Hewlett Packard Enterprise (HPE) Up 16.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Hewlett Packard Enterprise (HPE). Shares have added about 16.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hewlett Packard Enterprise due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

HPE Q1 Earnings Surpass Expectations, Revenues Rise Y/Y

HPE’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 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’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.

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.

For 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.

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

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in estimates review.

The consensus estimate has shifted 5.19% due to these changes.

VGM Scores

Currently, Hewlett Packard Enterprise has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hewlett Packard Enterprise has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report

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