Hewlett Packard Enterprise Co

Previous wording

The financial discussion and analysis in the following MD&A compares the three months ended January 31, 2025 to the comparable prior-year period and where appropriate, as of January 31, 2025, unless otherwise noted.

Current wording

The financial discussion and analysis in the following MD&A compares the three and six months ended April 30, 2025 to the comparable prior-year period and where appropriate, as of April 30, 2025, unless otherwise noted.

Previous wording

During the first three months of fiscal 2025, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted our operations, as follows:

Current wording

During the first six months of fiscal 2025, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted our operations, as follows:

Previous wording

Macroeconomic Uncertainty: The effect of the evolving macroeconomic environment has been impacting industry-wide demand, as customers take longer to work through prior orders and have been adopting a more conservative approach to discretionary IT spending. This has resulted in uneven demand across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own. Additionally, there is growing uncertainty surrounding U.S. trade policy and import/export regulations, which may, in turn, result in trading partners enacting reciprocally restrictive trade policies and measures. These may enhance global trade uncertainty and contribute to higher prices of components and end products and services. We expect such mixed macroeconomic environment to largely continue and possibly limit revenue and margin growth in the near term.

Current wording

Macroeconomic Uncertainty: The evolving macroeconomic environment has impacted industry-wide demand, as customers take longer to work through prior orders and have been adopting a more strategic approach to discretionary IT spending. This has resulted in uneven demand across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own. Additionally, there is growing uncertainty surrounding the tariff environment and import/export regulations, which has resulted in trading partners enacting reciprocally restrictive trade policies and measures. These have enhanced global trade uncertainty and contributed to higher prices of components and end products and services. We expect such mixed macroeconomic environment to largely continue and possibly limit revenue and margin growth in the near term.

Previous wording

Supply Chain: We experienced supply chain constraints for certain components, including graphics processing units, (“GPUs”) and accelerated processing units. Though, they have since eased, in part due to increased availability of supply and lower material and logistics costs, the future is uncertain due to forthcoming shifts in U.S. trade policy, which may impact our ability to import and export components and finished products and the costs of doing so. Logistics costs decreased from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network; however, these costs may rise with the aforementioned changes in trade policies. We have, in fact, been experiencing higher-than-normal inventory levels, primarily due to customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related orders; we expect this trend to continue in the medium term. We have experienced, and expect to continue experiencing, rising input component costs, which may exacerbate due to the global trade uncertainties referenced above, and a competitive pricing environment, which may impact our financial results. We plan to mitigate the impact of these dynamics through continued disciplined cost and pricing management and supply chain diversification.

Current wording

Supply Chain: We experienced supply chain constraints for certain components, including graphics processing units, (“GPUs”) and accelerated processing units. Though, they have since eased, in part due to increased availability of supply and lower material and logistics costs, the future remains uncertain due to continuous shifts in U.S. trade policy, which have thus far impacted our ability to import and export components and finished products and the costs of doing so. Additionally, logistics costs may rise with the aforementioned changes in trade policies. We have been experiencing higher-than-normal inventory levels, primarily due to customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related orders; we expect this trend to continue in the medium term. We have experienced, and expect to continue experiencing, rising input component costs due to the global trade uncertainties referenced above and a competitive pricing environment, all of which may impact our financial results. We plan to mitigate the impact of these dynamics through continued disciplined cost and pricing management and supply chain diversification.

Previous wording

Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. To date, 59 countries have enacted portions, or all, of the OECD proposal and a further 7 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules. Where enacted, the rules are effective for us beginning in fiscal 2025. Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes. We do not expect a material impact to our fiscal 2025 results.

Current wording

Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. To date, 59 countries have enacted portions, or all, of the OECD proposal and a further 6 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules. Where enacted, the rules are effective for us in fiscal 2025. Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes. We do not expect a material impact to our fiscal 2025 results.

Previous wording

The Internal Revenue Service (“IRS”) is conducting audits of our fiscal 2017 through 2022 U.S. federal income tax returns. Subsequent to the close of the first quarter of fiscal 2025, the IRS issued a Revenue Agent Report (“RAR”) with which we agreed. The final determination will not result in a material impact to our financial statements. The audit cycle for fiscal 2017 through 2019 will be considered effectively settled during the second quarter of fiscal 2025 resulting in a reduction of existing unrecognized tax benefits of approximately $358 million. A significant majority of these unrecognized tax benefits relates either to adjustments to foreign tax credits that carry a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which will affect our effective tax rate. The IRS audit for fiscal 2020 through 2022 remains open.

