Hewlett Packard Enterprise Co

Previous wording

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

Current wording

The financial discussion and analysis in the following MD&A compares the three months ended January 31, 2026 to the comparable prior-year period and where appropriate, as of January 31, 2026, unless otherwise noted.

Previous wording

•Trends and Uncertainties. A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment and heightening global trade restrictions, uneven demand across our portfolio, increased demand for and adoption of new technologies, increased inventory levels, conservative customer spending environment (though recovering), persistent inflation, foreign exchange pressures, recent tax developments, and competitive pricing pressures.

Current wording

•Trends and Uncertainties. A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment and heightening global trade restrictions, uneven demand across our portfolio, increased demand for and adoption of new technologies, supply chain constraints and related cost increases for certain components, increased inventory levels, conservative customer spending environment (though recovering), persistent inflation, foreign exchange pressures, recent tax developments, and competitive pricing pressures.

Previous wording

During the first nine 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 three months of fiscal 2026, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted our operations, as follows:

Previous wording

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards artificial intelligence (“AI”), hybrid cloud, edge computing, data security capabilities, and related offerings. The volume of data at the edge continues to grow, driven by the proliferation of more devices. The need for a unified cloud experience everywhere has grown, as well, in order to manage the growth of data at the edge. Increasing demand for AI is also contributing to changes in the competitive landscape. With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data. Secure networking that is purpose-built for AI workloads is the foundation that enables users to seamlessly connect and apply AI learnings to such data that lives in various ecosystems. While we believe our recent acquisition of Juniper Networks, Inc. positions us to capitalize on the growing market opportunities across AI-accelerated computing, data, and networking, our major competitors and emerging competitors are expanding their product and service offerings with integrated products and solutions and exerting increased competitive pressure. We expect these market dynamics and trends to continue in the longer term.

Current wording

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards AI, hybrid cloud, edge computing, data security capabilities, and related offerings. The volume of data at the edge continues to grow, driven by the proliferation of more devices. As a result, the need for a unified cloud experience everywhere has grown, in order to manage the growth of data at the edge. Increasing demand for AI is also contributing to changes in the competitive landscape. With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data. Secure networking that is purpose-built for AI workloads is the foundation that enables users to seamlessly connect and apply AI learnings to such data that lives in various ecosystems. While we believe our recent acquisition of Juniper Networks positions us to capitalize on the growing market opportunities across AI-accelerated computing, data, cloud and networking, our major competitors and emerging competitors are expanding their product and service offerings with integrated products and solutions and exerting increased competitive pressure. We expect these market dynamics and trends to continue in the longer term.

Previous wording

Macroeconomic Uncertainty: The evolving macroeconomic environment has impacted industry-wide demand, as, until recently, customers took longer to work through prior orders and, to this day, have been adopting a more strategic approach to discretionary IT spending. While this dynamic has been easing, 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 continues to be significant uncertainty surrounding the tariff environment and import/export regulations due to numerous factors, including but not limited to tariff imposition delays, changes to tariff rates and policies, and enactment of reciprocally restrictive trade policies and measures. These have enhanced global trade uncertainty and contributed to higher prices of components and end products and services. While we have relied on our global supply chain and pricing measures in an attempt to mitigate adverse impacts, we expect such a 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 have been taking longer to work through prior orders and continue to adopt a more strategic approach to discretionary IT spending. While this dynamic has been easing, it 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. Additionally, there continues to be significant uncertainty surrounding the tariff environment and import/export regulations due to numerous factors, including but not limited to tariff imposition delays, changes to tariff rates and policies, and enactment of reciprocally restrictive trade policies and measures around the world. These have enhanced global trade uncertainty and contributed to higher prices of components and end products and services. While we have sought to mitigate these adverse impacts by relying on our global supply chain and implementing pricing measures, we expect the current macroeconomic environment to continue with the potential to impact 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 remains uncertain due to continuous shifts in U.S. trade policy, which has 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 frequent component part updates, customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related orders. While we have been working to reduce inventory, any or all of the aforementioned factors could contribute to sustained higher-than-normal levels and further uncertainty. 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.

