HPE Q3 FY2026 Earnings: A $12.2B Record Built on Juniper and Memory Prices

Hewlett Packard Enterprise spent $13.6 billion on Juniper Networks in July 2025. One year later its balance sheet carries $29.5 billion of goodwill and intangible assets, more than its entire stockholders' equity of $26.6 billion. In the quarter that ended July 31, 2026, the company reported $12.213 billion of net revenue, up 33.7% and the highest in its history, and $1.540 billion of net earnings attributable to HPE, five times the prior year's figure. Two things produced the revenue record, and the company's own filing names both: a networking business that now includes Juniper, and servers that sold for more because memory costs more.

Every third-quarter figure below is from the Form 10-Q that HPE filed on September 3, 2026, one day after its earnings release. HPE's fiscal year ends October 31, so the third quarter is the three months from May 1 to July 31, 2026. The company reports in whole millions of dollars. This quarter is the current picture of the company until it reports its full fiscal year.

The Headline Numbers​

"Net revenue" is the line HPE's statement of earnings calls total net revenue: products, services and financing income. Gross profit is the figure the 10-Q gives in its discussion of results, which is net revenue less cost of products, cost of services and financing cost. The net income row is net earnings attributable to HPE, the line the statement prints before preferred stock dividends. Our ledger and the figures on our company page use that line in every period.

Two movements matter most. Revenue grew by $3,077 million and gross profit by $2,227 million, so 72 cents of each added dollar of revenue reached gross profit. That is unusual for a hardware company, and the next two sections explain where it came from. Then, below the operating line, a $444 million gain appears. It is the sale of HPE's remaining shares in H3C Technologies, and it will not recur because the investment is now gone. Earnings from operations of $1,393 million do not include it. Earnings before taxes do: without the gain they would have been $1,318 million by our subtraction.

Revenue Deep Dive​

HPE reorganized at the start of fiscal 2026. It merged its Server, Hybrid Cloud and Financial Services segments into one called Cloud & AI, and it moved two small businesses out of Networking. It now reports three segments, and it restated the prior year to match.

The three segment figures add up to $2,109 million of earnings from operations, against $1,393 million for the company. HPE does not allocate stock-based compensation, amortization of intangible assets, acquisition and cost-reduction charges or $130 million of corporate costs to its segments.

Networking grew by $1,239 million. The 10-Q gives one reason: the increase was "primarily due to revenue attributable to Juniper Networks". The acquisition closed on July 2, 2025, so the prior-year quarter held about one month of Juniper and this quarter holds three. Routing, a business HPE barely had before the deal, went from $213 million to $788 million. Data center networking more than doubled to $382 million. Campus and branch grew 31.0% to $1,442 million. The filing does not split any of these into Juniper and non-Juniper revenue, and neither do we. The segment margin was 22.0% against 22.1%, so the larger business earns at the same rate as the smaller one did.

Cloud & AI grew by $1,830 million, and nearly all of it was servers: $6,766 million, up 35.3%. Here the filing is precise about the cause, and it is not volume. "Server net revenue increased by $1.8 billion, or 35.3%, predominantly due to an increase in the average selling price. The increase in average selling price was primarily driven by commodity price increases, especially memory and SSDs." Storage grew 10.2% to $1,291 million. Financial Services, the leasing arm, was flat at $883 million.

The earnings release describes the same quarter in terms of demand. It reports "Record revenue of $12.2 billion, up 34% year-over-year", says the result reflects "robust demand across our portfolio" and refers to "our order backlog at a record level". It gives no figure for the backlog or for orders. The 10-Q has a sentence on unit volumes in an unexpected place, the goodwill note: "This has resulted in moderate unit growth in server offerings offset by expansion of average unit selling prices as a result of higher commodity and input costs." Both descriptions can be true. Customers are ordering, and each server costs more. But the 35% growth in server revenue is mostly a price increase, by the company's own account.

On supply the filing is direct. "We are affected by the worldwide shortage in memory components that began to impact the semiconductor industry throughout fiscal year 2026". It says the company expects the constraints "to continue in the medium term". The balance sheet shows how HPE responded, which we come to below.