Current wording

The Internal Revenue Service (“IRS”) is conducting audits of our fiscal 2020 through 2022 U.S. federal income tax returns. In the second quarter of fiscal 2025, the IRS issued a Revenue Agent Report (“RAR”) regarding the audit of our fiscal 2017 through 2019 U.S. federal income tax returns with which we agreed. The audit cycle for fiscal 2017 through 2019 is now considered effectively settled, resulting in a reduction of existing unrecognized tax benefits of approximately $340 million, which did not result in a material impact to our Condensed Consolidated Statement of Earnings and our Condensed Consolidated Balance Sheet. The resolution of the audit resulted in the release of tax reserves that were predominantly related either to adjustments to foreign tax credits that carried a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which affected our effective tax rate.

Previous wording

Other Trends and Uncertainties: The impacts ofgeopolitical volatility (including the ongoing conflict in the Middle East and in Ukraine and the relationship between China and the U.S.) may impact our operations, financial performance, and ability to conduct business in some non-U.S. markets. We have also entered into contracts for the sale of certain products and services that reflect heavier-than-normal discounting due to competitive pressures, which have resulted in lower margins than expected, and we expect will continue to negatively impact our margins in the near to medium term. We are monitoring and seeking to mitigate these risks with adjustments to our manufacturing, supply chain, distribution networks, pricing and discounting practices. We remain focused on executing our key strategic priorities, building long-term value creation for our stakeholders, and addressing our customers’ needs while continuing to make prudent decisions in response to the environment.

Current wording

Other Trends and Uncertainties: The impacts ofgeopolitical volatility (including the ongoing conflict in the Middle East and in Ukraine and the relationship between China and the U.S.) may impact our operations, financial performance, and ability to conduct business in some non-U.S. markets. We have, in the past, entered into contracts for the sale of certain products and services that reflect heavier-than-normal discounting due to competitive pressures, which have resulted in lower margins than expected, and we expect will continue to negatively impact our margins in the near term. We are monitoring and seeking to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks, as well as our pricing and discounting practices. We remain focused on executing our key strategic priorities, building long-term value creation for our stakeholders, and addressing our customers’ needs while continuing to make prudent decisions in response to the environment.

Previous wording

For further information about the Merger, refer to Note 8, “Acquisitions and Dispositions” to the Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report, and for further discussion about the risks related to the Merger, see the section titled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report.

Current wording

For further information about the Merger, refer to Note 8, “Acquisitions and Dispositions” to the Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report, and for further discussion about the risks related to the Merger, see the section titled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2025.

Previous wording

The estimates of the duration of the Program, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual amounts may differ materially from estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Program.

Current wording

The estimates of the duration of the Program, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual amounts may differ materially from estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Program. In connection with the Program, we incurred charges of $146 million for the three and six months ended April 30, 2025.

Previous wording

Net revenue of $7.9 billion represented an increase of 16.3% (increased 17.2% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment and higher unit volume in the Hybrid Cloud segment. The gross profit margin of 29.2% (or $2.3 billion), represents a decrease of 7.2 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments. The operating profit margin of 5.5% represents a decrease of 2.3 percentage points from the prior-year period primarily due to the aforementioned gross margin decline moderated by lower operating expenses.

Current wording

Net revenue of $7.6 billion represented an increase of 5.9% (increased 7.1% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment and higher unit volume and AUPs in the Hybrid Cloud segment. The gross profit margin of 28.4% (or $2.2 billion), represents a decrease of 4.6 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments. The operating profit margin of (14.5)% represents a decrease of 20.4 percentage points from the prior-year period primarily due to the impairment of goodwill.

Previous wording

(1)For purposes of calculating diluted net EPS, the preferred stock dividends are added back to the net earnings attributable to common stockholders and the diluted weighted average share calculation assumes the preferred stock was converted at issuance or as of the beginning of the reporting period.

Current wording

(1)For purposes of calculating diluted net (loss) earnings per share (“EPS”), the preferred stock dividends are added back to the net (loss) earnings attributable to common stockholders and the diluted weighted average share calculation assumes the preferred stock was converted at issuance or as of the beginning of the reporting period. For GAAP diluted net EPS, the effect of employee stock plans and preferred stock is excluded when calculating diluted net loss per share as it would be anti-dilutive.