Current wording

Supply Chain: We experienced supply chain constraints for certain components, including graphics processing units (“GPUs”), accelerated processing units, solid-state drives (“SSDs”), and other memory components. We are affected by the worldwide shortage in memory components that began to impact the semiconductor industry in the first quarter of fiscal year 2026 primarily due to the accelerating growth in AI usage and the related rapid expansion in AI data centers and compute refresh cycles. In the first quarter of fiscal year 2026, we experienced supply chain constraints due to these component shortages and expect such dynamics to continue in the medium term as memory supply constraints may continue until memory vendors transition greater production allocations towards high performance memory components required by AI. The future remains uncertain due to the macroeconomic uncertainty and dynamics discussed above, which have thus far impacted our ability to import and export components and finished products and increased our costs. Additionally, logistics costs have been, and may continue to remain, high due to changes in trade policies and ongoing geopolitical uncertainties. We have experienced higher-than-normal inventory levels, primarily due to frequent component part updates, customers transitioning to the next generation of GPUs, our efforts to secure supply ahead of demand, and longer customer acceptance timelines on AI-related orders. In addition, our current efforts to secure memory components and SSDs to meet forecasted demand may further increase our inventory levels in the medium term. While we have been working to reduce inventory, any or all of the aforementioned factors could contribute to sustained higher-than-normal levels and further uncertainty. We have experienced, and expect to continue experiencing, rising input component costs due to various factors, including but not limited to global trade uncertainties and the competitive pricing environment, all of which may impact our financial results. We are taking actions through continued disciplined cost pricing management and supply chain diversification to mitigate the impact of these dynamics. However, such actions may not fully mitigate any impact on our financial condition.

Previous wording

Public Sector: We have a number of engagements with various public sector entities, including the U.S. federal government and its agencies, as direct or indirect customers of our IT services and hardware. Significant staffing and resource reductions at certain public sector entities create an uncertain environment and as a result, our financial results may be impacted in the near term.

Current wording

Public Sector: We have a number of engagements with various public sector entities, including the U.S. federal government and its agencies, as direct or indirect customers of our IT services and hardware. Significant staffing and resource reductions at certain public sector entities create an uncertain environment and as a result, our financial results have been, and may continue to be, impacted in the near term.

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, 60 countries have enacted portions, or all, of the OECD proposal and a further 5 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.

Current wording

Recent Tax Developments: Proposals to reform U.S. and foreign tax laws could significantly impact how U.S. multinational corporations are taxed on foreign earnings. Several of the proposals currently being considered, if enacted into law, could have an impact on our effective tax rate, income tax expense, and cash flows. Our future effective tax rate may also be impacted by judicial decisions, changes in interpretation of regulations, as well as additional legislation and guidance. Further, 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, 65 countries have enacted portions, or all, of the OECD proposal. 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. While we do not anticipate a material adverse impact to our financial position in fiscal 2026, additional changes to global tax laws are likely to occur. For instance, some countries have enacted, and others have proposed, taxes based on gross receipts applicable to digital services, regardless of profitability. Such changes may adversely affect our tax liability.

Previous wording

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OB3”) into law. OB3 introduces several changes to tax regulations, including the permanent restoration of 100% depreciation and the permanent restoration of immediate deductibility of costs associated with research and development activities performed in the United States. We do not anticipate a material impact to our fiscal 2025 results but continue to evaluate the full impact of these changes on our future results.

Current wording

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OB3”) into law. OB3 introduced several changes to tax regulations, including the permanent restoration of 100% depreciation and the permanent restoration of immediate deductibility of costs associated with research and development activities performed in the United States. We do not expect a material impact in fiscal 2026, but we will continue to evaluate the full impact of these changes on our future results.

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, 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 have been 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.

