HPE (NYSE: HPE) Posts Record Q3 Revenue of $12.2B, Raises FY2026 and FY2027 Outlook

Hewlett Packard Enterprise (NYSE: HPE) reported record fiscal third-quarter revenue of $12.2 billion for the period ended July 31, 2026, up 33.7% year over year, while adjusted EPS of $1.11 exceeded the $0.94 analyst consensus by 18.1%. The company raised its full-year and fiscal 2027 financial frameworks, citing record orders and an expanding AI server backlog. Shares gained 5.04% on Thursday, September 3, while the S&P 500 advanced 1.05%.

Q3 Fiscal 2026 Results

• Revenue: $12.2 billion, up 33.7% year over year from $9.1 billion in Q3 fiscal 2025.
• Adjusted EPS: $1.11, up from $0.44 in the prior-year period, versus the $0.94 consensus estimate; GAAP EPS of $1.06, up from $0.21 a year ago.
• GAAP operating income: $1.39 billion, up 464.0% year over year; non-GAAP operating income of $1.98 billion, up 155.0% year over year.
• Non-GAAP operating margin: 16.2%, up 7.7 percentage points year over year; GAAP operating margin of 11.4%, up 8.7 percentage points year over year.
• Operating cash flow: $1.6 billion, up $0.3 billion from the prior-year period; free cash flow of $1.0 billion, up $0.2 billion year over year.
• Capital returns: $324 million returned to shareholders via dividends and share repurchases in the quarter.

What Drove the Results

Adjusted EPS of $1.11 beat the $0.94 consensus by 18.1%, and revenue of $12.21 billion exceeded the prior-year period by 33.7%, with no divergence between revenue and operating income direction. The strongest segment contribution came from Networking, where revenue reached $2.9 billion, up 74.9% year over year. Within that segment, Routing revenue grew 270.0% to $788 million and Data Center Networking revenue increased 112.2% to $382 million.

The Cloud and AI segment generated $9.0 billion in revenue, up 25.4% year over year, with operating profit margin expanding to 17.0% from 7.0% in the prior-year period. Server revenue within Cloud and AI rose 35.3% to $6.8 billion, while Storage revenue grew 10.2% to $1.3 billion. The sharp operating leverage across both segments drove GAAP gross margin to 40.1%, up 1,090 basis points year over year, and non-GAAP gross margin to 40.4%, up 1,050 basis points year over year.

The GAAP-to-adjusted EPS gap of $0.05 reflects recurring non-cash adjustments including amortization of intangible assets, stock-based compensation, and acquisition-related charges. A $444 million gain on the sale of an equity interest also appeared in the GAAP income statement for the quarter.

Forward Guidance and Raised Outlook

HPE raised its fiscal 2026 full-year revenue growth outlook to a range of 34% to 37%, and lifted its Networking segment revenue growth expectation to 73% to 74%. Full-year non-GAAP diluted EPS guidance was raised to $3.75 to $3.85, with GAAP diluted EPS guidance raised to $2.93 to $3.03. Full-year free cash flow guidance was raised to at least $3.75 billion. For the fiscal fourth quarter, HPE guided revenue of $13.9 billion to $14.8 billion, with non-GAAP diluted EPS of $1.20 to $1.30 and GAAP diluted EPS of $1.12 to $1.22.

The company also raised its fiscal 2027 framework: revenue growth of 13% to 17%, non-GAAP diluted EPS growth of 16% to 20%, non-GAAP operating margin of 14% to 15%, and free cash flow of at least $5.0 billion. HPE stated it plans to return at least 75% of free cash flow to shareholders in the fiscal fourth quarter. The Board declared a quarterly cash dividend of $0.1425 per share, payable on or about October 16, 2026, to shareholders of record as of September 17, 2026.

Wall Street View

Analyst consensus on HPE stood at 13 Buy and 6 Strong Buy recommendations as of September 1, 2026, with 9 Hold ratings and no Sell or Strong Sell ratings, reflecting broad constructive positioning ahead of these results. The scale of the guidance raise, particularly the fiscal 2027 framework, gives analysts incremental room to revisit price targets in the days following the report.

Investor Takeaway

The combination of a record revenue quarter, 18.1% adjusted EPS beat, and raised guidance across fiscal 2026 and fiscal 2027 frames HPE as a beneficiary of sustained enterprise AI infrastructure spending, with operating leverage now clearly visible in margin expansion. The fiscal Q4 revenue midpoint of $14.35 billion implies sequential acceleration, and the commitment to return at least 75% of free cash flow in Q4 adds a shareholder-return dimension that was not a feature of prior quarters. The fiscal 2027 free cash flow target of at least $5.0 billion, if achieved, would represent a substantial step up from the raised fiscal 2026 floor of $3.75 billion and may become the primary valuation anchor for longer-term investors.