HPE · Q2 2026 Earnings

Bullish

Hewlett Packard Enterprise

Reported June 1, 2026

30-second summary

30-second take: Revenue of $10.68B (+40% YoY, +14.8% QoQ) beat consensus of $9.77B by 9.3% and crushed the $9.6–$10.0B guide by $678M, while non-GAAP EPS of $0.79 beat the $0.53 consensus by 49.1% and cleared the $0.51–$0.55 guide by $0.24+. Management raised FY26 non-GAAP EPS guidance from $2.30–$2.50 to $3.35–$3.45 (+38% at midpoint), nearly doubled GAAP EPS guidance, lifted FY FCF from "at least $2.0B" to "at least $3.5B" (+75%), and explicitly pulled the FY28 long-term plan forward by two years. Cloud & AI segment growth guidance jumped from mid-to-high single digits to "low 20%" — the AI de-prioritization framing from Q1 has been rewritten by demand strength management didn't see coming 90 days ago.

Headline numbers

EPS

Q2 FY2026

$0.79

Revenue

Q2 FY2026

$10.68B

+40.0% YoY

+9.3% vs est.

Gross margin

Q2 FY2026

36.5%

Free cash flow

Q2 FY2026

$0.92B

Operating margin

Q2 FY2026

7.0%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$10.68B	$7.63B	+40.0%	$9.30B	+14.8%
EPS	$0.79	$0.38	+107.9%	$0.65	+21.5%
Gross margin	36.5%	29.4%	+710bps	35.9%	+60bps
Operating margin	7.0%	8.0%	-100bps	5.1%	+190bps
Free cash flow	$0.92B	$-0.85B	+208.0%	$0.71B	+29.2%

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q2 FY2026	$9.6B to $10.0B	$10.678B	+$0.678B above high end of guide	Beat
Non-GAAP EPS	Q2 FY2026	$0.51 to $0.55	$0.79	+$0.24 to $0.28 above high end of guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q3 FY2026	$11.5B to $12.1B	+25.8% to +32.4% YoY
Non-GAAP EPS	Q3 FY2026	$0.88 to $0.93	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Non-GAAP EPS	FY2026	$2.30 to $2.50	$3.35 to $3.45	+$0.85 to $0.95 at low/high ends (~38% raise at midpoint)	Raised
GAAP EPS	FY2026	$1.02 to $1.22	$2.42 to $2.52	+$1.20 to $1.40 (+99% to +137% raise)	Raised
Revenue growth	FY2026	17% to 22%	29% to 33% (reported basis); high teens (normalized basis)	+7 to 11 percentage points (reported basis)	Raised
Operating profit growth	FY2026	32% to 40% (non-GAAP)	80% to 85%	+40 to 53 percentage points	Raised
Free cash flow	FY2026	at least $2.0B	at least $3.5B	+$1.5B (+75% raise)	Raised
Networking revenue growth	FY2026	68% to 73%	72% to 75% (reported basis); approaching 10% (normalized basis)	+4 to 7 percentage points (reported basis)	Raised
Cloud & AI revenue growth	FY2026	mid-to-high single-digit range	low 20% range	+10+ percentage points (qualitative raise from mid-to-high single-digit to low 20%)	Raised

Product revenue

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Networking	$2.69B	—	+148.2%
Cloud & AI	$7.707B	—	+22.9%
Campus & Branch	$1.322B	—	+50.2%
Server	$5.454B	$4.058B	+34.4%
Data Center Networking	$0.32B	—	+233.3%
Storage	$1.175B	—	+2.4%
Security	$0.273B	—	+155.1%
Financial Services	$0.904B	$0.856B	+5.6%
Routing Revenue	$775M	—	—

Management tone

Q3 FY25 anchor: AI orders nearly double → Q4 FY25 anchor: integration accretive, FY26 framework crystallizes → Q1 FY26 anchor: margin protection over AI growth → Q2 FY26 anchor: two years ahead of plan.

