Hewlett Packard Enterprise Company Q1 FY2026 earnings call

• HPE started fiscal 26 with strong first quarter, delivering revenue growth at high end of outlook range and record earnings per share, driven by networking and cloud/AI. • Phase one of Juniper integration complete, on track for fiscal 26 synergy targets. • Navigating commodity shortages and inflation by securing supply, protecting margins, and communicating with customers. • Networking segment performance strong, with high growth in data center switching/routing, Wi-Fi 7 adoption, etc. • Cloud and AI segment focusing on higher margin product orders, managing AI server revenue timing, etc. • Progress in catalyst modernization and cost programs, on track for fiscal 26 savings targets.

Networking segment: Revenue was $2.7 billion, up 7% on a normalized basis. Order growth exceeded revenue, with cumulative networks for AI orders targeting $1.7 to $1.9 billion by fiscal 2026 end. Data center networking and routing delivered 31% and 10% normalized growth respectively. Campus and branch grew 2% fueled by Wi-Fi 7 adoption. Networking operating margin was 23.7%. Cloud and AI segment: Revenue totaled $6.3 billion, down 3%. Server revenue declined 3% in line with expectations. Storage revenue was up 1%. Financial service revenue growth was roughly flat with all-time high return on equity.

• Raised EPS outlook range by 5 cents to $2.30 to $2.50 and gap EPS by 40 cents to $1.02 to $1.22. • Raised full year networking revenue growth to 68% to 73% reported basis or mid to high single digit normalized. • Lowered full year cloud and AI revenue growth to mid to high single digit from prior range. • Lowered OI&E outlook to $540 to $590 million from ~$650 million. • Increased free cash flow outlook to at least $2 billion from prior $1.7 to $2 billion. • Expect Q2 total revenue between $9.6 to $10 billion, networking revenue to grow 142% to 152% year-over-year reported, cloud and AI operating margins near midpoint of FY26 target range.

• Unprecedented supply tightness and rapidly rising component costs. • Supreme Court tariff decision impact needs clearer outcome to assess business impact. • Uncertainty in Middle East business environment.

Q: Rupalu filling in for Wamsi asked if current environment drives more customers to use HPE GreenLake, which areas had pull-ins, and if there was demand destruction from price increases.

A: Yes, ongoing adoption expected, no push out, demand very strong.

Q: Catherine Murphy asked about memory pricing impact on profitability in traditional data center and networking, and supply sufficiency.

A: Contemplated line of sight for supply and profitability, memory costs to persist, have supply to meet outlook.

Q: Simon Leopold asked about networking growth uptick drivers and margin guide degradation.

A: Driven by demand for products like campus/branch self-driving networks and data center switching/routing, margins guided low 20% as prudent with more synergies ahead.

Q: Eric Woodwing asked about classifying Q2 revenue growth as pull forward or strong demand.

A: Reflection of large orders and Juniper momentum, back half AI systems conversion.

Q: Amit Daryanani asked about networking growth drivers and margin guide.

A: Driven by existing and new customers, margins guided low 20% as prudent through phase one of integration.

Q: Aaron Rakers asked about server CPU lead times and pricing changes.

A: Less concerned about CPU, agile pricing with shortened quoting cycles and right to reprice.

Q: Tim Long asked about campus branch business growth and competitive landscape.

A: Order intake high single digits, clarity on deployment paths, new AI approaches, and integrated sales organization.

Q: Asya Merchant asked about AI segment margins and attach rates.

A: Margins expected to be impacted by shipment timing, focusing on protecting margins and navigating commodity prices.