Previous wording

The 45% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud, Server and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, Server aaS and Intelligent Edge aaS activity.

Current wording

The 46% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud, Server and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, Server aaS and Intelligent Edge aaS activity.

Previous wording

Returning capital to our stockholders remains an important part of our capital allocation framework, which also consists of strategic investments. The holders of HPE common stock are entitled to receive dividends when and as declared by the Board of Directors. Our ability to pay dividends will depend on many factors, such as its financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in its debt, industry practice, legal requirements, regulatory constraints, and other factors that the Board of Directors deems relevant. Furthermore, so long as any share of our Preferred Stock remains outstanding, no dividend on shares of common stock (or any other class of stock junior to the Preferred Stock) shall be declared or paid unless all accumulated and unpaid dividends for all preceding dividend periods for the Preferred Stock have been declared and paid in full in cash, shares of the Company’s common stock or a combination thereof, or a sufficient sum of cash or number of shares of its common stock has been set apart for the payment of such dividends, on all outstanding shares of the Preferred Stock. During the first quarter of fiscal 2025, we paid a quarterly dividend of $0.13 per share of common stock. On March 6, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about April 18, 2025, to our holders of record as of the close of business on March 21, 2025. We also declared a cash dividend of $0.953125 per share of our 7.625% Series C Mandatory Convertible Preferred Stock, which was paid on March 1, 2025, to holders of record as of the close of business on February 15, 2025.

Current wording

Returning capital to our stockholders remains an important part of our capital allocation framework, which also consists of strategic investments. The holders of HPE common stock are entitled to receive dividends when and as declared by the Board of Directors. Our ability to pay dividends will depend on many factors, such as its financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in its debt, industry practice, legal requirements, regulatory constraints, and other factors that the Board of Directors deems relevant. Furthermore, so long as any share of our Preferred Stock remains outstanding, no dividend on shares of common stock (or any other class of stock junior to the Preferred Stock) shall be declared or paid unless all accumulated and unpaid dividends for all preceding dividend periods for the Preferred Stock have been declared and paid in full in cash, shares of the Company’s common stock or a combination thereof, or a sufficient sum of cash or number of shares of its common stock has been set apart for the payment of such dividends, on all outstanding shares of the Preferred Stock. During the second quarter of fiscal 2025, we paid a quarterly dividend of $0.13 per share of common stock. On June 3, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about July 17, 2025, to our holders of record as of the close of business on June 18, 2025. We also declared a cash dividend of $0.953125 per share of our 7.625% Series C Mandatory Convertible Preferred Stock, which was paid on June 1, 2025, to holders of record as of the close of business on May 15, 2025.

Previous wording

As of January 31, 2025, we had a remaining authorization of approximately $0.8 billion for future share repurchases.

Current wording

As of April 30, 2025, we had a remaining authorization of approximately $0.7 billion for future share repurchases.

Previous wording

Three months ended January 31, 2025 compared with the three months ended January 31, 2024

Current wording

Three and six months ended April 30, 2025 compared with the three and six months ended April 30, 2024

Previous wording

For the three months ended January 31, 2025, total net revenue of $7.9 billion represented an increase of $1.1 billion, or 16.3% (increased 17.2% on a constant currency basis). U.S. net revenue increased by $224 million, or 9.8%, to $2.5 billion, and net revenue from outside of the U.S. increased by $875 million, or 19.6%, to $5.3 billion.

Current wording

For the three months ended April 30, 2025, total net revenue of $7.6 billion represented an increase of $0.4 billion, or 5.9% (increased 7.1% on a constant currency basis). U.S. net revenue increased by $155 million, or 6.0%, to $2.7 billion, and net revenue from outside of the U.S. increased by $268 million, or 5.8%, to $4.9 billion.

Previous wording

•Corporate Investments and Other net revenue decreased $41 million, or 17.2%, primarily due to the divestiture of the Communications Technology Group (“CTG”) business

Current wording

•Corporate Investments and Other net revenue decreased $58 million, or 23.0%, primarily due to the divestiture of the Communications Technology Group (“CTG”) business

Previous wording

For the three months ended January 31, 2025, the total gross profit margin of 29.2% represents a decrease of 7.2 percentage points as compared to the respective prior year period. The decrease for the three months ended January 31, 2025, was primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments.

Current wording

For the three and six months ended April 30, 2025, the total gross profit margin of 28.4% and 28.8%, respectively, represents a decrease of 4.6 and 5.8 percentage points, respectively, as compared to the respective prior year periods. The decrease for the three and six months ended April 30, 2025, was primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments.