The Margin Story​

Gross margin rose 10.9 points in a year and 3.6 points in a single quarter. The 10-Q attributes it to "the favorable mix of higher-margin revenues in the Cloud & AI and Networking segments and the acquisition of Juniper Networks." The segment figures show both parts. Networking earns a gross margin of 59.5%, far above the company average, and it is now 24% of revenue against 18% a year earlier. Cloud & AI is the larger surprise: its gross profit rose 89.8% on revenue growth of 25.4%, and its cost of sales rose only 5.9%.

That last number is the pricing story in one line. Server revenue rose $1.8 billion because of higher selling prices, while the segment's cost of sales rose $324 million. When a seller raises prices for a component shortage faster than its own costs rise, margin expands. It can also reverse. For the nine months the filing describes the same effect as "favorable mix of higher-margin revenues, partially offset by higher commodity and input costs", which says the costs are arriving.

Operating expenses grew quickly too, and Juniper is the reason given. Research and development rose 86.2% to $1,158 million, which is 9.5% of revenue against 6.8% a year earlier. Selling, general and administrative expense rose 31.1%. Amortization of intangible assets rose from $126 million to $315 million, which is the acquired Juniper technology and customer relationships being written down each quarter.

HPE also reports a non-GAAP operating profit. The release reconciles it this way:

The bridge's $75 million of acquisition, disposition and other charges is not the $71 million line in the statement of earnings: the release's adjustment also counts amounts recorded on other lines, among them a $3 million credit in cost of sales, and it does not itemize the rest. The adjustments add $586 million, taking the operating margin from 11.4% to 16.2%. At the net level the gap nearly closes. Non-GAAP net earnings attributable to HPE were $1,610 million against $1,540 million under GAAP, because the non-GAAP figure removes the $444 million H3C gain. That is why GAAP diluted earnings per share of $1.06 sit so close to the non-GAAP $1.11.

The One Big Question: What Does the Record Rest On?​

It rests on three things, and each has a line in the ledger.

An acquisition, paid for and still on the books. HPE paid $13,625 million for Juniper, of which $13,386 million was cash, and recorded $7,272 million of goodwill and $6,219 million of intangible assets. Goodwill now stands at $23,907 million and intangible assets at $5,547 million. Together they are 35% of total assets. The financing has been coming down: notes payable, short-term borrowings and long-term debt total $20,244 million, against $22,365 million nine months earlier, and the term loan drawn for the deal was fully repaid by May 2026. The preferred stock issued to help fund it costs $29 million a quarter in dividends.

The goodwill is not all safe. The 10-Q says that for the Cloud & AI reporting unit excluding Financial Services, which holds $13.5 billion of goodwill, "the excess of fair value over carrying amount was 10%." HPE has already written down goodwill twice in five years: $905 million in fiscal 2022 and $1,578 million in fiscal 2025, inside that year's $1,621 million of impairment charges.

A component shortage, which lifted prices and inventory together. Inventory was $11,823 million at July 31, up from $6,352 million nine months earlier. Purchased parts account for most of the increase, $8,419 million against $4,139 million. The filing explains it as "our efforts to secure supply ahead of demand" and warns that "our current efforts to secure memory components and SSDs in advance to meet forecasted demand may further increase our inventory levels in the medium term." Suppliers funded the build. Accounts payable rose from $7,731 million to $13,734 million, which the filing attributes to "higher purchases to secure strategic component supply and fulfill backlog." HPE's own working-capital table puts days of supply in inventory at 145, against 89 at the end of fiscal 2025.

A one-time gain. The $444 million from H3C is a quarter of pre-tax earnings.

Two other system makers closed quarters on the same day, July 31, 2026, and we have both in the library: Dell and HP. HP Inc. is the PC and printer company that HPE's own filings call its former parent.