Current wording

Other Trends and Uncertainties: The impacts ofgeopolitical volatility (including the continued uncertainty in the Middle East, the ongoing conflict 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 have been 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

On July 2, 2025, we completed the Juniper Networks, Inc. (“Juniper Networks”) merger (the “Merger”). Under the terms of the Merger Agreement, HPE agreed to pay $40.00 per share of Juniper Networks common stock, issued and outstanding as of July 2, 2025, representing a cash consideration of approximately $13.4 billion. The results of operations of Juniper Networks are included in the unaudited Condensed Consolidated Financial Statements commencing on July 2, 2025. See Note 8, “Acquisitions and Dispositions” to the Condensed Consolidated Financial Statements for additional information.

Current wording

On July 2, 2025, we completed the Juniper Networks Merger. Under the terms of the Agreement and Plan of Merger, dated January 9, 2024, by and among Juniper Networks, HPE and Jasmine Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of HPE Merger Agreement, HPE agreed to pay $40.00 per share of Juniper Networks common stock, issued and outstanding as of July 2, 2025, representing a cash consideration of approximately $13.4 billion. The results of operations of Juniper Networks are included in the Consolidated Financial Statements commencing on July 2, 2025. See Note 7, “Acquisitions and Dispositions” to the Condensed Consolidated Financial Statements in Item 1 of Part I for additional information.

Previous wording

On March 6, 2025, the Board of Directors approved a cost reduction program (the "Program") intended to reduce structural operating costs and continue advancing our ongoing commitment to profitable growth. The Program is expected to be implemented through fiscal year 2026 and deliver gross savings of approximately $350 million by fiscal year 2027 through reductions in our workforce.

Current wording

On March 6, 2025, the Board of Directors approved a cost reduction program (the "Program") intended to reduce structural operating costs and continue advancing our ongoing commitment to profitable growth. The Program is expected to be implemented through fiscal year 2026 and deliver gross savings of approximately $350 million by fiscal year 2027 through reductions in our workforce. The Program has since become a part of Catalyst, a set of broader company-wide actions to reduce costs and enhance efficiency throughout the Company.

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. In connection with the Program, we incurred charges of $2 million and $148 million for the three and nine months ended July 31, 2025, respectively.

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 $23 million for the three months ended January 31, 2026.

Previous wording

Net revenue of $9.1 billion represented an increase of 18.5% (increased 17.7% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment, higher revenue from the Merger in the Networking segment, and higher unit volume in the Hybrid Cloud segment. The gross profit margin of 29.2% (or $2.7 billion), represents a decrease of 2.4 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Networking and Hybrid Cloud segments. The operating profit margin of 2.7% represents a decrease of 4.4 percentage points from the prior-year period primarily due to the costs associated with the Merger.

Current wording

Net revenue of $9.3 billion represented an increase of 18.4%, primarily due to higher revenue in the Networking segment from the Merger. The gross profit margin of 35.9% (or $3.3 billion), represents an increase of 6.7 percentage points from the prior-year period, primarily due to higher revenue in the Networking segment. The operating profit margin of 5.1% represents a decrease of 0.4 percentage points from the prior-year period, primarily due to an increase in operating expenses associated with the Merger.

Previous wording

(1)For purposes of calculating diluted net earnings (loss) per share (“EPS”), the 7.625% Series C mandatory convertible preferred stock (“Preferred Stock”) dividends are added back to the net earnings (loss) 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.

Current wording

(1)For purposes of calculating diluted net earnings per share (“EPS”), the 7.625% Series C mandatory convertible preferred stock (“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.

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 the Company’s 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 third quarter of fiscal 2025, we paid a quarterly dividend of $0.13 per share of common stock. On September 3, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about October 17, 2025, to our holders of record as of the close of business on September 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 September 1, 2025, to holders of record as of the close of business on August 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 the Company’s 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 2026, we paid a quarterly dividend of $0.1425 per share of common stock. On March 9, 2026, we declared a regular cash dividend of $0.1425 per share of our common stock, payable on or about April 23, 2026, to our holders of record as of the close of business on March 24, 2026. 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, 2026, to holders of record as of the close of business on February 15, 2026.

Previous wording

As of July 31, 2025, we had a remaining authorization of approximately $0.7 billion for future share repurchases.

