HPE shares slide 7.8% despite Q3 beat and raised guidance

Hewlett Packard Enterprise posted fiscal Q3 revenue of $12.2 billion, up 33.7 percent year over year, yet shares slid 7.8 percent after hours.

BofA Securities analyst Wamsi Mohan, who lifted his price target to $82 days before the report, had expected "a strong quarter driven by strength in storage and industry standard servers." Fifteen of 23 analysts rate the stock a buy, with a mean target of $65.28, according to Investing.com.

Diluted earnings of $1.06 topped the $0.94 consensus, extending a run of five straight quarterly EPS surprises. Gross profit reached $4.9 billion and operating profit $1.4 billion, while net income attributable to common shareholders rose to $1.5 billion. Cash from operations increased to $1.6 billion, lifting cash and equivalents to $6.2 billion.

The after-hours decline leaves the stock consolidating after a roughly 120 percent year-to-date advance that had already priced in the beat. Management raised full-year free cash flow guidance to at least $3.5 billion from $2 billion, and the AI systems backlog stood at $5.9 billion entering the quarter.

AI backlog and Juniper integration

The networking business, expanded by the mid-2025 Juniper Networks acquisition, drove reported revenue growth of more than 150 percent year over year in recent quarters. Normalized networking revenue grew 10 percent last quarter, with campus and branch orders in the upper 20 percent range, according to 24/7 Wall St.

Chief Executive Antonio Neri has flagged DRAM and NAND inflation as the binding constraint on converting orders into revenue. Management guided to reach 2x net leverage by fiscal year-end, one year early, unlocking a 75 percent free cash flow payout policy.

The market reaction suggests investors had already priced in the beat after the stock's 120 percent advance this year, leaving little cushion for disappointment. The fiscal Q4 report will test whether the AI systems backlog and Juniper synergies can keep compounding at the pace that drove the rally.

This article is for informational purposes only and does not constitute investment advice.