The quarter-end is shared but the fiscal calendars are not: July 31, 2026 closed the third quarter of fiscal 2026 for HPE and for HP, whose years end October 31, and the second quarter of fiscal 2027 for Dell, whose year ends at the close of January. The Dell and HP figures are from our published analyses of those quarters, and the last row is our division. HPE and Dell earned almost the same operating margin. They got there differently. Dell is nearly four times HPE's size and grew faster. HPE earns a 40.1% gross margin, against 20.9% for Dell by our division of its gross profit by its revenue, and then spends the difference on research, selling and amortization. The row that sets HPE apart is the last one. It holds inventory equal to nearly a full quarter of revenue, twice Dell's ratio.

Tracking an $83.6 Billion Balance Sheet in Plain Text​

An acquisition changes many lines of a company's statements at once, and a press release shows the favorable ones first. Double-entry bookkeeping has no such order. Every caption has to be posted, so goodwill, debt and amortization appear alongside the revenue they bought. Our HPE ledger follows how we model every company.

Here is the third quarter's income statement as it sits in the ledger. In Beancount, income is negative (a credit) and expenses are positive (a debit), and the transaction must sum to zero.

; Check: −12,213 + 5,235 + 1,963 + 116 + 1,158 + 1,962 + 315 + 71 + 75 + −444 + 222 + 1,540 = 0 ✓
2026-07-31 * "Hewlett Packard Enterprise Company" "FY2026Q3 Income Statement"
  Income:Revenue                               -12213 MUSD  ; total net revenue: products 8,730 + services 3,291 + financing income 192
  Expenses:CostOfRevenue                         5235 MUSD  ; cost of products (exclusive of amortization shown separately)
  Expenses:CostOfRevenue                         1963 MUSD  ; cost of services (exclusive of amortization shown separately)
  Expenses:CostOfRevenue                          116 MUSD  ; financing cost — the filing's own line: interest expense on borrowing and funding-related activity associated with Financial Services
  Expenses:ResearchAndDevelopment                1158 MUSD  ; research and development
  Expenses:SellingGeneralAdministrative          1962 MUSD  ; selling, general and administrative
  Expenses:AmortizationOfAcquiredIntangibles      315 MUSD  ; amortization of intangible assets — the filing's own line
  Income:OtherNet                                  71 MUSD  ; acquisition, disposition and other charges — the filing's own line
  Income:OtherNet                                  75 MUSD  ; interest and other, net — the filing's own line, an expense
  Income:OtherNet                                -444 MUSD  ; gain on sale of equity interest — the filing's own line (H3C shares)
  Expenses:IncomeTax                              222 MUSD  ; provision for taxes
  Equity:Adjustments                             1540 MUSD  ; net earnings attributable to HPE offset (accumulated deficit set by balance assertion)

Revenue is one posting equal to the filing's total. Cost of revenue is three postings, one for each line the statement prints. Amortization has its own account, because after an acquisition this size it is a line worth reading by itself. The three lines on Income:OtherNet are the items the statement lists after amortization. Two are charges and one is the H3C gain. They net to income of $298 million this quarter, so they share the income account, and the two charges appear there as debits. The last posting is net earnings attributable to HPE. The $29 million of preferred dividends is a distribution to shareholders, not an expense, so it is a comment in the ledger file and not a posting.

The balance sheet lines that carry the story:

2026-07-31 balance Assets:Current:Inventory                        11823 MUSD  ; inventory
2026-07-31 balance Assets:NonCurrent:LongTermInvestments               0 MUSD  ; investments in equity interests — nil after the May 2026 sale of the remaining H3C shares
2026-07-31 balance Assets:NonCurrent:Goodwill                      23907 MUSD  ; goodwill
2026-07-31 balance Assets:NonCurrent:IntangibleAssets               5547 MUSD  ; intangible assets, net
2026-07-31 balance Liabilities:Current:AccountsPayable            -13734 MUSD  ; accounts payable
2026-07-31 balance Liabilities:NonCurrent:LongTermDebt            -17343 MUSD  ; long-term debt

The second line is the end of a long story. HPE held an equity stake in H3C that stood at $2,197 million in fiscal 2023. It sold most of it in September 2024 for a $733 million gain, and the rest in May 2026 for the $444 million gain in this quarter. The fiscal 2024 10-K lists the proceeds of that first sale among the planned sources of funding for Juniper. One detail in the equity section is worth knowing: the balance sheet prints a dash on the preferred stock line, because the stock's par value of $0.01 a share is less than a million dollars in total. The $1,462 million it raised sits in additional paid-in capital. Our ledger asserts the preferred account at zero and says why.