Current wording

As of January 31, 2026, we had a remaining authorization of approximately $3.4 billion for future share repurchases.

Previous wording

Three and nine months ended July 31, 2025 compared with the three and nine months ended July 31, 2024

Current wording

Three months ended January 31, 2026 compared with the three months ended January 31, 2025

Previous wording

For the three months ended July 31, 2025, total net revenue of $9.1 billion represented an increase of $1.4 billion, or 18.5% (increased 17.7% on a constant currency basis). U.S. net revenue increased by $1.4 billion, or 48.4%, to $4.3 billion, and net revenue from outside of the U.S. increased by $30 million, or 0.6%, to $4.8 billion.

Current wording

For the three months ended January 31, 2026, total net revenue of $9.3 billion represented an increase of $1.4 billion, or 18.4%. U.S. net revenue increased by $802 million, or 31.9%, to $3.3 billion, and net revenue from outside of the U.S. increased by $645 million, or 12.1%, to $6.0 billion.

Previous wording

For the three and nine months ended July 31, 2025, the total gross profit margin of 29.2% and 29.0%, respectively, represents a decrease of 2.4 and 4.6 percentage points, respectively, as compared to the respective prior year periods. The decrease for the three and nine months ended July 31, 2025, was primarily due to an increase in cost of sales in the Server, Networking, and Hybrid Cloud segments.

Current wording

For the three months ended January 31, 2026, the total gross profit margin of 35.9% represents an increase of 6.7 percentage points, as compared to the respective prior year period. The increase was primarily due to higher revenue in the Networking segment.

Previous wording

For thethree months ended July 31, 2025, R&D expense increased by $75 million, or 13.7%, primarily due to operating expenses associated with Juniper Networks, which contributed 17.3 percentage points to the change, and higher employee costs, which contributed 6.2 percentage points. The increase was partially offset by lower operating expenses due to higher mix of capital versus expense investment, which contributed 8.9 percentage points to the change.

Current wording

For thethree months ended January 31, 2026, R&D expense increased by $269 million, or 56.6%, primarily due to operating expenses associated with Juniper Networks, which contributed 38.5 percentage points to the change, and higher employee costs, which contributed 9.6 percentage points to the change.

Previous wording

For the three months ended July 31, 2025, SG&A expense increased by $267 million, or 21.7%, primarily due to higher employee costs and increased operating expenses associated with Juniper Networks, which contributed 21.9 percentage points to the change.

Current wording

For the three months ended January 31, 2026, SG&A expense increased by $430 million, or 33.9%, primarily due to increased operating expenses associated with Juniper Networks, which contributed 34.9 percentage points to the change.

Previous wording

For the three and nine months ended July 31, 2025, acquisition, disposition and other charges increased by $139 million or 331.0%, and $171 million, or 130.5%, respectively, primarily due to costs incurred in connection with the Merger.

Current wording

For the three months ended January 31, 2026, acquisition, disposition and other charges increased by $51 million or 77.3% primarily due to costs incurred in connection with the Merger.

Previous wording

On December 1, 2024, we completed the disposition of CTG. We received net proceeds of $210 million and recognized a gain of $245 million.

Current wording

On December 1, 2024, we completed the disposition of CTG. We received net proceeds of $210 million and recognized a gain of $244 million.

Previous wording

For the three months ended July 31, 2025 and 2024, we recorded income tax benefit of $17 million and income tax expense of $96 million, respectively, which reflects an effective tax rate of (6.5)% and 15.8%, respectively. For the nine months ended July 31, 2025 and 2024, we recorded income tax expense of $94 million and $323 million, respectively, which reflects an effective tax rate of (359.9)% and 21.0%, respectively. For the three and nine months ended July 31, 2025 and the three months ended July 31, 2024, the 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. The effective tax rate for the nine months ended July 31, 2025 also included the effects of the non-deductible goodwill impairment.

Current wording

For the three months ended January 31, 2026 and 2025, we recorded income tax benefit of $19 million and income tax expense of $106 million, respectively, which reflects an effective tax rate of (4.4)% and 14.5%, 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.

