HPE changes

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View the full Nov 10, 2026 version

Price: $47.93
Discount category: Below intrinsic value
Next earnings: Dec 2, 2026
Next earnings is estimate: Yes
Company name: added: Hewlett Packard Enterprise
Sector: added: IT hardware: servers, networking and storage
About: added: Hewlett Packard Enterprise (HPE) sells servers, networking equipment, storage, software and services to companies, governments and cloud providers, including systems for AI. It bought Juniper Networks on July 2, 2025 for about $13.4 billion in cash. It reports three segments: Networking, Cloud & AI, and Corporate Investments and Other. In Q3 of fiscal 2026, the quarter to July 31, 2026, revenue was $12.2 billion. Cloud & AI gave $9.0 billion, of which servers gave $6.8 billion, storage $1.3 billion and financial services $0.9 billion. Networking gave $2.9 billion from campus and branch, data center networking, security and routing products. The fiscal year ends on October 31. The shares trade on the New York Stock Exchange. The head office is in Spring, Texas, near Houston. Antonio Neri is President and Chief Executive Officer.
Thesis: added: HPE trades below its intrinsic value because investors doubt that its record margins can last. In Q3 fiscal 2026, revenue rose 34% to $12.2 billion, the GAAP gross margin rose to 40.1% from 29.2% a year earlier, and non-GAAP diluted EPS rose to $1.11 from $0.44. HPE raised its fiscal 2026 outlook for non-GAAP diluted EPS to $3.75 to $3.85, from $2.25 to $2.45 in December 2025, while a worldwide shortage of memory chips makes component costs and supply hard to predict. For the gap to close, three things must be true. HPE must reach its fiscal 2026 outlook in the Q4 report, expected in early December 2026. Fiscal 2027 must bring revenue growth of 13% to 17%, non-GAAP EPS growth of 16% to 20% and free cash flow of at least $5.0 billion, as HPE expects. Networking must keep an operating margin in the mid-to-high 20s percent, with Juniper cost savings of $800 million a year by the end of fiscal 2028. If HPE delivers this through fiscal 2027, the gap can close in one to two years.
Risks: added: A worldwide shortage of memory chips and other components affects costs and supply. HPE expects the shortage to continue in the medium term, and a change in memory prices can lower margins fast. Servers give most of the revenue. Large AI orders are uneven from quarter to quarter, and Dell, Supermicro and other makers compete strongly on price. Total debt was $20,244 million at July 31, 2026, partly from the purchase of Juniper Networks. Higher interest rates or lower cash flow can slow the reduction of debt. The integration of Juniper Networks must deliver the planned cost savings of $800 million a year by the end of fiscal 2028 without a loss of customers. The 7.625% Series C mandatory convertible preferred stock adds about 76 million shares to the diluted share count, and the Oracle warrant can add up to 4,156,466 shares.
Balance sheet: added: Cash: $6.2B Debt: $20.2B Net debt: $14.0B Debt due within 12 months: $2.9B HPE funds itself with bonds, commercial paper, asset-backed debt and cash flow. At July 31, 2026, cash and cash equivalents were $6,216 million. Total debt was $20,244 million: notes payable and short-term borrowings of $2,901 million, which include $2,137 million of long-term debt due within a year, and long-term debt of $17,343 million. Part of the debt, such as $0.9 billion of asset-backed debt securities due within a year, funds the leases and loans of Financial Services. In 2026, HPE repaid the rest of the term loan for the Juniper purchase: $1.25 billion in March and $0.75 billion in May. There were no borrowings under the revolving credit facility. HPE had 30,000,000 shares of 7.625% Series C mandatory convertible preferred stock and 1,327,464,779 common shares on August 27, 2026. It had $3.2 billion of share repurchase authorization left. The quarterly dividend is $0.1425 per share. HPE expects free cash flow of at least $3.75 billion in fiscal 2026 and at least $5.0 billion in fiscal 2027. As of Jul 31, 2026.
Checkpoints: added: Sep 2, 2026: Q3 fiscal 2026 results and outlook. Passed. Watch: Results above the outlook range and a higher fiscal 2026 outlook pass; a lower outlook fails. Outcome: Non-GAAP diluted EPS was $1.11, above the outlook of $0.88 to $0.93, and HPE raised its fiscal 2026 and 2027 outlook. Dec 2, 2026 (estimate): Q4 fiscal 2026 results and fiscal 2027 guidance. Pending. Watch: Q4 non-GAAP diluted EPS of $1.20 or more and fiscal 2026 free cash flow of at least $3.75 billion pass; lower results fail. Q2 2027 (estimate): Margins in the first half of fiscal 2027. Pending. Watch: A Networking operating margin in the mid-to-high 20s percent and a stable gross margin pass; a large fall in margins fails.
Recent events: added: Sep 30, 2026: At its Networking Investor Day, HPE raised its fiscal 2027 outlook for Networking revenue growth to the high teens to low 20s percent and its target for Juniper cost savings to $800 million a year by the end of fiscal 2028, from at least $600 million. It also received a $1.2 billion order from Vultr for AMD Helios AI racks. Sep 2, 2026: HPE reported Q3 fiscal 2026 results. Revenue rose 34% to a record $12.2 billion, and non-GAAP diluted EPS rose to $1.11 from $0.44. Networking revenue rose 74.9% to $2.9 billion, and server revenue rose 35.3% to $6.8 billion. HPE raised its fiscal 2026 outlook for non-GAAP diluted EPS to $3.75 to $3.85 and expects fiscal 2027 revenue growth of 13% to 17%. Jul 2, 2026: HPE gave Oracle a warrant to buy up to 4,156,466 HPE shares at $0.01 per share, in tranches that vest when Oracle buys products, as part of an agreement to use HPE networking in Oracle's AI data centers. Jun 1, 2026: HPE reported Q2 fiscal 2026 results. Revenue rose 40% to $10.7 billion, and non-GAAP diluted EPS rose to $0.79 from $0.38. HPE raised its fiscal 2026 outlook and gave a first growth framework for fiscal 2027. On May 28, 2026, it sold its remaining 5.2% stake in H3C Technologies for about $370.4 million. Mar 9, 2026: HPE reported Q1 fiscal 2026 results. Revenue rose 18% to $9.3 billion, and non-GAAP diluted EPS rose to $0.65 from $0.49.