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HPE
Earnings call · Jul 2026 (Q3 FY26)

Hewlett Packard Enterprise Q3 FY26 earnings call HPE

Sep 2, 2026 Source

Executive summary

Hewlett Packard Enterprise Q3 FY26 — Record Results Driven by AI Demand and Networking Momentum

HPE delivered record Q3 FY26 results, exceeding all financial commitments, driven by strong AI demand and networking momentum. The company raised its FY26 and FY27 outlooks, citing record orders and backlog, despite ongoing supply constraints. Strategic acquisitions and internal initiatives are ahead of schedule, positioning HPE for continued profitable growth and capital returns.

Highlights

5

  • Record revenue of $12.2 billion, up 34% year-over-year.

  • Record non-GAAP gross margin of 40%.

  • Record non-GAAP operating profit of $2 billion, up 2.5x year-over-year.

  • Record non-GAAP EPS of $1.11, the first time exceeding $1 in a single quarter.

  • Highest Q3 free cash flow ever at $958 million, driven by strong operating profit and collections.

Concerns

3

  • Supply constraints continue to affect the ability to fulfill increased customer demand, particularly for DDR5, DDR4, NAND, and wafer capacity.

  • Operating expense was up 17% sequentially due to higher variable compensation reflecting record financial results.

  • Gross margin is expected to moderate toward more historical levels in Q4 and FY27, driven by the growth in AI systems and normalization in traditional servers.

Guidance & targets

CategoryTargetConfidence
Q4 FY26 Revenue
$13.9 billion to $14.8 billion
high materiality
High
Q4 FY26 Networking Revenue Growth
11% to 13%
medium materiality
High
Q4 FY26 Networking Operating Margin
improve modestly quarter-over-quarter
medium materiality
Medium
Q4 FY26 Cloud and AI Revenue Growth
60% to 72%
medium materiality
High
Q4 FY26 Cloud and AI Operating Margin
moderate sequentially to a mid-teens rate
medium materiality
Medium
Q4 FY26 Total Operating Expenses
decrease sequentially by a low single digit
medium materiality
Medium
Q4 FY26 Non-GAAP EPS
$1.20 to $1.30
high materiality
High
Q4 FY26 GAAP EPS
$1.12 to $1.22
medium materiality
High
FY26 Non-GAAP EPS
$3.75 to $3.85
high materiality
High
FY26 GAAP EPS
$2.93 to $3.03
medium materiality
High
FY26 Free Cash Flow
at least $3.75 billion
high materiality
High
FY27 Consolidated Revenue Growth
13% to 17%
high materiality
High
FY27 Networking Revenue Growth
14% to 17%
medium materiality
High
FY27 Cloud and AI Revenue Growth
14% to 18%
medium materiality
High
FY27 Company Operating Profit Growth
14% to 18%
high materiality
High
FY27 Company Operating Margin
14% to 15%
high materiality
High
FY27 Networking Operating Margin
mid- to high 20% range
medium materiality
High
FY27 Cloud and AI Operating Margin
approximately 13%
medium materiality
High
FY27 Non-GAAP EPS
$4.40 to $4.60
high materiality
High
FY27 Free Cash Flow
at least $5 billion
high materiality
High
Networks for AI Orders Target
$2.5 billion to $3 billion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Networking
Revenue growth is on a normalized basis. Orders grew 3.5x faster than revenue, led by AI infrastructure-related investments in data center switching and routing, and strong demand for self-driving networks in campus and branch. Supply constraints limited revenue conversion. Operating margin reflects disciplined execution and early Juniper synergies, partially offset by higher variable compensation.
Orders growth: 36%AI infrastructure orders: $700 millionCumulative AI orders: $2.2 billionCampus & Branch revenue growth: 8%Routing revenue growth: 23%Security revenue growth: 12%Data center networking revenue growth: -6%Enterprise revenue growth: 12%Service provider revenue growth: 5%
$2.9 billion10%—22%
Cloud and AI
Exceeded outlook, reflecting strength in traditional servers with higher average selling prices driving server revenue to an all-time high. Operating profit growth accelerated. Operating margin expanded 460 basis points sequentially. Robust demand from large enterprise, sovereign, and cloud providers for servers. AI Systems pipeline remains multiples of backlog.
Operating profit: >$1.5 billionOperating profit growth sequentially: 61%Operating profit growth YoY: triple digitsServer revenue growth: 35%AI systems orders: $2.4 billionAI systems orders growth sequentially: >30%AI Systems backlog growth sequentially: 14%AI Systems revenue: ~$1.6 billionStorage revenue growth: 10%PCAI orders growth: triple digitsAlletra MP orders and revenue growth: strong double digits
$9 billion25%—17%
Financial Services
Generated third quarter records in financing volumes and residual value. Continues to deepen customer relationships and offer a meaningful competitive advantage, especially for AI investments.
Return on equity: >20%
roughly flat———