The AI strategy completed a fourth pivot in five quarters — from "selective participation" (Q2 FY25) to "exploding sovereign" (Q3 FY25) to "deliberate de-prioritization of AI revenue volume" (Q1 FY26) to "demand durability with elevated pricing and broad-based orders" (this quarter). One quarter ago management was explaining why the FY26 strategy "prioritizes higher margin product orders, which have an impact on our AI system to revenue growth rate." This quarter: "We are seeing a broad pattern across industries. Enterprises want the flexibility of choosing multiple AI models with the governance and control of on-premises." AI systems orders of $1.8B were called out as "more balanced and broad-based." The de-prioritization framing has been quietly retired — not because management was wrong about margin discipline, but because the demand mix has expanded into enterprise where margin and volume are no longer in tension.

The FY28 long-term plan is now a FY26 print. Q4 FY25 introduced the multi-year $3.00+ EPS / $3.5B+ FCF FY28 commitment as the first explicit long-term framework HPE had put in market. Q1 FY26 reaffirmed it. This quarter, anchored by the new $3.35–$3.45 midpoint of $3.40 and $3.5B+ FCF: "We now expect to deliver $3.40 in non-GAAP earnings per share at the midpoint in fiscal 2026, two years ahead of our committed long-term plan." That's not a guidance raise — it's the wholesale invalidation of a forward planning framework that was less than a year old. Few large-cap hardware vendors collapse a three-year plan into one year and remain credible; the FY27 view embedded in Q&A ("demand strength to continue into fiscal 2027 and beyond") is the next test.

Self-driving networks moved from concept to operational reality. Q1 FY26 introduced agentic AI as a strategic theme; this quarter it became a product claim with deployments: "The self-driving network is no longer a concept. It is a reality." Combined with the 1,200 internal AI use cases and 250+ agentic AI deployments management cited in Q&A, this is a tonal shift from "we're building toward AI" to "we are an AI company." Whether the customer-facing self-driving network deployments translate to networking ASP/margin expansion is the read-through that matters into FY27.

Catalyst and Juniper synergies moved from "tracking to plan" to "ahead of schedule, 40%+ EPS upside." Q4 FY25 framed synergies as integration accretion in year one. Q1 FY26 absorbed the language into the operating model. This quarter management quantifies the structural advantage: 65,000 headcount is the lowest since the merger, down 9%+ since the programs began. The +47-point raise in FY26 non-GAAP operating profit growth (from +32–40% to +80–85%) cannot be explained by revenue mix alone — the synergy program is running materially ahead of the original underwriting.

Hedging language receded materially. Q1 FY26 reintroduced macro and tariff hedges that had faded in Q3 and Q4 FY25. This quarter, the hedges are narrower and more operational — supply constraints on DRAM/NAND, inflationary component costs, lumpy AI deal timing. The Middle East, tariffs, and Supreme Court risk language is absent. Management is no longer pricing macro risk into the framing.

Recurring themes management leaned on this quarter:

Agentic AI and AI inferencing acceleration across enterprise and service provider segmentsSelf-driving networks transition from concept to operational deployment with customer winsNetworks-for-AI portfolio strength and leadership in AI infrastructure scalingJuniper integration ahead of schedule with unified portfolio driving market momentumRecord backlog and demand visibility enabling two-year acceleration of fiscal 2028 targetsCatalyst cost savings and synergies outpacing initial expectations, fueling margin expansion

Risks management surfaced:

Supply constraints on DRAM and NAND affecting server ASPs and unit volumesInflationary component costs requiring ongoing pricing actions and partner negotiationsLumpy nature of large-scale AI deals creating revenue timing uncertaintyPotential inventory buildup if second-half AI shipments do not materialize as expectedCompetitive pressure in converging networking and security market

Q&A highlights

Asya Merchant · Citi

How are enterprise budgets sustaining given price inflation, and what gives confidence to provide fiscal 2027 guidance given concerns about a demand cliff? What drives confidence across networking, cloud, and AI?

