HPE's fiscal Q3 2026 revenue rose 33.7% to $12.2B as memory-driven server price increases and a full quarter of Juniper lifted sales, while Cloud & AI operating margin jumped from 7.0% to 17.0%.
Revenue
$12.2B
+33.7% YoY
Net income
$1.5B
+404.9% YoY
Diluted EPS
$1.06
+404.8% YoY
Operating margin
11.4%
Overview
Hewlett Packard Enterprise's fiscal year ends on October 31, so this is fiscal Q3 2026, the three months ended July 31, 2026. Revenue rose 33.7% to a record $12.2 billion and GAAP operating profit rose more than fivefold, from $247 million to $1.39 billion. Two things did most of the work, and neither is ordinary volume growth:
Server prices went up because memory got expensive. HPE's 10-Q says Server revenue rose 35.3% "predominantly due to an increase in the average selling price," which was "primarily driven by commodity price increases, especially memory and SSDs." A worldwide memory-chip shortage, caused by AI data centers soaking up supply, raised component costs, and HPE passed them on to customers.
Juniper Networks is in the numbers for a full quarter this year, but only about one month last year. HPE closed its roughly $13.4 billion cash purchase of Juniper on July 2, 2025, so the year-ago quarter included Juniper for about four weeks. That is most of the reason Networking revenue rose 74.9%.
GAAP net earnings were also lifted by a one-off $444 million gain from selling HPE's last stake in the Chinese networking company H3C in May 2026.
Key metrics
Metric
Fiscal Q3 2026
Fiscal Q3 2025
YoY Change
Revenue
$12,213M
$9,136M
+33.7%
Gross margin (GAAP)
40.1%
29.2%
+10.9 pts
Operating income (GAAP)
$1,393M
$247M
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Gross margin is the share of revenue left after the direct cost of making and delivering the products. Operating margin is the share left after also paying for research, sales and administration, before interest and tax. HPE's non-GAAP figures exclude items such as amortization of acquired intangibles (an accounting charge that spreads the value of Juniper's technology and customer relationships over several years), stock-based pay, deal costs and the H3C gain. Both views are shown because they diverge sharply this quarter.
Why GAAP EPS jumped fivefold
GAAP diluted EPS went from $0.21 to $1.06. HPE's own reconciliation shows how much of that will not repeat: the H3C stake sale produced a $444 million pre-tax gain, worth $0.31 per share. Without it, GAAP EPS would have been roughly $0.75, still more than three times last year. Tax moved the other way: an effective tax rate of 12.6% versus a tax benefit (a negative rate of 6.5%) a year earlier.
The non-GAAP figure, which strips out the gain and the acquisition accounting, rose from $0.44 to $1.11 and beat HPE's own outlook range of $0.88 to $0.93. That is the better guide to the underlying business, and it still more than doubled.
Segments
HPE reorganised its reporting on November 1, 2025: Server, Hybrid Cloud and Financial Services were merged into one Cloud & AI segment, and the Telco and Instant On businesses moved out of Networking into Corporate Investments and Other. Prior-year figures below are restated on the new basis.
Segment
Revenue Q3 FY26
YoY
Operating margin Q3 FY26
Operating margin Q3 FY25
Cloud & AI
$9,042M
+25.4%
17.0%
7.0%
of which Server
$6,766M
+35.3%
n/a
n/a
of which Storage (incl. GreenLake Flex and software)
$1,291M
+10.2%
n/a
n/a
of which Financial Services
$883M
-0.3%
n/a
n/a
Networking
$2,893M
+74.9%
22.0%
22.1%
of which Campus & Branch
$1,442M
+31.0%
n/a
n/a
of which Data Center Networking
$382M
+112.2%
n/a
n/a
of which Security
$281M
+75.6%
n/a
n/a
of which Routing
$788M
+270.0%
n/a
n/a
Corporate Investments and Other
$278M
+3.0%
-24.1%
-7.0%
Segment operating margins exclude amortization of intangibles, stock-based pay, deal costs and restructuring charges, so segment profits add up to more than the GAAP total. HPE does not report margins below segment level.
Cloud & AI: the margin story
The most striking number in the filing is that Cloud & AI revenue rose $1.8 billion while its cost of sales rose only 5.9% ($5,535M to $5,859M). Gross profit therefore rose 89.8%, and segment operating margin went from 7.0% to 17.0%. The 10-Q attributes this to a "favorable mix of higher-margin revenues." In plain terms: on the deals it shipped this quarter, HPE's selling prices rose faster than its own costs, and more of its revenue came from higher-margin products.
That margin may not be fully durable. In the same filing HPE warns that some contracts were "negotiated at prices prior to the recent escalation of component costs," which "have resulted in lower margins than expected, and we expect will continue to negatively impact our margins in the near term." And because Server growth is mostly price rather than more machines shipped, revenue per server would fall if memory prices ease.
