability and cash generation this quarter through continued operational discipline as well as executing ahead of schedule against Juniper Networks and Catalyst cost synergies,” said Marie Myers, EVP and CFO, HPE. “Based on our performance, we are raising our fiscal 2026 guidance and introducing a fiscal 2027 financial growth framework. These updates reflect the durability of our performance and continued operational excellence – and point to faster progress toward our long-term financial plan.”

In the quarter, HPE achieved record revenue, gross margin, and non-GAAP diluted net EPS, as well as its highest-ever free cash flow generation for a second quarter.

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Second Quarter Fiscal 2026 Financial Results

• Revenue: $10.7 billion, up 40% from the prior-year period
• Gross margins:
  • GAAP of 36.5%, up 810 basis points from the prior-year period and up 60 basis points sequentially
  • Non-GAAP⁽¹⁾ of 36.9%, up 750 basis points from the prior-year period and up 30 basis points sequentially
• Diluted net earnings per share (“EPS”):
  • GAAP of $0.44, up $1.26 from the prior-year period and above our outlook range of $0.09 – $0.13
  • Non-GAAP⁽¹⁾ of $0.79, up $0.41 from the prior-year period and above our outlook range of $0.51 – $0.55
• Cash flow from operations: $1.4 billion, an increase of $1.9 billion from the prior-year period
• Free cash flow⁽¹⁾⁽²⁾: $0.9 billion, an increase of $1.8 billion from the prior-year period
• Capital returns to common shareholders: $343 million in the form of dividends and share repurchases

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Second Quarter Fiscal 2026 Segment Results

• Networking revenue was $2.7 billion, up 148.2% from the prior-year period, with 21.6% operating profit margin, compared to 25.0% from the prior-year period
  • Within Networking, revenue from:
    • Campus & Branch was $1.3 billion, up 50.2% from the prior-year period
    • Data Center Networking was $320 million, up 233.3% from the prior-year period
    • Security was $273 million, up 155.1% from the prior-year period
    • Routing was $775 million, compared to $1 million in the prior-year period
• Cloud & AI revenue was $7.7 billion, up 22.9% from the prior-year period, with 12.4% operating profit margin, compared to 6.6% from the prior-year period
  • Within Cloud & AI, revenue from:
    • Server was $5.5 billion, up 32.7% from the prior-year period
    • Storage was $1.2 billion, up 2.4% from the prior-year period
    • Financial Services was $0.9 billion, up 5.6% from the prior-year period
• Corporate Investments and Other revenue was $281 million, up 3.3% from the prior-year period, with -3.2% of operating profit margin, compared to -2.6% from the prior-year period

Dividend
The HPE Board of Directors declared a regular cash dividend of $0.1425 per share on the company’s common stock, payable on or about July 15, 2026, to stockholders of record as of the close of business on June 16, 2026.

Fiscal 2026 Third Quarter Outlook
HPE estimates revenue to be in the range of $11.5 billion to $12.1 billion. HPE estimates GAAP diluted net EPS to be in the range of $0.84 to $0.89 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $0.88 to $0.93. Fiscal 2026 third quarter non-GAAP diluted net EPS estimate excludes net after-tax adjustments of approximately $0.04 per diluted share, primarily related to amortization of intangible assets, stock-based compensation expense, acquisition, disposition and other charges, cost reduction program, and adjustments related to the sale of H3C.

Fiscal 2026 Full Year Outlook
HPE is raising its FY26 revenue growth outlook range to 29% to 33%. HPE is raising revenue growth expectations for the Networking segment to 72% to 75%. HPE estimates GAAP operating profit growth to be 885% to 930% and non-GAAP operating profit growth between 80% to 85%⁽¹⁾⁽³⁾.

HPE is raising both GAAP diluted net EPS to be in the range of $2.42 to $2.52 and non-GAAP diluted net EPS⁽¹⁾⁽⁴⁾ to be in the range of $3.35 to $3.45. Fiscal 2026 non-GAAP diluted net EPS estimate excludes net after-tax adjustments of approximately $0.93 per diluted share, primarily related to amortization of intangible assets, stock-based compensation expense, acquisition, disposition and other charges, cost reduction program, and adjustments related to the sale of H3C. HPE is also raising its free cash flow^(1)(2)(4) guidance and now expects free cash flow to be at least $3.5 billion.

The updated FY26 outlook ranges for non-GAAP diluted net EPS and free cash flow are higher than what HPE projected the company would achieve by FY28 when it released long-term financial guidance at the HPE Securities Analyst Meeting in October 2025. The company had expected to generate at least $3.00 in non-GAAP diluted net EPS and more than $3.5 billion in free cash flow by FY28.

Fiscal 2027 Outlook Framework
The company is introducing its growth framework for FY27. HPE estimates revenue growth to be in the range of 8% to 12%. HPE estimates non-GAAP diluted net EPS⁽¹⁾⁽⁴⁾ growth to be in the range of 12% to 16% and non-GAAP operating margin rate to be in the range of 12% to 16%⁽¹⁾⁽⁴⁾. HPE estimates it will generate free cash flow^(1)(2)(4) of at least $4.5 billion.

H3C Technologies Co., Limited Update
HPE also notes that the divestiture of its stake in H3C Technologies Co., Limited was completed on May 28. Cash proceeds totaling approximately $1.357 billion were received in exchange for the sale of HPE’s remaining 19% of total H3C shares outstanding. HPE received a total pretax consideration of approximately $3.5 billion for its stake in the company since it announced its intention to exit the joint venture.

¹ A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”
² Free cash flow represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash
³ FY26 non-GAAP operating profit excludes costs of approximately $2.6 billion primarily related to amortization of intangible assets, stock-based compensation expense, acquisition, disposition and other charges, and cost reduction program.
⁴ HPE provides certain guidance on a non-GAAP basis. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, Hewlett Packard Enterprise is unable to provide a reconciliation to the most directly comparable GAAP financial measure without unreasonable efforts, as the Company cannot predict some elements that are included in such directly comparable GAAP financial measure. These elements could have a material impact on the Company’s reported GAAP results for the guidance period. Refer to the discussion of non-GAAP financial measures below for more information