Hewlett Packard Enterprise Company Goldman Sachs Communacopia + Technology Conference 2026
Review the key takeaways and the transcript of this earnings call.
- HPE reported a strong quarter with revenue growth, order growth exceeding revenue growth, and EPS significantly above guidance, achieving $1.11 earnings per share, the first quarter over $1 EPS for the company.
- HPE recorded a record free cash flow of nearly $1 billion for the quarter.
- Networking revenue grew 10% with 36% order growth; storage revenue grew 10% with double order growth; traditional server orders grew 75% year over year.
- HPE raised its fiscal 2026 networks for AI order target from $1.5 billion to $2.5-3 billion.
- The company secured a $3.5 billion enterprise hyperscale deal post-quarter, focused on on-premises CPU servers for inferencing with traditional server margins.
- HPE's cloud and AI segment delivered 17% margin this quarter, with a fiscal 2027 margin guidance of 13%.
- HPE's full-year fiscal 2027 networking revenue growth outlook was raised from 8-12% to 14-17%.
- HPE's AI server orders were $2.4 billion in the quarter with nearly $7 billion backlog.
- HPE highlighted a significant $30 billion purchase commitment, up from $6 billion last quarter, to secure supply, especially for networking, cloud, and AI components.
- The company emphasized strong demand constrained by supply, with management focused on converting orders into revenue.
- HPE is leveraging the combined HPE and Juniper sales force and partner network to expand enterprise and hyperscale customer reach.
- HPE is participating in AMD Helios rack opportunities by providing full racks and trays, aiming for a better margin profile and expansion into hyperscale and neocloud spaces.
- Campus and branch business grew revenue 8% and orders in the low teens percentage, driven by Wi-Fi 7 refresh and integration of Mist technology.
- HPE expects networking segment margins to expand into the mid to high 20% range in fiscal 2027, driven mainly by synergies and continued investment in silicon and products.
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Transcript
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Welcome everybody to the HPE Fireside Chat at the Goldman Sachs Communacopia + Technology Conference. The privilege of having Shannon Cross here from HPE to join us. My name is Kat Murphy. I cover HPE and IT hardware more broadly here at Goldman Sachs. We have about 35 minutes for today's session, inclusive of Q&A. You have some safe harbor to read first before I get started?
Yes. I'm sure no one's heard this before. My remarks may contain forward-looking statements, so please refer to our SEC filings included in our most recent Form 10-Q for a discussion of the risk factors that relate to our business. Thank you very much for having me.
Great. Thank you for being here. To kick it off, HPE reported earnings last Wednesday.
Raised both your fiscal 2026 and fiscal 2027 outlook, now calling for 13%-17% revenue growth, 16%-20% EPS growth for fiscal 2027. Before we dig into some more strategic questions and talk through the drivers of that raised outlook, could you provide a brief recap for the quarter and any key takeaways that you think are important to level set for this audience?
Sure. We were very, very pleased with the quarter and the strength we saw. Our revenue was strong. Our order growth was even stronger. We exceeded EPS significantly from the guide we had provided. We did $1.11 in earnings this last quarter, which was the first quarter the company has done over a dollar in earnings. That was pretty exciting. We also had a record free cash flow, and that is something that is near and dear to my heart, for the quarter as well, at almost $1 billion. Overall, we are seeing very strong demand on the networking side. Our revenue grew 10%. We had 36% growth in orders, so very good there. Our storage business actually grew 10%, and we saw twice the growth there in terms of orders as well.
We had very strong server growth, especially on the traditional side, and our order growth in traditional server was 75% year-over-year. Overall, demand remains really strong. I think what the management team right now is extreme focused on is converting all of those orders into revenue as we look forward to a really strong 2027.
Maybe following up on that point, you have talked about guidance being constrained by supply more so than the demand element, which remains very strong. In your Form 10-Q, there were some disclosures around $30 billion in purchase commitments, stepping up from $6 billion last quarter. Can you talk about the improving visibility that you have into supply and what is driving some of that opportunity to raise your fiscal 2027 outlook?
Sure. Yes. We are very happy with what we have committed to. I would say what we disclosed during the call was basically that our purchase commitments for networking doubled quarter-over-quarter. Obviously, if you see six to 30, part of that is networking, but the remainder is focused on cloud and AI. As you can imagine, that basically is focused on the components that are in the shortest supply right now. What we are doing, we have always signed LTAs. I think maybe one of the misconceptions that has been out there, I think it is kind of packed now, but was that LTAs were kind of a new invention. They are really not. They have been around for a long time, and our company has relationships with the DRAM manufacturers going back to Compaq days.
Very tight there, but we have signed multi-year larger agreements to lock in supply, and that is one of the things that makes us feel more confident in what we gave for fiscal 2027.
Got you. Let's spend some time on the Networking for AI portfolio. You raised the Networking for AI order target to $2.5 billion-$3 billion for fiscal 2026. You have talked about the opportunities across scale up, scale out, and scale across, but before we go into each of those in more detail, where do you see the biggest opportunity for that Networking for AI number, in 2026 and 2027, and then going forward, maybe across those three buckets?
Sure. Yes, Networking for AI, for those who are keeping score, we started back in October at $1.5 billion by the end of the year, and we are now getting closer, obviously, to the end of the year, and that target is now $2.5 billion-$3 billion. We have seen significant demand in what was really a nascent market for us even a year ago. We are very excited about our position and where we stand. When you look at what we are offering, we are offering basically scale across with our PTX router, which has its own silicon. We have the Express silicon chip there. It is something that Juniper has worked on. We are on multiple generations now, and we believe that that is a really strong product that has seen extreme demand. If you remember Juniper's history, that was the telco business before.
The telco business, I remember looking back at it and it was like, well, how low can it go? Now obviously with AI data center and the opportunity there, we are seeing significant demand and hypergrowth. Like that side of it, we have the MX, which is the on-ramp. That is our Trio silicon, and the MX router is basically on-ramp to the data center. That has seen significant demand. This is one of the reasons why Oracle was really interested in signing with us. We have our QFX, which is the first 100% direct liquid-cooled Tomahawk 6 top-of-rack switch. We are seeing demand across the board. I would say routing is absolutely something that connecting all these AI data centers is in really strong demand in an area that I think we are extremely well positioned.
Across the board, we are really happy with what we see in Networks for AI, and I would expect to see, not an update, but more details provided. We are hosting a networking analyst day on September 30th. It is in the Bay Area. If people would like to attend, please let us know, and it will be webcast.
Great. Can you talk more about that gigawatt scale Oracle deal that you announced last quarter? You mentioned the QFX platform as being something very attractive, but any more details on what really drove HPE's win of that opportunity and kind of quantifying the scale of the opportunity?
Sure. This is different than the relationship that Juniper and Oracle had in the past. I think maybe some of that got lost in translation. This is absolutely AI data center. We are providing the PTX, the MX, and the QFX, which basically running the back end of the data center, which this was a competitive bid or a competitive contest that we went through. So obviously Oracle saw value in us. I think there were a few things that really drove it. One, I think the interest level in what Juniper can do really peaked up when we announced the direct liquid, the DLC switch. Because, again, we are time to market versus the competition by at least 6 months. So that was helpful. It reduces power consumption.
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