Key points for investors:
- Juniper acquisition closed (July); integration progressing and expected to accelerate HPE’s focus on networking, cloud and AI. The combined networking business is already material to profitability and should drive higher-growth, higher-margin revenue mix. Management reiterated at least $600M of cost synergies over the next three years (with ~$200M expected next year).
- Q3 results: total revenue $9.1B (up ~18% YoY, ~11% ex-Juniper). Networking revenue $1.7B (+54% YoY, one month of Juniper); server revenue a record $4.9B (+16% YoY); hybrid cloud $1.5B (+11% YoY).
- AI momentum: record AI backlog of $3.7B and large sequential increase in AI systems orders (nearly doubled quarter-to-quarter). AI systems revenue hit a record $1.6B. Sovereign and enterprise AI orders now represent >50% of cumulative AI orders since Q1 2023.
- Profitability and margins: non-GAAP operating margin (incl. Juniper) 8.5%; networking accounted for nearly 50% of HPE’s non-GAAP consolidated operating profit. Server operating margin improved; management expects total server operating margin around ~10% in Q4 (Q3 server margin was 6.4%, impacted by AI mix and a large deal).
- Recurring revenue and cloud: ARR/run-rate $3.1B (incl. Juniper $590M); reported ARR up 75% YoY (40% organic). GreenLake customers ~44,000 (added ~2,000 this quarter); software and services ARR mix improving (software/services ARR >81% of ARR mix).
- Cash, working capital and capital allocation: inventory significantly reduced (standalone HPE inventory down ~$1.9B sequentially excluding Juniper July balances). Free cash flow improved to roughly $0.7B in the quarter; pro forma net leverage ~3.1x including Juniper, with a target to return to ~2x by 2027 and a stated commitment to investment-grade rating. Share repurchases were paused during the quarter due to possession of material non-public information; dividends continued.
- FY25 and Q4 guidance (updated to include four months of Juniper): FY revenue growth target ~14–16% (constant currency); FY non-GAAP EPS raised to $1.88–$1.92; FY non-GAAP operating margin expected in the upper-9% range; Q4 revenue guide $9.7–$10.1B; Q4 non-GAAP EPS $0.56–$0.60; Q4 networking op margin expected in the low-20% range.
- Cost actions: Catalyst program underway (initial workforce reductions and operational efficiency targets), targeting early realization of savings (aiming for 20% of total savings by FY25 end).
Overall takeaway: HPE reported strong top-line growth, clear AI and networking momentum, significant progress closing and beginning to integrate Juniper, and an explicit focus on converting that deal into near-term accretion, synergy capture, and improved free cash flow and leverage over the medium term.
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