Previous wording

For thethree months ended January 31, 2025, R&D expense decreased by $107 million, or 18.4%, primarily due to higher mix of capital versus expense investment and lower employee costs, which contributed 10.8 and 7.4 percentage points, respectively, to the change.

Current wording

For thesix months ended April 30, 2025, R&D expense decreased by $157 million, or 13.4%, primarily due to higher mix of capital versus expense investment, which contributed 11.9 percentage points to the change.

Previous wording

For the three months ended January 31, 2025, acquisition, disposition and other charges increased by $23 million or 53.5%, primarily due to costs incurred in connection with the divestiture of CTG and the proposed acquisition of Juniper Networks.

Current wording

For the six months ended April 30, 2025, acquisition, disposition and other charges increased by $32 million, or 36.0%, primarily due to costs incurred in connection with the divestiture of CTG and the proposed acquisition of Juniper Networks.

Previous wording

For the three months ended January 31, 2025, interest and other, net income increased by $127 million, or 144.3%, primarily due to a gain on equity investments recognized in the current period compared to a loss on equity investments in the prior-year period, an increase in net interest income, and an increase in the non-service net periodic benefit credit.

Current wording

For the six months ended April 30, 2025, interest and other, net income increased by $188 million, or 170.9%, primarily due to an increase in net interest income, a gain on equity investments recognized in the current period compared to a loss on equity investments in the prior-year period, and an increase in the non-service net periodic benefit credit.

Previous wording

For thethree months ended January 31, 2025, earnings from equity interests decreased $29 million, or 63.0%, primarily due to lower net income earned by H3C as a result of the disposition of 30% of the total issued share capital of H3C.

Current wording

For thethree and six months ended April 30, 2025, earnings from equity interests decreased $17 million, or 40.5%, and $46 million, or 52.3%, respectively, primarily due to lower earnings from our equity interest in H3C as a result of the disposition of 30% of the total issued share capital of H3C.

Previous wording

For the three months ended January 31, 2025 and 2024, we recorded income tax expense of $106 million and $96 million, respectively, which reflects an effective tax rate of 14.5% and 19.9%, respectively. Our effective tax rate generally differs from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from our operations in lower tax jurisdictions throughout the world but is also impacted by discrete tax adjustments during each fiscal period.

Current wording

For the three months ended April 30, 2025 and 2024, we recorded income tax expense of $5 million and $131 million, respectively, which reflects an effective tax rate of (0.5)% and 29.4%, respectively. For the six months ended April 30, 2025 and 2024, we recorded income tax expense of $111 million and $227 million, respectively, which reflects an effective tax rate of (35.6)% and 24.5%, respectively. For the three and six months ended April 30, 2025, our effective tax rate generally differs from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from our operations in lower tax jurisdictions throughout the world and the effects of the non-deductible goodwill impairment. For the three and six months ended April 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% due to the geographic mix of forecasted earnings and net unfavorable permanent differences from U.S. income tax on non-U.S. earnings.

Previous wording

(2)Segment earnings (loss) from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, transformation costs, and acquisition, disposition and other charges.

Current wording

(2)Segment earnings (loss) from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, transformation (credit) costs, H3C divestiture related severance costs, severance costs related to the cost reduction program, acquisition, disposition and other charges and impairment of goodwill.

Previous wording

Server net revenue increased by $963 million, or 28.9% (increased 29.9% on a constant currency basis), primarily due to a $945 million, or 37.8%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $1,006 million, or 40.2%, partially offset by unfavorable currency fluctuations of $32 million, or 1.3%, and a decrease in net unit volume of $29 million, or 1.2%.

Current wording

Server net revenue increased by $1,180 million, or 16.5% (increased 17.5% on a constant currency basis), primarily due to a $1,180 million, or 21.5%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $1,607 million, or 29.3%, partially offset by a decrease in net unit volume of $377 million, or 6.9%, and unfavorable currency fluctuations of $50 million, or 0.9%.

Previous wording

Server earnings from operations as a percentage of net revenue decreased 3.3 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in costs of products and services as a percentage of net revenue was primarily due to competitive pricing pressure and input cost increases. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

Current wording

Server earnings from operations as a percentage of net revenue decreased 4.1 percentage points due to an increase in costs of products as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in cost of products as a percentage of net revenue was primarily due to competitive pricing pressure, input cost increases, and higher mix of lower margin products. The decrease in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue increase while total operating expenses remained relatively flat.

