Hewlett Packard Enterprise’s shares fell 5.6% to $48.93 in pre-market trading after the company posted strong fiscal third-quarter results but cautioned that operating margins may soften in the fourth quarter.
The company reported adjusted earnings per share of $1.11, exceeding analyst expectations of $0.93, marking the first time HPE has surpassed $1 in a single quarter. Revenue reached $12.21 billion, up 34% year-over-year and above the $11.9 billion forecast. Non-GAAP gross margin hit a record 40%, reflecting efficiency gains and pricing power.
However, HPE noted that supply chain constraints—specifically shortages of DDR5, DDR4, NAND flash, and wafer capacity—limited its ability to convert order growth into revenue. Order intake surged 42% year-over-year, outpacing revenue growth and underscoring persistent bottlenecks in key components.
Management indicated that fourth-quarter operating margins may decline due to a shift toward higher-margin AI systems and evolving pricing dynamics, suggesting the current gross margin level may not be sustainable in the near term. Despite this, HPE maintained its raised guidance for fiscal 2026 and 2027, signaling confidence in its long-term trajectory.
Analysts at Deutsche Bank upgraded their price target on HPE to $68 from $62, retaining a Buy rating. The company also announced an expanded partnership with Oracle to deploy HPE Juniper Networking across Oracle’s AI data centers, further embedding its infrastructure in enterprise AI deployments.
The broader U.S. equity market showed little directional movement, with the S&P 500, Dow Jones, and Nasdaq trading modestly higher amid mixed sentiment. HPE’s stock remains well above its 52-week low of $19.84 but remains below the recent high of $64.25.
