HPE Q1 Earnings Surpass Expectations, Revenues Rise Y/Y

Hewlett Packard Enterprise HPE reported better-than-expected results for first-quarter fiscal 2026. The company’s non-GAAP earnings of 65 cents per share beat the Zacks Consensus Estimate by 10.2% and increased 32.7% year over year.

HPE posted revenues of $9.3 billion for the quarter, missing the Zacks Consensus Estimate by 0.25%. The company’s revenues increased 18% year over year.

HPE’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 7.3%.

HPE’s Segment-Wise Performance

HPE changed its segment reporting structure. The previous Server, Hybrid Cloud and Financial Services segments are now consolidated under the Cloud & AI segment, while Networking includes the former Intelligent Edge business plus Juniper Networks.

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company Quote

Hewlett Packard Enterprise’s Networking segment generated $2.7 billion in revenues in the first quarter of fiscal 2026, up 151.5% year over year, primarily driven by the inclusion of Juniper Networks and strong demand for campus, branch and data center networking solutions. The segment reported an operating profit margin of 23.7%, down 600 basis points from the year-ago quarter.

The Cloud & AI segment reported $6.3 billion in revenues, down 2.7% year over year, with an operating profit margin of 10.2%, up from 8.4% in the prior-year period. Within this segment, server revenues were $4.2 billion, down 2.7% year over year, while storage revenues totaled $1.1 billion, up 0.6%, and Financial Services contributed $900 million, up 0.3% year over year.

HPE’s Corporate Investments and Other revenues came in at $261 million, down 2.2% from the prior-year period.

HPE’s Operating Results

Hewlett Packard Enterprise’s non-GAAP gross profit for the first quarter of fiscal 2026 was $3.40 billion compared with $2.31 billion in the year-ago quarter, while the non-GAAP gross margin expanded to 36.6%, up 720 basis points year over year.

The company’s non-GAAP operating profit was $1.18 billion compared with $780 million in the year-ago quarter. The non-GAAP operating margin improved to 12.7%, up 280 basis points from the year-ago quarter.

HPE’s Balance Sheet and Cash Flow

Hewlett Packard Enterprise ended the fiscal first quarter with $4.84 billion in cash and cash equivalents compared with $5.77 billion at the end of the previous quarter.

In the first quarter, HPE generated $1.18 billion in cash from operating activities and produced $708 million in free cash flow, both increasing meaningfully from the prior-year period.

HPE returned $348 million through dividends and share repurchases in the first quarter of fiscal 2026.

HPE Updates FY26 and Q2 Guidance

Hewlett Packard Enterprise provided guidance for the second quarter of fiscal 2026 and reaffirmed its outlook for the full fiscal year. For the second quarter of fiscal 2026, HPE expects revenues in the range of $9.6 billion to $10.0 billion. The Zacks Consensus Estimate is pegged at $9.63 billion, indicating year-over-year growth of 18.72%.

It anticipates GAAP diluted earnings per share in the range of 9 cents to 13 cents and non-GAAP diluted EPS of 51 cents to 55 cents. The Zacks Consensus Estimate is pegged at 52 cents per share, indicating year-over-year growth of 36.8%.

For full-year fiscal 2026, HPE reaffirmed its revenue growth outlook of 17-22% and raised its expectations for the Networking segment to 68-73% growth.

The company expects GAAP diluted EPS to be in the range of $1.02-$1.22 and non-GAAP diluted EPS to be between $2.30 and $2.50. The Zacks Consensus Estimate is pegged at $2.34 per share, indicating year-over-year growth of 20.6%.

HPE also increased its free cash flow guidance to at least $2.0 billion for fiscal 2026.

Zacks Rank and Stocks to Consider

HPE currently carries a Zacks Rank #4 (Sell).

Getty Images GETY, HUYA HUYA and Micron Technology MU are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. While HUYA and Micron Technology sport a Zacks Rank #1 (Strong Buy) each, Getty Images carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Getty Images is set to report fourth-quarter 2025 results on March 16. Getty Images shares have lost 56.1% in the trailing six-month period.

HUYA is set to report fourth-quarter 2025 results on March 17. HUYA shares have lost 4.7% in the trailing six-month period.

Micron Technology is set to report second-quarter fiscal 2026 results on March 18. Micron Technology shares have appreciated 203.7% in the trailing six-month period.

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This article originally published on Zacks Investment Research (zacks.com).

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