Hewlett Packard Enterprise Company HPE used its third-quarter fiscal 2026 earnings call to emphasize accelerating enterprise AI demand, record order activity and a growing backlog, while supply constraints continued to limit how quickly that demand could convert into revenues.
The quarter supported higher fiscal 2026 and fiscal 2027 targets. Non-GAAP EPS of $1.11 topped the Zacks Consensus Estimate of $0.95, while revenues of $12.21 billion exceeded the $12.09 billion consensus.
HPE Raises Fiscal 2027 Framework
Executive vice president and CFO Marie Myers raised the fiscal 2027 revenue growth framework to 13-17%, with Networking expected to grow 14-17% and Cloud & AI 14-18%.
Myers also guided to fiscal 2027 non-GAAP operating margin of 14-15%, EPS of $4.4-$4.6 and free cash flow of at least $5 billion.
For fiscal 2026, Myers raised revenue growth guidance to 34-37%, non-GAAP EPS to $3.75-$3.85 and free cash flow to at least $3.75 billion. Fiscal fourth-quarter revenues are projected at $13.9-$14.8 billion.
Hewlett Packard Enterprise Leans Into Enterprise AI
President and CEO Antonio Neri said that enterprise AI has moved beyond early training pilots toward agentic AI and inferencing, expanding demand for traditional servers, storage, private cloud and AI systems.
Neri also stated that more AI initiatives are becoming board-level priorities. He also pointed to customer interest in running workloads on premises to control data, governance and token economics.
Myers mentioned that AI systems orders reached $2.4 billion, up more than 30% sequentially, while backlog increased 14% sequentially to a new high. She expects AI systems revenues to improve sequentially in the fourth quarter.
HPE Networking Orders Outpace Revenue
Myers said that Networking orders rose 36% on a normalized basis, about 3.5 times faster than revenue growth, as demand strengthened across routing, data center switching and Campus & Branch.
Neri said that supply availability, rather than demand, is limiting order conversion. Myers added that networking purchase commitments more than doubled quarter over quarter.
CEO Antonio Neri also highlighted an Oracle collaboration for gigawatt-scale AI infrastructure using HPE Juniper switching, routing, software and AI operations across global deployments.
Hewlett Packard Enterprise Flags Margin Normalization
HPE reported fiscal third-quarter non-GAAP gross margin of 40.4%. Myers attributed the strength to disciplined traditional-server pricing and a richer networking mix.
Myers cautioned that gross margin should moderate toward historical levels as AI systems become a larger revenue mix and traditional-server deal mix normalizes.
Myers expects fourth-quarter Cloud & AI operating margin to move to a mid-teens rate. Lower variable compensation, Catalyst efficiencies and Juniper synergies should reduce total operating expenses sequentially by a low-single-digit rate.
HPE Q&A Centers on Supply and Demand Durability
A Goldman Sachs analyst asked whether strong demand reflected a durable infrastructure cycle or pulled-forward spending. Neri cited enterprise AI adoption, a large pipeline and continued AI cloud build-outs behind the fiscal 2027 outlook.
An Evercore ISI analyst pressed on the gap between Networking orders and revenues. Neri said that supply constraints remain the main issue, although revenue growth should accelerate as capacity becomes available.
A Morgan Stanley analyst questioned why server margins would normalize despite strong demand. Myers said that third-quarter margins reflected scale, pricing, deal mix and Catalyst benefits, with mix expected to moderate into fiscal 2027.
Hewlett Packard Enterprise Stays Focused on Execution
Neri closed by emphasizing networking as the strategic lead for the company, with Cloud & AI supporting broader customer needs, profitability and cash generation.
Myers expects Juniper synergy capture to remain on track for $600 million in annual run-rate savings by the end of fiscal 2028. She also said HPE plans to return at least 75% of free cash flow to shareholders in the fourth quarter.
HPE's Rank and Style Scores Stay Favorable
HPE carries a Zacks Rank #2 (Buy) at present, with a Value Score of B and a Growth Score of A, a Momentum Score of A and a VGM Score of A. Under the Zacks framework, top-ranked stocks paired with A or B Style Scores have historically offered stronger potential over the next one to three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Within the Zacks scoring framework, the A Growth and Momentum grades denote stronger growth characteristics and favorable momentum timing, while the B Value grade remains in the preferred A/B tier. The A VGM Score combines those style factors. The Zacks Rank can change as analysts revise earnings estimates after the just-reported results.
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Hewlett Packard Enterprise Company (HPE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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