Previous wording

Hybrid Cloud net revenue increased by $132 million, or 10.4% (increased 11.1% on a constant currency basis), primarily due to an increase in unit volume, partially offset by lower AUPs. Hybrid Cloud product revenue increased by $53 million, or 7.7%, primarily due to a unit volume increase of $36 million, or 5.3%, led by storage products and higher AUPs of $13 million or 1.9%. Hybrid Cloud services revenue increased by $79 million, or 13.6%, primarily due to a unit volume increase of $141 million, or 24.2%, led by private cloud and storage services. This increase was partially offset by lower AUPs of $63 million, or 10.8%, led by storage services.

Current wording

Hybrid Cloud net revenue increased by $303 million, or 11.9%, (increased 12.8% on a constant currency basis) primarily due to an increase in unit volume. Hybrid Cloud product revenue increased by $159 million, or 11.7%, primarily due to a unit volume increase of $132 million, or 9.7%, led by private cloud products. Hybrid Cloud services revenue increased by $144 million, or 12.0%, primarily driven by higher services contribution from private cloud products and storage subscription services.

Previous wording

Intelligent Edge earnings from operations as a percentage of net revenue decreased 2.0 percentage points primarily due to an increase in cost of products and services as a percentage of net revenue, partially offset by a decrease in operating expenses as a percentage of net revenue. The increase in cost of product and services as a percentage of net revenue was primarily due to competitive pricing pressure. The decrease in operating expenses as a percentage of net revenue primarily due to our cost containment measures.

Current wording

Intelligent Edge earnings from operations as a percentage of net revenue increased 1.8 percentage points primarily due to a decrease in operating expenses as a percentage of net revenue, partially offset by an increase in cost of products and services as a percentage of net revenue. The increase in cost of product and services as a percentage of net revenue was primarily due to competitive pricing pressure. The decrease in operating expenses as a percentage of net revenue primarily due to our cost containment measures.

Previous wording

Intelligent Edge net revenue decreased by $55 million, or 4.6% (decreased 4.3% on a constant currency basis). Product revenue decreased by $95 million, or 10.3%, led by lower AUPs of $168 million, or 18.2%, partially offset by higher volume and product mix effect of $76 million, or 8.2%. The product revenue decrease was primarily led by switching products due to higher backlog reduction in prior-year period, partially offset by an increase in wireless local area network products. Services net revenue increased $40 million, or 14.2%, primarily led by our aaS offerings and attached support service.

Current wording

Intelligent Edge net revenue increased by $21 million, or 0.9% (increased 1.5% on a constant currency basis). Services net revenue increased $73 million, or 12.8%, primarily led by our aaS offerings. Product revenue decreased by $52 million, or 3.0%, led by lower AUPs of $172 million, or 10.0%, partially offset by higher volume and product mix effect of $128 million, or 7.5%. The product revenue decrease was primarily led by switching products due to higher backlog reduction in prior-year period, partially offset by an increase in wireless local area network products.

Previous wording

FS earnings from operations as a percentage of net revenue increased 0.9 percentage points due to a decrease in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat. The decrease in cost of services as a percentage of net revenue resulted primarily from lower depreciation expense, partially offset by higher bad debt expense.

Current wording

FS earnings from operations as a percentage of net revenue increased 1.1 percentage points due to a decrease in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat. The decrease in cost of services as a percentage of net revenue resulted primarily from lower depreciation expense, partially offset by higher bad debt expense.

Previous wording

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 15.2% for the three months ended January 31, 2025, as compared to the prior-year period. The decrease was primarily driven by lower financing of third-party product sales and services, partially offset by higher financing of HPE product sales and services.

Current wording

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 21.9% and 18.9% for the three and six months ended April 30, 2025, as compared to the prior-year period. The decrease for the three and six months ended April 30, 2025, was primarily driven by lower financing of both HPE and third-party product sales and services.

Previous wording

(3)Debt benefiting FS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity associated with FS and its subsidiaries. Debt benefiting FS totaled $11.8 billion as of both January 31, 2025 and October 31, 2024, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at both January 31, 2025 and October 31, 2024 was $1.7 billion.

Current wording

(3)Debt benefiting FS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity associated with FS and its subsidiaries. Debt benefiting FS totaled $11.6 billion and $11.8 billion as of April 30, 2025 and October 31, 2024, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at both April 30, 2025 and October 31, 2024 was $1.7 billion.

