HPE reported 25Q3 GAAP EPS of $0.21 vs. 24Q3’s income of $0.24. Net revenue increased 18.5% to $9.1 billion (or 17.7% on a constant currency basis). The increase was due to higher average unit prices in the Server business, the merger with Juniper Networks and higher unit volume in the Hybrid Cloud business. Operating expenses rose 24.2%, due to lower gross profits and operating expenses mostly attributable to the Juniper merger. Thus, net earnings declined 40.4%, GAAP EPS fell 44.2% to $0.21 and non-GAAP EPS dropped 12.3% to $0.44. My GAAP EPS estimate was $0.34 and non-GAAP was $0.49. Consensus non-GAAP was $0.42. My projections did not factor in the impact of Juniper. Consensus non-GAAP estimates were most likely updated to incorporate the Juniper acquisition.
Management characterized the quarter as solid. It believes that Juniper will help accelerate the company’s momentum across its networking, cloud and AI businesses. Customer demand was broad-based, with increased sequential operating profit in its three major business units. HPE’s renamed Networking segment (f/k/a Intelligent Edge before the acquisition of Juniper) accounted for ~50% of the company’s consolidated non-GAAP operating profit. Free cash flow was $719 million in the quarter, up slightly from the prior year, due to a significant reduction in inventory that was driven by higher AI backlog conversion and improved supply chain execution. Post-the Juniper acquisition, the company sees good growth potential from the strong demand for networking and the convergence of AI, cloud and networking, which it believes will usher in a new era of IT and business transformation.
With the completion of the Juniper acquisition, management now anticipates 25Q4 net revenue of $9.7-$10.1 billion, GAAP diluted EPS of $0.50-$0.54 and non-GAAP EPS of $0.56-$0.60. For the full year fiscal 2025, it expects revenue growth of 14%-16%, GAAP diluted EPS of $0.42-$0.46 and non-GAAP EPS of $1.88-$1.92. My revised projections show net revenue of $14.9 billion, up 14.9%, GAAP diluted EPS of $0.41 and non-GAAP EPS of $1.94. For fiscal 2026, I now project net revenue of $39.4 billion, up 13.7%, GAAP diluted EPS of $1.70 and non-GAAP EPS of $2.15.
Since my last report (June 15), HPE’s stock has risen 40.0% outpacing the S&P 500’s 11.4% gain and the S&P 500 Technology sector’s 19.2% gain. The stock has blown past my price target of $20, so I am now raising it to $25. That equates to a forward valuation of 15.0 times projected 2026 GAAP EPS of $1.70 and 11.8 times 2026 non-GAAP EPS of $2.15. That is still well below the peer group average one year forward non-GAAP EPS multiple of 21 times. At today’s closing price of $24.70, the stock now has a potential total return of 3.3%, including its 2.1% dividend yield. Accordingly, I am maintaining my performance rating of “3” (Neutral), as the stock is overbought after such a sharp advance. I will revisit my price target and performance rating after the company holds its 2025 Securities Analyst Day on October 15.
This is a summary of my recent update report on Hewlett Packard Enterprise Co. (HPE). To obtain a copy of the report, please reach out to me using the contact information provided below.
September 24, 2025 (Report published on September 23, 2025.)
Stephen P. Percoco
Lark Research
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