HPE operating KPIs by quarter

HPE operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2025 Q1 FY25 Oct 2025 Q4 FY25 Apr 2026 Q2 FY26This call Jul 2026 Q3 FY26Change vs prior quarter
Customers HPE GreenLake Cloud
41K+ We finished Q1 with more than 41,000 enterprises using HPE GreenLake Cloud. Source transcript
~46K We added approximately 7,000 new customers to GreenLake, ending the year with approximately 46,000 customers. Source transcript
~50K We exited Q2 with approximately 50,000 customers operating their IT in our GreenLake cloud, managing more than 6.7 million systems, up from 5.3 million a year ago. Source transcript
52K In Q3, the number of GreenLake customers grew 18% to 52,000, up from 44,000 a year ago. Source transcript
—
Annual recurring revenue (ARR)
$2.1B Our annual recurring revenue was $2.1 billion, up 46% year-over-year, driven by AI and Intelligent Edge. Source transcript
$3.2B Total company ARR was $3.2 billion, up 62% year-over-year with the addition of Juniper. Source transcript
——+52.4%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total Orders record Q3 FY26

up 42% (normalized basis)

Orders grew faster than revenues.

Total Backlog record Q3 FY26

Resulted from booking more orders than any prior quarter in history.

Networks for AI Orders $700 million Q3 FY26

up triple digits

Reached a new high in Q3.

Cumulative Networks for AI Orders $2.2 billion Q3 FY26

Surpassed the FY26 target.

AI Systems Backlog new high Q3 FY26

increased 14% sequentially

Pipeline remains multiples of backlog.

Deals & partnerships

Oracle Expanded collaboration to accelerate gigawatt scale AI infrastructure. multi-gigawatt on a multi-year basis multi-year

Oracle will use HPE Juniper's QFX switching products (based on Broadcom Tomahawk 6) and PTX routing platform (using Express 5 silicon) for scale-out and scale-across AI infrastructure.

Hyperscaler customer (unnamed) Multibillion-dollar server deal specifically designed for AI inferencing. multibillion-dollar

The deal is for the hyperscaler customer's own internal usage as an enterprise customer, not for selling Tier 1 infrastructure.

Capital programs

Juniper Synergies on track $600 million

Benefit:annual run rate savings

Juniper synergies capture remains on track to achieve the $600 million annual run rate savings target by the end of FY28, with integration costs tracking better than planned.

Catalyst Transformation underway

Benefit:efficiencies and operational simplification

AI-enabled process simplification within Catalyst has been expanded across the enterprise, contributing to efficiencies and operating expense reduction.

Risks & headwinds

Supply Constraints ongoing, expected to last for a longer period

Affecting ability to fulfill increased customer demand; DDR5, DDR4, NAND, and wafer capacity constrained.

Mitigation:Collaborating closely with partners to secure additional multiyear supply agreements; providing alternative product configurations and deeper planning interlocks.

Gross Margin Moderation Q4 FY26 and FY27

Expected to moderate toward more historical levels.

Mitigation:Driven by growth in AI systems and normalization in traditional servers, partially offset by growing mix of networking. Management is focused on disciplined execution and managing mix and input costs.

Operating Expense Increase Q3 FY26

Up 17% sequentially in Q3.