Previous wording

As of January 31, 2025 and October 31, 2024, FS net cash and cash equivalents balances were approximately $779 million and $533 million, respectively.

Current wording

As of April 30, 2025 and October 31, 2024, FS net cash and cash equivalents balances were approximately $670 million and $533 million, respectively.

Previous wording

Net portfolio assets as of January 31, 2025 decreased 4.5% from October 31, 2024. The decrease generally resulted from portfolio runoff exceeding new financing volume during the period, along with unfavorable currency fluctuations.

Current wording

Net portfolio assets as of April 30, 2025 decreased 2.2% from October 31, 2024. The decrease generally resulted from portfolio runoff exceeding new financing volume during the period, partially offset by favorable currency fluctuations.

Previous wording

FS bad debt expense includes charges to general reserves, specific reserves, and write-offs for sales-type, direct-financing, and operating leases. For the three months ended January 31, 2025 and 2024, FS recorded net bad debt expense of $25 million and $12 million, respectively.

Current wording

FS bad debt expense includes charges to general reserves, specific reserves, and write-offs for sales-type, direct-financing, and operating leases. For the three and six months ended April 30, 2025, FS recorded net bad debt expense of $25 million and $50 million, respectively. For the three and six months ended April 30, 2024, FS recorded net bad debt expense of $10 million and $22 million, respectively.

Previous wording

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 3.2 percentage points primarily due to decreases in cost of services and operating expenses as a percentage of net revenue due to the divestiture of the CTG business effective December 1, 2024.

Current wording

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 0.8 percentage points primarily due decreases in cost of services and operating expenses as a percentage of net revenue due to the divestiture of the CTG business effective December 1, 2024.

Previous wording

As of January 31, 2025, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Current wording

As of April 30, 2025, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2024, except for estimates used in our goodwill impairment analysis.

Previous wording

We use cash generated by operations as our primary source of liquidity. We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and stockholder dividend payments. We expect to supplement this short-term liquidity, if necessary, by accessing the capital markets, issuing commercial paper, and borrowing under credit facilities made available by various domestic and foreign financial institutions. However, our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions. We anticipate that the funds made available, including the debt funding related to the proposed acquisition of Juniper Networks, proceeds from issuance of the Preferred Stock and proceeds from the sale of 30% of the total issued share capital of H3C, and cash generated from our operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months (including for the payment of consideration to consummate the Juniper Networks transaction) and for the foreseeable future thereafter. Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report, and market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this Quarterly Report.

Current wording

We use cash generated by operations as our primary source of liquidity. We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation (credit) costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and stockholder dividend payments. We expect to supplement this short-term liquidity, if necessary, by accessing the capital markets, issuing commercial paper, and borrowing under credit facilities made available by various domestic and foreign financial institutions. However, our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions. We anticipate that the funds made available, including the debt funding related to the proposed acquisition of Juniper Networks, proceeds from issuance of the Preferred Stock and proceeds from the sale of 30% of the total issued share capital of H3C, and cash generated from our operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months (including for the payment of consideration to consummate the Juniper Networks transaction) and for the foreseeable future thereafter. Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report, and market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this Quarterly Report.

Previous wording

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $52 million, during the first three months of fiscal 2025. As of January 31, 2025, we had a remaining authorization of approximately $0.8 billion for future share repurchases. For more information on our share repurchase program, refer to the section entitled “Unregistered Sales of Equity Securities and Use of Proceeds” in Item 2 of Part II.

Current wording

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $102 million, during the first six months of fiscal 2025. As of April 30, 2025, we had a remaining authorization of approximately $0.7 billion for future share repurchases. For more information on our share repurchase program, refer to the section entitled “Unregistered Sales of Equity Securities and Use of Proceeds” in Item 2 of Part II.

Previous wording

For the three months ended January 31, 2025, net cash used in operating activities increased by $0.5 billion, as compared to the corresponding period in fiscal 2024. The increase was primarily due to unfavorable changes from other assets and liabilities, and unfavorable working capital changes driven by the timing of payments. The increase was moderated by increase in collection from financing receivables, as compared to the prior-year period.

Current wording

For the six months ended April 30, 2025, net cash used in operating activities increased by $2.0 billion, as compared to the corresponding period in fiscal 2024. The increase was primarily due to unfavorable working capital changes driven by the timing of payments, moderated by an increase in collection from financing receivables, as compared to the prior-year period.