HPE tops fiscal third-quarter revenue expectations, shares up

Investing.com -- Shares of Hewlett Packard Enterprise Co (NYSE:HPE) climbed over 2% in premarket trading Tuhrsday after the company delivered a solid fiscal third-quarter beat. The company’s fourth-quarter guidance fell short of Wall Street expectations at the midpoint. 

The company reported adjusted earnings per share of $0.44, exceeding estimates by $0.02, while revenue grew 19% year-over-year to $9.14 billion, far surpassing the $8.35 billion consensus. GAAP EPS was $0.21, reflecting acquisition and restructuring-related charges.

Free cash flow came in at $790 million, an increase of $121 million from the same quarter a year ago, while operating cash flow reached $1.3 billion. Annualized revenue run-rate hit $3.1 billion, up 77% year-over-year, highlighting strength in HPE’s subscription-based offerings.

“HPE delivered record-breaking revenue and improved profitability this quarter as we marked a major milestone by closing our acquisition of Juniper Networks,” said Antonio Neri, president and CEO. “Customer demand stretched broadly across our portfolio and was particularly strong in our Server and Networking segments.”

Server revenue rose 16% to $4.9 billion, while networking revenue, now including Juniper results, jumped 54% to $1.7 billion. Hybrid Cloud grew 12% to $1.5 billion, while Financial Services totaled $886 million, showing flat performance in constant currency.

Bank of America analysts reiterated their Buy rating on HPE shares after the results as they "see upside from Juniper synergies, structurally higher margins and upside from AI."

Separately, Morgan Stanley analysts said the results "were modestly ahead of our expectations with relative strength in Servers and Networking."

"Keeping our eyes on AI server margins, but believe tonight’s results set up positively for HPE’s A-Day next month, a key stock catalyst," they added.

The company guided Q4 adjusted EPS to a range of $0.56 to $0.60, below the $0.59 consensus at the midpoint, and projected revenue between $9.7 billion to $10.1 billion, also falling slightly short of the $10.1 billion estimate at the midpoint.

“In Q3, we delivered on our commitments, generating record revenue, as well as improved sequential operating profit with major contributions from our three largest segments,” said Marie Myers, executive vice president and CFO. She noted that the Juniper deal already boosted results, with further upside expected from integration and cost synergies.

While operational performance remains robust, the disappointing midpoint guidance signaled caution heading into year-end, suggesting potential headwinds in execution or integration. That note of conservatism appeared to outweigh otherwise strong metrics in the eyes of investors.

(Luke Juricic contributed to this report.)