HPE: Fiscal 3Q26 Financial Results

Summary:

• Record revenue of $12.2 billion, up 34% YoY
• Record operating profit, with GAAP OP up 464% and non-GAAP OP up 155% YoY

HPE announced financial results for the third quarter ended July 31, 2026.“HPE’s strategy is proving itself again this quarter. Our results demonstrate the durability of our profitable growth momentum. We delivered record revenue, orders, and profitability, fueled by surging customer demand across our portfolio,” said Antonio Neri, president and CEO, HPE. “AI is becoming a multi-year growth driver for HPE, and our differentiated portfolio positions us to capture that opportunity at scale.”

“Our outstanding revenue performance and expanded profitability in the third quarter reflect robust demand across our portfolio and consistent, disciplined execution,” said Marie Myers, EVP and CFO, HPE. “With our Q3 results and our order backlog at a record level, we are raising our financial outlook and plan to return at least 75% of free cash flow to shareholders in Q4.”

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Third Quarter Fiscal 2026 Financial Results

• Revenue: $12.2 billion, up 34% from the prior-year period
• Gross margins:
  • GAAP of 40.1%, up 1,090 basis points from the prior-year period and up 360 basis points sequentially
  • Non-GAAP⁽¹⁾ of 40.4%, up 1,050 basis points from the prior-year period and up 350 basis points sequentially
• Operating profit margins:
  • GAAP of 11.4%, up 870 basis points from the prior-year period and up 440 basis points sequentially
  • Non-GAAP⁽¹⁾ of 16.2%, up 770 basis points from the prior-year period and up 290 basis points sequentially
• Diluted net earnings per share (“EPS”):
  • GAAP of $1.06, up $0.85 from the prior-year period and above our outlook range of $0.84 – $0.89
  • Non-GAAP⁽¹⁾ of $1.11, up $0.67 from the prior-year period and above our outlook range of $0.88 – $0.93
• Cash flow from operations: $1.6 billion, an increase of $0.3 billion from the prior-year period
• Free cash flow⁽¹⁾⁽²⁾: $1.0 billion, an increase of $0.2 billion from the prior-year period
• Capital returns to common shareholders: $324 million in the form of dividends and share repurchases

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Third Quarter Fiscal 2026 Segment Results

• Networking revenue was $2.9 billion, up 74.9% from the prior-year period, with 22.0% operating profit margin, compared to 22.1% from the prior-year period
• Within Networking, revenue from:
  • Campus & Branch was $1.4 billion, up 31.0% from the prior-year period
  • Data Center Networking was $382 million, up 112.2% from the prior-year period
  • Security was $281 million, up 75.6% from the prior-year period
  • Routing was $788 million, up 270.0% from the prior-year period
• Cloud & AI revenue was $9.0 billion, up 25.4% from the prior-year period, with 17.0% operating profit margin, compared to 7.0% from the prior-year period
• Within Cloud & AI, revenue from:
  • Server was $6.8 billion, up 35.3% from the prior-year period
  • Storage was $1.3 billion, up 10.2% from the prior-year period
  • Financial Services was $0.9 billion, down 0.3% from the prior-year period
• Corporate Investments and Other revenue was $278 million, up 3.0% from the prior-year period, with -24.1% of operating profit margin, compared to -7.0% 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 October 16, 2026, to stockholders of record as of the close of business on September 17, 2026.

Fiscal 2026 Fourth Quarter Outlook
HPE estimates revenue to be in the range of $13.9 billion to $14.8 billion. HPE estimates GAAP diluted net EPS to be in the range of $1.12 to $1.22 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $1.20 to $1.30. Fiscal 2026 fourth quarter non-GAAP diluted net EPS estimate excludes net after-tax adjustments of approximately $0.08 per diluted share, primarily related to amortization of intangible assets, stock-based compensation expense, acquisition, disposition and other charges, and cost reduction program.

Fiscal 2026 Full Year Outlook
HPE is raising its FY26 revenue growth outlook range to 34% to 37%. HPE is raising revenue growth expectations for the Networking segment to 73% to 74%. HPE estimates GAAP operating profit growth range to be 1,070% to 1,105% and non-GAAP operating profit growth range between 100% to 105%⁽¹⁾⁽³⁾.

HPE is raising both GAAP diluted net EPS to be in the range of $2.93 to $3.03 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $3.75 to $3.85. Fiscal 2026 non-GAAP diluted net EPS estimate excludes net after-tax adjustments of approximately $0.82 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 $3.75 billion.

Fiscal 2027 Outlook Framework
The company is raising its growth framework for FY27. HPE is raising its revenue growth outlook range to 13% to 17%. HPE is raising expectations for non-GAAP diluted net EPS growth to be in the range of 16% to 20%⁽¹⁾⁽⁴⁾. HPE estimates non-GAAP operating margin rate to be in the range of 14% to 15%⁽¹⁾⁽⁴⁾. HPE is also raising its free cash flow guidance and now expects free cash flow to be at least $5.0 billion^(1)(2)(4). 

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 $2.5 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