Previous wording

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

Current wording

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

Previous wording

A description of the products and services for each segment, along with other pertinent information related to segments can be found in Note 2, “Segment Information” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Current wording

As described in Note 1, “Overview and Summary of Significant Accounting Policies,” effective as of the beginning of the first quarter of fiscal 2026, the Company realigned its five reportable segments to three reportable segments. These changes had no impact to HPE’s previously reported consolidated GAAP results. A description of the products and services for each segment, along with other pertinent information related to segments can be found in Note 2, “Segment Information” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

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, H3C divestiture related severance costs, severance costs related to the cost reduction program, acquisition, disposition and other charges, and impairment of goodwill.

Current wording

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

Previous wording

An interim impairment test was performed as of November 1, 2024 based on organizational changes impacting the Hybrid Cloud and Server reporting units. The interim impairment test did not result in an impairment of goodwill.

Current wording

Goodwill is tested annually for impairment, as of the first day of the fourth quarter, at the reporting unit level. Additionally, an interim impairment test was performed as of November 1, 2025 based on organizational changes impacting the reporting units. The interim impairment test did not result in any impairment of goodwill. For all reporting units other than Cloud & AI (excluding Financial Services), a qualitative test was performed and there were no indicators of impairment of goodwill. For the Cloud & AI (excluding Financial Services) reporting unit a quantitative assessment was performed, and the excess of fair value over carrying amount was 10%. In order to evaluate the sensitivity of the estimated fair value of the reporting units in the goodwill impairment test, we applied a 10% decrease to the fair value of the Cloud & AI, (excluding Financial Services) reporting unit. Based on the results of this hypothetical 10% decrease, this reporting unit did not have an excess of fair value over carrying value.

Previous wording

The Hybrid Cloud reporting unit has remaining goodwill of $3.5 billion as of July 31, 2025 and an excess of fair value over carrying value of net assets of 0% as of the interim test date. Hybrid Cloud business is transitioning to a more cloud-native, software-defined platform with HPE Alletra. Translating this growth to revenue and operating income will take time because a greater mix of high margin business, such as ratable software and services, are deferred and recognized in future periods.

Current wording

The Cloud & AI (excluding Financial Services) reporting unit has goodwill of $13.5 billion as of January 31, 2026. In the current macroeconomic and inflationary environment, customers are investing selectively. This has resulted in moderate unit growth and competitive pricing in traditional servers offerings. While AI servers is growing at a faster pace, because graphics processing units represent a large portion of the solutions, the pricing is very competitive and margins are limited. In addition, the business is managing a storage product model transition to a more cloud-native, software-defined platform with HPE Alletra. Translating this growth to revenue and operating income will take time because a greater mix of high margin business, such as ratable software and services, are deferred and recognized in future periods. The Cloud & AI (excluding Financial Services) reporting unit continues to focus on capturing market share in both traditional and AI servers and storage while maintaining operating margin and leveraging its strong portfolio of products and services. If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if we have significant or sustained decline in its stock price, it is possible its estimates about this reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the Cloud & AI (excluding Financial Services) reporting unit exceeding its estimated fair value and potential impairment charges.

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, 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 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 subsequent Quarterly Reports, 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, 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, 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 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, 2025, 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 $102 million, during the first nine months of fiscal 2025. As of July 31, 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.

Current wording

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $158 million, during the first three months of fiscal 2026. As of January 31, 2026, we had a remaining authorization of approximately $3.4 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

(3) The maximum aggregate capacity under the uncommitted lines of credit is $1.4 billion, of which $0.4 billion was primarily utilized towards issuances of bank guarantees.

Current wording

(2) The maximum aggregate capacity under the uncommitted lines of credit is $1.8 billion, of which $0.4 billion was primarily utilized towards issuances of bank guarantees.

Previous wording

DOS measures the average number of days from procurement to sale of our products. DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold. Compared to the corresponding three-month period in fiscal 2024, the decrease in DOS in the current period was primarily due to higher shipments for large deals and lower purchases, partially offset by the impact of incremental inventory as a result of the Merger.