Management cites durable demand driven by multiple factors: AI deployment use cases, data center buildouts, and enterprise modernization. Pipeline remains multiples of backlog. No evidence of demand cliff; customers prioritizing technology access to avoid being left behind on AI. Company has 1,200+ AI use cases internally with 250+ agentic AI deployments.

Pipeline remains multiples of current backlogBranch orders up 20%+, cloud networking up 30%+1,200 AI use cases internally, 250+ agentic AI deployments at company levelNo demand cliff observed, no order pull-ins seen

Amit Daryanani · Evercore

Is the bigger gating factor to growth customer demand or component availability? Does the outlook reflect actual demand or is there upside if supply constraints ease?

Management states demand equals bookings, which remain strong with record backlog. Pipeline multiples of backlog. Supply availability is the constraint on revenue conversion. No incremental supply factored into FY26 guidance; FY27 assumes current long-term supplier agreements. If supply improves in FY27, potential upside exists, but cost environment expected to remain elevated through 2027.

Record backlog at company levelPipeline multiples of current backlogNo incremental supply factored into FY26 guidanceSupply constraints expected to persist into FY27

Eric Woodring · Morgan Stanley

What specifically changed in the last 90 days to drive cloud and AI from mid-to-high single digit growth expectations to low 20% year-over-year? Which customer cohorts drove this inflection?

Core driver is demand acceleration across multiple categories: traditional server (customer urgency to access products), agentic AI (key driver), storage (transition to Alletra MP, new object/file platforms), virtualization/modernization, and GreenLake platform (net retention near 110%). Customers adopting OPEX model given budget constraints. Combination of infrastructure modernization and AI factors.

Demand acceleration manifested across multiple cloud/AI categoriesAgentic AI identified as key driver of accelerationAlletra MP driving triple-digit growth in both orders and revenueGreenLake net retention rate near 110%

David Vaught · UBS

Strong networking orders but only approaching double-digit normalized growth for FY26 and similar growth for FY27—why no acceleration? What drives margin uplift in networking for FY27 given supply constraints and cost inflation?

Supply chain is the constraint on converting strong orders to revenue; Broadcom component availability (DDR4, DDR5, other constrained components) limits conversion speed. Margin uplift in FY27 driven by full-year benefit of Juniper synergies program, which also helps gross margins by buffering commodity cost impacts.

HPE is largest OEM partner of Broadcom in networkingComponent constraints (DDR4, DDR5) limit conversion speedFY27 margin benefit from full-year Juniper synergies (started at deal close)Juniper synergies benefit both operating and gross margins

Wamsi Mohan · Bank of America

How does the 'scale-up, scale-out, scale-across' opportunity mix evolve for FY27? What drives the growth in free cash flow significantly exceeding EPS growth in FY27?

Opportunity is fairly balanced across four product segments: campus/branch (self-driving network resonating with customers), data center networking (20% enterprise growth driving portfolio synergies, new Tomahawk 6 switch with HelioStack 1.6 terabits launching fall 2027), scale-across with PTX platform for data center interconnect. FCF growth driven by operating profit growth translating to cash flow; FY26 baseline includes Juniper synergy charges not repeated in FY27; share repurchase pulled into early FY27; 2x leverage target by end of FY26 enabling capital returns of ~75% in FY27.

Data center networking enterprise growth: 20%Tomahawk 6 switch: 1.6 terabits, launching fall 2027PTX 10,000 and 12,000 driving data center interconnectOperating profit growth expected to support FCF expansion

Answers to last quarter's watch list

Q2 revenue print vs the $9.6–$10.0B guide and the implied +25.8–31.1% YoY against the $7.63B Q2 FY25 base. Q2 printed $10.68B (+40% YoY, +14.8% QoQ) — $678M above the high end of the guide and well above the implied YoY range. The "memory-driven demand steering biting harder than the AI de-prioritization framing implies" scenario was inverted: AI de-prioritization was retired, and Cloud & AI grew 22.9% YoY.

Resolved positively

Server segment YoY trajectory. Q1 was -2.7%; the watch flagged mid-single-digit declines or worse as plausible. Q2 printed +32.7% YoY — a 35-point swing in one quarter. The AI de-prioritization narrative was wrong about the demand side, even if the margin discipline holds.

Resolved positively

Networking margin sustainability above the low-20s FY guide. Q4 23.0%, Q1 23.7%, Q2 21.6%. The two-quarter trend above 23% reverted to the FY low-20s guide — the first quarter where sustained margin outperformance didn't persist. Whether this is one-quarter mix volatility or scale benefits rolling off is unresolved; the FY networking guide raise to +72–75% reported wasn't accompanied by a networking margin guide change. Status: Resolved negatively (margin reverted; FY guide unchanged)

Memory cost trajectory and customer cancellation activity. No cancellation activity disclosed on the print. Management cited Q&A commentary that "elevated component costs" will persist through 2027 and DDR4/DDR5 are supply-constrained — but framed as a revenue-conversion constraint, not a demand-destruction signal.

Continue monitoring

GAAP EPS bridge. Q2 GAAP EPS of $0.44 vs non-GAAP $0.79 — a $0.35 gap. Q1 was $0.31 vs $0.65 — a $0.34 gap. The bridge has stabilized at roughly $0.34–$0.35 quarterly, suggesting the prior anomalous spread has normalized into recurring Juniper-related amortization and integration costs. Status: Resolved positively (bridge stabilized, no new disclosure anomaly)

ARR progress toward the $3.5B FY26 target. The press release framing does not disclose a Q2 ARR figure. Q4 ARR was $3.2B; the watch required +$100M+ sequential adds. The company didn't disclose ARR on the print.

Continue monitoring

What to watch into next quarter

Q3 FY26 revenue print vs the $11.5–$12.1B guide and the implied +25.8% to +32.4% YoY against the $9.14B Q3 FY25 base. A low-end print would suggest the Q2 inflection is being lapped at a slower rate than implied; a print above the high end would force a second consecutive material FY revenue guide raise.

Networking operating margin vs the FY low-20s guide. Q2 reverted to 21.6% from two quarters above 23%. Watch whether Q3 stabilizes near 22% (consistent with the FY guide) or continues to slip — a sub-21% print would be the first clean evidence that Juniper integration costs scale with revenue growth rather than declining as a percentage.

AI systems orders cadence and enterprise mix. Q2 disclosed $1.8B of AI systems orders described as "more balanced and broad-based." Watch whether the Q3 disclosure quantifies the enterprise share specifically and whether quarterly AI orders remain at or above $1.8B — order growth flattening would call into question the multi-vector enterprise acceleration narrative.

Server revenue growth durability. Q2 was +32.7% YoY. The Q3 base ($4.94B in Q3 FY25) is higher than Q2 FY25's $4.06B, so a sub-25% Q3 server YoY print would still be an acceleration vs Q1's -2.7% but a clear deceleration from Q2 — the read-through to FY27 demand depends on which side of 25% the print lands.

FY26 FCF cadence vs the $3.5B+ floor. YTD FCF is roughly $1.6B (Q1 $0.71B + Q2 $0.915B). Q3 + Q4 needs to generate $1.9B+. Watch whether Q3 FCF lands above $700M — anything below $500M would put the just-raised floor at risk.

2x net leverage target progression. Management committed to reaching 2x by end of FY26, one year ahead of schedule, enabling ~75% capital returns in FY27. Watch for the Q3 net leverage figure — anything materially above 2.5x at quarter-end would stretch the timing of the early FY27 buyback pull-in mentioned in Q&A.

Networks-for-AI cumulative order target. Management raised the cumulative FY26 networks-for-AI order target to at least $2B. Watch Q3 disclosure for the running cumulative figure — a print well above the prior trajectory would force another upward revision into the FY27 framework.

Sources

HPE Q2 FY2026 press release (Form 8-K Exhibit 99.1), filed June 1, 2026 — https://www.sec.gov/Archives/edgar/data/1645590/000164559026000052/ex-991x612026x8k.htm
HPE Q2 FY2026 earnings call prepared remarks and Q&A (referenced for tone analysis, segment color, and forward guidance commentary).

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