The Multi-Year Arc​

Gross margin is net revenue less cost of products, cost of services and financing cost, divided by net revenue. Goodwill and intangibles, and total debt (notes payable and short-term borrowings plus long-term debt), are each the sum of two balance sheet captions.

For four years HPE barely grew. Revenue went from $27.8 billion to $30.1 billion, about 8% in three years, while gross margin drifted between 33% and 35%. Net earnings moved far more than the business did, and special items explain most of it. Fiscal 2021's $3,427 million included a $2,351 million litigation judgment. Fiscal 2022's $868 million came after a $905 million goodwill impairment. Fiscal 2024's $2,579 million included the first H3C gain of $733 million.

Fiscal 2024 is also when the balance sheet began preparing for Juniper. Debt rose by $5.9 billion and cash reached $14.8 billion, both raised ahead of a deal that had not yet closed. Fiscal 2025 is the year it closed. Goodwill and intangibles rose by $11.5 billion, debt by a further $4.1 billion, and cash fell to $5.8 billion. That year's income statement took $1,621 million of impairment charges on the older Hybrid Cloud business, and net earnings attributable to HPE were $57 million. After $116 million of preferred dividends, common stockholders had a net loss of $59 million.

The third quarter of fiscal 2026 is the first that shows the combined company in a strong market. Its gross margin of 40.1% is nearly ten points above fiscal 2025's and five above any year in the table.

The Verdict: Bull vs. Bear​

Bull Case

• Gross margin reached 40.1%, and 72 cents of each added dollar of revenue became gross profit. Networking earns a 59.5% gross margin and is now 24% of revenue.
• The Networking segment held its operating margin at 22.0% with three full months of Juniper in it, and the filing expects "at least $600 million in cost savings from synergies by fiscal 2028".
• Debt is falling. Borrowings are down $2.1 billion in nine months and the acquisition term loan is repaid, while cash rose to $6.2 billion.
• Cash followed earnings this quarter. Cash flow from operations was $1,641 million against net earnings attributable to HPE of $1,540 million.
• The release raised the fiscal 2026 revenue growth outlook to 34% to 37% and guides the fourth quarter to $13.9 billion to $14.8 billion, with the order backlog described as a record.

Bear Case

• Server growth is price, not units. The 10-Q attributes it to "commodity price increases, especially memory and SSDs" and describes unit growth as moderate. Memory prices have cycles, and a price-led margin can fall the way it rose.
• The release's demand language, "robust demand" and a record backlog, comes with no order or backlog figure. The filing's numbers support higher prices and a larger company; they do not show volume.
• Inventory nearly doubled to $11.8 billion, 145 days of supply, bought at shortage prices. If component prices fall before those parts ship, the write-down lands in cost of sales. The quarter already carried a $158 million provision for excess or obsolete inventory.
• Goodwill and intangibles of $29.5 billion exceed stockholders' equity of $26.6 billion, and the largest goodwill unit has a 10% cushion over its carrying amount after two impairments in five years.
• $444 million of the quarter's $1,762 million pre-tax earnings is a gain that cannot repeat, and the equity income H3C used to contribute ($245 million in fiscal 2023) is gone with it.

Our Take

This was a very good quarter, and the 10-Q explains why more candidly than the release does. Networking grew because HPE bought Juniper. Servers grew because memory got expensive and HPE passed it on, and then some. Neither is a criticism: the acquisition is delivering the margin it was bought for, and pricing through a shortage is what a well-run hardware company does. But neither is the "surging customer demand" of the release either. We think the durable part of the record is networking, which now earns steady 22% margins on $2.9 billion a quarter. The less durable part is a Cloud & AI margin that went from 7.0% to 17.0% in a year on component prices. The number to watch is the one HPE has just doubled: $11.8 billion of inventory, most of it parts. If it turns into shipments at these prices, fiscal 2027 starts from a much higher base. If memory prices turn first, the inventory will be worth less than HPE paid for it and the margin gain will reverse.