Storage grew a more modest 10.2%. Financial Services, HPE's leasing and financing arm, was flat at $883 million.
Networking: separating Juniper from underlying growth
Networking's 74.9% growth is mostly acquisition arithmetic; the 10-Q says the increase was "primarily due to revenue attributable to Juniper Networks." Routing, Juniper's core business, shows the effect most clearly: it was $213 million in fiscal Q3 2025 but only $215 million for the whole first nine months of fiscal 2025, meaning almost all of last year's routing revenue came from the four weeks after the deal closed. This quarter Routing was $788 million.
HPE does not disclose Juniper's standalone revenue for the quarter, so a clean "organic" growth rate (growth excluding the acquisition) cannot be calculated from the filing. What can be said is that Networking's segment operating margin was flat at 22.0% versus 22.1%: Juniper has not diluted profitability, but has not lifted it either, and Networking operating expenses rose 72.6%, roughly in line with revenue. HPE expects at least $600 million of annual cost savings from the Juniper integration by fiscal 2028, requiring about $800 million of investment; it recorded $69 million of Juniper-related acquisition costs this quarter.
This distortion ends next quarter. Fiscal Q4 2025 already included Juniper for the full three months, so from Q4 onward Networking growth rates will be much closer to an underlying reading. HPE's full-year Networking growth guide of 73% to 74% reflects the easy comparison of the first nine months.
Balance sheet and cash: building inventory ahead of demand
Inventory nearly doubled since the fiscal year began, from $6.35 billion to $11.82 billion, and accounts payable (money owed to suppliers) rose from $7.73 billion to $13.73 billion. HPE says it bought more "to secure strategic component supply and fulfill backlog," and its unconditional purchase commitments now total $30.4 billion. Because supplier bills grew about as fast as inventory, suppliers have effectively financed the build so far: nine-month operating cash flow was $4.23 billion versus $454 million a year earlier, which the 10-Q attributes "primarily" to "the timing of vendor payments and higher net cash generated from operations."
That timing benefit reverses when the bills are paid. The risk to watch is the value of $11.8 billion of inventory, much of it components bought at elevated prices, if those prices fall before it is sold.
Total debt fell to $20.2 billion from $22.4 billion at the start of the fiscal year, helped by $1.36 billion of proceeds from the H3C sale. HPE bought back $447 million of stock in the first nine months and has about $3.2 billion of buyback authorization left. HPE also completed the sale of its Telco Solutions business to HCLTech on August 1, 2026, just after quarter end.
Takeaway: HPE's record quarter is real, but it rests on two things that fade: server price increases driven by a memory shortage, and a Juniper comparison against a year-ago quarter that held only one month of the acquired business. The number that matters most is the Cloud & AI margin jump from 7.0% to 17.0%, which shows HPE is currently charging more than its costs are rising. Yet the company itself warns that older fixed-price contracts will squeeze margins, and it holds $11.8 billion of inventory bought at high component prices.
Outlook
Guidance from HPE's September 2, 2026 earnings release:
Fiscal Q4 2026: revenue of $13.9 to $14.8 billion; GAAP diluted EPS of $1.12 to $1.22; non-GAAP diluted EPS of $1.20 to $1.30.
Fiscal 2026 (raised): revenue growth of 34% to 37%; Networking revenue growth of 73% to 74%; GAAP diluted EPS of $2.93 to $3.03; non-GAAP diluted EPS of $3.75 to $3.85; free cash flow of at least $3.75 billion.
Fiscal 2027 framework (raised): revenue growth of 13% to 17%; non-GAAP diluted EPS growth of 16% to 20%; non-GAAP operating margin of 14% to 15%; free cash flow of at least $5.0 billion.
CFO Marie Myers said the order backlog is at "a record level" and that HPE plans to return at least 75% of free cash flow to shareholders in Q4. Neither the release nor the 10-Q gives a dollar figure for AI system orders or backlog, so the size of that backlog cannot be checked from the filings.
Our read: the fiscal 2027 framework says something about margins. Non-GAAP operating margin was 14.2% for the first nine months and 16.2% this quarter; guiding next year to 14% to 15% suggests HPE does not expect this quarter's profitability to hold as the component-price cycle and older contracts play through. Revenue growth slowing from the mid-30s to the mid-teens is largely the Juniper comparison running out. The things to watch in coming quarters are whether Cloud & AI margin stays in the mid-teens once memory prices stabilise, and whether inventory starts turning into cash rather than continuing to grow.
Sources: HPE Form 10-Q for the quarter ended July 31, 2026 (filed September 3, 2026); guidance and non-GAAP reconciliations from the fiscal Q3 2026 earnings release (Form 8-K Exhibit 99.1, September 2, 2026).