Mitigation:Due to higher variable compensation reflecting record financial results. Expected to decrease in FY27 as variable compensation normalizes, with continued benefit from Catalyst transformation efficiencies and Juniper integration synergies.

What to watch in Q4 FY26

Networking Revenue Growth

Q4 FY26
Current 10% (normalized)
Target 11% to 13%

Why it matters

Verifies improved supply chain conversion and sustained momentum in the networking segment, a key growth driver.

We expect networking revenue to grow 11% to 13%, driven by order strength and improved supply chain conversion.

Q&A highlights

What gives confidence in sustained demand for AI infrastructure, and how much of the raised FY27 outlook is due to the new hyperscale inference and Oracle deals?

Antonio stated that demand is sustained by large AI cloud build-outs and the inflection of enterprise AI (agentic AI, inferencing), with growing on-premise token usage and a strong pipeline. Marie clarified that the Oracle and hyperscaler deals are included in the FY27 networking (14-17%) and cloud/AI (14-18%) revenue growth guidance.

“Our guide is informed by what we see in the market, and the market is telling us the demand continues to be exceptionally strong.”

asked by Katherine Campagna · answered by Antonio Neri

3 min read 7 chapters

Detailed narrative

Juniper Networks Integration & Strategic Impact

The U.S. Federal Court approved HPE's settlement with the Department of Justice regarding the Juniper Networks acquisition, reinforcing confidence in its long-term value. The integration plan and cost synergies are ahead of schedule, with the business performance strengthening through expanded innovation and strong execution. This enhanced ability to compete is already driving more innovative networking solutions for customers and higher profitable growth for shareholders.

AI as a Multi-Year Growth Driver

AI has become a multi-year growth driver, expanding demand across the entire HPE portfolio. Customer demand accelerated across both business segments in Q3, with orders growing faster than revenues, resulting in a record backlog. AI is inflecting beyond early proof-of-concept deployments into broader enterprise workflow transformation and AI inferencing opportunities, requiring accelerated computing infrastructure and secure data storage.

Networking Segment Performance & Oracle Collaboration

Networking orders reached a new high of $700 million for AI infrastructure in Q3, with cumulative AI orders surpassing the FY26 target of $2.2 billion. Campus & Branch revenue achieved record levels, and routing and data center switching demand accelerated. Supply constraints limited revenue conversion, but the company expects improvement in Q4. HPE announced an expanded collaboration with Oracle to accelerate gigawatt-scale AI infrastructure, deploying HPE Juniper networking routers and switches.

Cloud and AI Segment Strength

The Cloud and AI segment delivered record revenue of $9 billion, operating profit exceeding $1.5 billion, and an operating margin of 17%. This performance reflects strength in traditional servers, with higher average selling prices driving server revenue to an all-time high. AI systems orders increased over 30% sequentially to $2.4 billion, driven by broad-based demand, and the AI Systems backlog grew 14% sequentially to a new high.

Storage and Private Cloud AI Momentum

Storage had a standout quarter with record revenue, benefiting from HPE's focus on owned IP offerings and a modern multi-data protocol platform for the AI era. PCAI orders increased triple digits in Q3 as enterprise customers adopt HPE's AI factory platform to support agent AI and inferencing initiatives, optimizing token economics. Alletra MP orders and revenue also increased strong double digits year-over-year.

GreenLake and Financial Services Contributions

GreenLake continues to be a key differentiator, with the number of customers growing 18% year-over-year to 52,000. Customers are broadening their utilization of GreenLake cloud services, increasing net retention rates. HPE Financial Services generated Q3 records in financing volumes, residual value, and return on equity, providing a meaningful competitive advantage, especially as customers seek financing for AI investments.

Operational Efficiency and Cash Generation

HPE is making strong progress in building a more efficient company, running ahead of plan on multiple projects to lower cost of sales and operating expenses. Juniper synergies are on track to achieve the $600 million annual run rate savings target by the end of FY28. The company is deploying an internal agentic AI platform, built on private cloud AI, which can reduce token costs by up to 60% compared to public cloud, contributing to strong operating cash flow of $1.6 billion and free cash flow of $958 million.

AI-generated summary of the company's earnings call. Not investment advice.