Hewlett Packard Enterprise (HPE) Stock Slides Despite Blowout Q3 Results

Key Takeaways

• Fiscal Q3 adjusted earnings per share reached a record $1.11, surpassing analyst expectations of $0.93, while revenues climbed to $12.2 billion—a 34% year-over-year increase
• AI and cloud-focused revenue totaled $9 billion with 25% growth, while the networking segment exploded 75% to $2.9 billion
• The company elevated its fiscal 2026 revenue growth projection to 34%-37% and boosted fiscal 2027 expectations to 13%-17%
• Shares dropped over 5% in extended trading despite the earnings beat, driven by investor concerns over shrinking margins and component availability
• Chief Executive Antonio Neri cautioned that supply availability will face “very constrained” conditions lasting until 2028, with memory chips representing the primary challenge

Shares of Hewlett Packard Enterprise tumbled more than 5% during after-hours trading Wednesday following the technology infrastructure provider’s announcement of record-breaking quarterly performance. Prior to the earnings release, the stock had surged 116% year-to-date.

Hewlett Packard Enterprise Company, HPE

The company’s adjusted earnings per share registered at $1.11, a substantial increase from $0.44 in the same period last year and significantly exceeding the Wall Street consensus of $0.93. Quarterly revenues reached $12.2 billion, representing a 34% annual climb and surpassing analyst projections of $12 billion.

The AI and cloud computing segment generated $9 billion in quarterly revenue, marking a 25% year-over-year expansion. Server sales climbed 35% to $6.8 billion, while networking revenues experienced a dramatic 75% surge to $2.9 billion.

The enterprise technology giant also revealed an expanded partnership with Oracle, deploying HPE Juniper Networking solutions throughout Oracle’s artificial intelligence data center infrastructure.

Chief Executive Antonio Neri characterized the performance as successfully “turning exceptional demand into durable, profitable growth.”

However, Wall Street’s response remained lukewarm despite the positive results.

Component Shortages to Persist Until 2028

The company’s primary challenge involves securing sufficient components to satisfy customer demand. Chief Financial Officer Marie Myers identified memory chips as the most significant constraint, with NAND flash storage, central processing units, and storage drives also presenting difficulties.

“Demand is far outstripping supply,” Myers told Reuters.

HPE has negotiated extended supply contracts to secure better access to critical components, though shortages will continue impacting order fulfillment capacity and profit margins.

Leadership projected operating margins will decline sequentially during the October quarter, attributed to a greater proportion of AI system sales and competitive pricing dynamics.

Neri indicated supply limitations won’t improve “anytime soon” and anticipated these challenges persisting through 2028.

Company inventory reached $11.82 billion at the close of July, up from $7.16 billion twelve months prior. Myers explained the increase stems from elevated commodity prices and strategic procurement to fulfill expanding order volumes and backlog.

Raised Guidance for Fiscal 2026 and Beyond

The technology infrastructure provider increased its fiscal 2026 revenue growth forecast to a range of 34% to 37%, elevated from the previous outlook of 29% to 33%.

For the upcoming October quarter, management projected revenues between $13.9 billion and $14.8 billion, with the midpoint exceeding the analyst consensus of $13 billion. Adjusted earnings per share guidance of $1.20 to $1.30 similarly surpassed the $1.07 Wall Street estimate.

Additionally, fiscal 2027 revenue growth projections were raised to 13% to 17%.

The company finalized its acquisition of Juniper Networks in July 2025, strengthening its networking capabilities. This segment now anticipates full-year growth of 73% to 74%.

Myers observed that enterprise artificial intelligence adoption is “really starting to settle in,” with the company anticipating this momentum will fuel expansion beyond the current fiscal period.

These results arrive alongside optimistic forecasts from Dell Technologies and Super Micro Computer, as technology sector companies collectively plan to invest over $730 billion in AI infrastructure throughout this year.

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