Key Takeaways:
HPE reported fiscal third-quarter adjusted EPS of $1.11 on revenue of $12.2 billion, beating Wall Street estimates by 20.65 percent and 2.26 percent, respectively.
"We booked more orders than any prior quarter in our history," Chief Executive Antonio Neri said, citing record demand for AI infrastructure, networking equipment and enterprise systems.
Revenue rose 34 percent year over year, with non-GAAP gross margin hitting a record 40 percent. Operating profit reached $2 billion, up 2.5 times from a year earlier. Orders grew 42 percent on a normalized basis, outpacing revenue as supply constraints limited fulfillment.
Shares fell 4.07 percent after hours to $49.72 from a $51.83 close, as management flagged persistent shortages in DDR5, DDR4, NAND and wafer capacity. HPE raised full-year EPS guidance to $3.75-$3.85 and outlined a fiscal 2027 framework calling for EPS of $4.40-$4.60.
Networking revenue rose 10 percent on a normalized basis to $2.9 billion, with orders up 36 percent — roughly 3.5 times faster than sales. Networks for AI orders reached a quarterly high of $700 million, up triple digits, while cumulative orders hit $2.2 billion, surpassing the company's fiscal 2026 target. HPE raised that year-end target to $2.5 billion to $3 billion.
Cloud and AI revenue climbed 25 percent to $9 billion, driven by traditional server ASP growth and AI systems demand. Server revenue rose 35 percent, with AI systems orders reaching $2.4 billion, up more than 30 percent sequentially. Storage revenue increased 10 percent, while Private Cloud AI orders grew triple digits. HPE also secured a multi-billion-dollar server deal with a hyperscaler customer for AI inferencing after quarter end.
HPE announced an expanded collaboration with Oracle to deploy HPE Juniper networking routers and switches across gigawatt-scale AI cloud infrastructure. CFO Marie Myers said the demand environment remains strong as orders continue to outpace revenue.
For fiscal Q4, HPE guided revenue of $13.9 billion to $14.8 billion and adjusted EPS of $1.20 to $1.30. The company raised its fiscal 2026 free cash flow target to at least $3.75 billion and projected fiscal 2027 revenue growth of 13 percent to 17 percent, with free cash flow of at least $5 billion.
Management said the fiscal 2027 outlook excludes the AMD Helios opportunity, which Neri described as potentially worth tens of billions of dollars in market size. The company expects supply constraints to persist through 2027, though multi-year supplier agreements should improve conversion.
The after-hours decline suggests investors are weighing how much of the record margin strength can continue as the mix shifts toward lower-margin AI systems. Investors will watch HPE's Networking Investor Day later this month for details on its Juniper integration strategy and AI networking roadmap.
This article is for informational purposes only and does not constitute investment advice.