Current wording

DOS measures the average number of days from procurement to sale of our products. DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold. Compared to the corresponding three-month period in fiscal 2025, the decrease in DOS in the current period was primarily due to higher shipments and lower inventory purchases.

Previous wording

DPO measures the average number of days our accounts payable balances are outstanding. DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold. Compared to the corresponding three-month period in fiscal 2024, the decrease in DPO in the current period was primarily due to lower purchases.

Current wording

DPO measures the average number of days our accounts payable balances are outstanding. DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold. Compared to the corresponding three-month period in fiscal 2025, the decrease in DPO in the current period was primarily due to lower purchases along with higher payments to outsourced manufacturers.

Previous wording

For the nine months ended July 31, 2025, net cash used in investing activities increased by $12.0 billion, as compared to the corresponding period in fiscal 2024. The increase was primarily due to a payment made for the Merger, net of cash acquired of $12.3 billion, partially offset by proceeds from the divestiture of our CTG business of $0.2 billion during the current period, as compared to the prior-year period.

Current wording

For the three months ended January 31, 2026, net cash used in investing activities increased by $0.8 billion, as compared to the corresponding period in fiscal 2025. The increase was primarily due to higher cash utilized in net financial collateral activities in the current period of $0.5 billion and proceeds from the divestiture of our CTG business received in the prior period of $0.2 billion.

Previous wording

For the nine months ended July 31, 2025, net cash provided by financing activities increased by $4.1 billion, as compared to the corresponding period in fiscal 2024. This increase was primarily due to higher proceeds from debt, net of issuance costs of $3.2 billion, lower repayments of debt of $1.1 billion, partially offset by higher cash utilized for stock-based award activities of $0.2 billion, as compared to the prior-year period.

Current wording

For the three months ended January 31, 2026, net cash used in financing activities increased by $0.6 billion, as compared to the corresponding period in fiscal 2025. This increase was primarily due to higher repayments of debts of $0.4 billion and higher cash utilized for share repurchases of $0.1 billion, as compared to the prior-year period.

Previous wording

Free cash flow (“FCF”) represents cash flow from operations less net capital expenditures (investments in property, plant and equipment (“PP&E”) and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash. For the nine months ended July 31, 2025, FCF decreased by $1.7 billion, as compared to the corresponding period in fiscal 2024. This was primarily due to lower cash provided by operating activities, as compared to the prior-year period. For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A.

Current wording

Free cash flow (“FCF”) represents cash flow from operations less net capital expenditures (investments in property, plant and equipment (“PP&E”) and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash. For the three months ended January 31, 2026, FCF increased by $1.6 billion, as compared to the corresponding period in fiscal 2025. This was primarily due to higher cash provided by operating activities, as compared to the prior-year period. For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A.

Previous wording

We maintain debt levels that we establish through consideration of several factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure. We maintain a revolving credit facility and two commercial paper programs, “the Parent Programs,” and a wholly-owned subsidiary maintains a third program. In September 2024, we terminated our prior senior unsecured revolving credit facility that was entered into in December 2021, and entered into a new senior unsecured revolving credit facility with an aggregate lending commitment of $5.25 billion for a period of five years. The commitment initially comprised of (i) $4.75 billion of commitments available immediately and (ii) $500 million of commitments available from and subject to the closing of the Merger and refinancing of Juniper Networks’ credit agreement. With the completion of the Merger and the associated refinancing, the full $5.25 billion commitment under the new facility is now available to us. There have been no changes to our commercial paper programs since October 31, 2024.

Current wording

We maintain debt levels that we establish through consideration of several factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure. We maintain a revolving credit facility and two commercial paper programs, “the Parent Programs,” and a wholly-owned subsidiary maintains a third program. There have been no changes to our revolving credit facility and commercial paper programs since October 31, 2025.

Previous wording

Significant funding and liquidity activities for the nine months ended July 31, 2025 were as follows:

Current wording

Significant funding and liquidity activities for the three months ended January 31, 2026 were as follows: