Hewlett Packard Enterprise (NYSE:HPE) Stock Drops on Weak Revenue Guidance Despite Earnings Beat

Hewlett Packard Enterprise (NYSE:HPE) closed its fiscal 2025 with a fourth-quarter earnings report that presented a mixed financial picture, leading to a sharp negative reaction in after-hours trading. The company delivered revenue and profit that largely met or exceeded expectations for the quarter but issued guidance for the coming period that fell short of Wall Street's forecasts, particularly concerning its core server business.

Quarterly Performance Versus Estimates

For the quarter ended October 31, 2025, HPE reported revenue of $9.68 billion, a 14% increase year-over-year. This figure, however, came in below the analyst consensus estimate of approximately $10.02 billion. On the profitability front, the company's non-GAAP earnings per share (EPS) of $0.62 surpassed the estimated $0.59.

The company's performance was heavily influenced by its recent acquisition of Juniper Networks, which significantly bolstered its networking segment. A breakdown of key quarterly results includes:

• Revenue: $9.68 billion (up 14% YoY, but below estimates)
• Non-GAAP EPS: $0.62 (above estimates)
• Annualized Revenue Run-Rate (ARR): $3.2 billion (up 63% YoY)
• Free Cash Flow: $1.9 billion (an increase of $420 million YoY)

Market Reaction and Guidance Concerns

Following the earnings release, HPE's stock dropped over 8% in after-hours trading. This decline is primarily attributed to the company's outlook for the first quarter of fiscal 2026. HPE provided revenue guidance in the range of $9.0 billion to $9.4 billion, with a midpoint of $9.2 billion. This outlook fell meaningfully short of the analyst consensus estimate of $9.84 billion for the upcoming quarter.

While the company raised its full-year fiscal 2026 non-GAAP EPS guidance to a range of $2.25 to $2.45, it reaffirmed its existing revenue growth outlook of 17% to 22%. The market's focus appeared to zero in on the near-term top-line forecast, interpreting it as a signal that demand, particularly for artificial intelligence servers, may not be meeting elevated expectations.

Segment Performance and Strategic Highlights

The earnings release highlighted the transformative impact of the Juniper Networks acquisition, which was completed during the fiscal year. The integration has created a significantly larger and more competitive networking business. A review of segment results reveals the shifting dynamics within HPE's portfolio:

• Networking: Revenue skyrocketed 150% year-over-year to $2.8 billion, driven by the Juniper inclusion.
• Servers: Revenue declined 5% to $4.5 billion, with the operating profit margin contracting.
• Hybrid Cloud: Revenue decreased 12% to $1.4 billion.
• Financial Services: Revenue remained flat at $889 million but delivered improved profitability.

CEO Antonio Neri described fiscal 2025 as a "transformative year," citing the completion of the Juniper acquisition and the scaling of AI and cloud businesses as key achievements providing momentum for the year ahead.

Looking Ahead

The central narrative emerging from HPE's report is one of successful integration and strategic repositioning, juxtaposed with near-term execution challenges in its traditional hardware businesses. The strong growth in high-margin, recurring revenue streams like ARR and robust free cash flow generation are positive indicators of the company's long-term shift towards a more software- and services-oriented model.

However, the market's immediate reaction underscores the weight placed on quarterly revenue targets and the competitive intensity in the AI infrastructure market. Investors will be watching closely to see if the first-quarter guidance proves conservative or if it reflects a more sustained period of digestion and transition.

For a detailed look at historical earnings and future analyst estimates for HPE, you can review the data here.

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