HPE 10-K & 10-Q changes, risk factors and insider trading

You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating Hewlett Packard Enterprise. Any of the following risks could materially and adversely affect our results of operations or financial condition. Some of the factors, events, and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. The following risk factors should be read in conjunction with Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of OperationOperation,” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report Form 10-K.

•IfOur wesuccess cannotdepends on our ability to successfully execute our go-to-market strategy, including offering our entire portfoliosolutions as-a-Service, oureffectively business, operating results,planning and financialmanaging performanceour mayresources, suffer.and continuing to develop and manage our offerings to integrate new features and solutions.

•We depend on third-party suppliers, contract manufacturers (including original equipment and original design manufacturers), as well as single-source and limited source suppliers, and our financial results could suffer if we fail to manage ourthese supplierthird party relationships properly.effectively.

•FailureOur to meet responsiblesustainable and sustainableresponsible business expectations orand standardsactions ortowards achieveachieving our Living Progress goalsobjectives may expose us to operational, legal, or reputational risks and could adversely affect our business, results of operations, financial condition, or stock price.

InternationalFinancial Risks

RegulatoryLegal, Regulatory, and GovernmentCompliance Risks

•Our business is subject to various federal, state, locallocal, and foreign laws and regulations that could result in costs or other sanctions that adversely affect our business and results of operations.

•Unanticipated changes in our tax provisions, the adoption of new tax legislationlegislation, or exposure to additional tax liabilities could affect our financial performance.

IfOur wesuccess cannotdepends on our ability to successfully execute our go-to-market strategy, including offering our entire portfoliosolutions as-a-Service, oureffectively business, operating results,planning and financialmanaging performanceour mayresources, suffer.and continuing to develop and manage our offerings to integrate new features and solutions.

TheOur ongoing process of improving our HPE GreenLake; cloudexpanding offerings,our offerings across all our businesses (including cloud, AI, and networking offerings); enhancing existing hardware, software, and cloud-based solutions,solutions; and developing and improving the systems necessary for new and evolving data-intensive artificial intelligence-basedAI-based workloads are all complex, costly, and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately, to invest sufficiently in strategic growth areas, or to otherwise successfully execute this strategy could significantly harm our market share, results of operations, and financial performance.

Having developed a cloud platform product in HPE GreenLake and the hardware capabilities to support artificial intelligenceAI computing, we must be able to continue integrating new features that are relevant to our customers and to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements, which we may not succeed at doing. These offerings face competition from peer companies with their own cloud platform and artificial intelligence computing offerings, and any delay in the development, production, or marketing of a new product, service, or solution could result in our offerings being late to reach the market, which could harm our competitive position.requirements. In addition, shouldthrough HPE Networking we successfullynow consummateoffer a full networking IP stack: from silicon, to infrastructure, to the Merger,operating system, to security, to software and services, in a cloud-native and AI-driven approach following the Merger. The process of integrating and streamlining our offerings (including integrating Juniper Networks’ offerings with ours) or developing new solutions based on our respective technological portfolios may be complex, costly, time-consuming, and uncertain, and failure by us to successfully do so could adversely impact our future results of operations and financial performance. Furthermore,These weofferings anticipateface needingcompetition from peer companies, and any delay in our development, production, or marketing of a new product, service, or solution could result in our offerings being late to adaptreach the market, which could harm our go-to-marketcompetitive structureposition. These offerings also depend on the continued growth of demand for secure network and internet protocol (“IP”) infrastructure from timecustomers that are able to timebuild withtheir newnetwork salescapacity, grow their IP services, and marketing approaches,choose to betterdeploy alignour withproducts aaSin businesstheir modelsnetworks and toIP capture unique market opportunities, such as in hybrid cloud and artificial intelligence. Changing our go-to-market structure may affect employee compensation models and ultimately our ability to retain employees.infrastructures. There is no assurance that we will be able to implement these adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from them.

Our HPE GreenLake and networking solutions generally are multiyear agreements, which result in recurring revenue streams over the term of the arrangement. As customer demand for our aaS offerings increases, we have experienced, and will continue to experience, differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our aaS offerings (for which revenue is generally recognized ratably over the term of the arrangementcontract). As such, our financial results and growth depend, in part, on customers continuing to purchase our services and solutions over the contract life on the agreed terms. Additionally, implementing this business model also means that our historical results, especially those from before the transition,Merger, may not be indicative of future results, which may adversely affect our ability to accurately forecast our future operating results. Our aaS offerings also could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal, regulatory, or other costs.

We depend on third-party suppliers, contract manufacturers (including original equipment and original design manufacturers), as well as single-source and limited source suppliers, and our financial results could suffer if we fail to manage ourthese supplierthird party relationships properly.effectively.

Our operations depend on our ability to anticipate our needs for components, products, and services, as well as the ability of our suppliers’manufacturers abilities(including original equipment manufacturers, original and outsourced design manufacturers, and contract manufacturers), and suppliers to deliver sufficient quantities of quality components, products, and services at reasonable prices and in time for us to meet critical schedules for the delivery of our own products and services. Given the wide variety of solutions that we offer,offer; the large and diverse distribution of our suppliers and contract manufacturers,manufacturers; and the long lead times required to manufacture, assemble, and deliver certain products and solutions, problems have, from time to time in the past, arisen, and could in the future arise, in production, planning, and inventory management thathave could harmharmed our business.business Inat addition,times, and may do so again in the future. Any delay in our ongoing effortsability to optimizeproduce theand efficiency ofdeliver our supply chainproducts could cause supplyour disruptionscustomers to purchase alternative products from our competitors. Manufacturing and be more expensive, time-consuming, and resource-intensive than expected. Furthermore, certain of our suppliers have at times decided, and may in the future decide, to discontinue conducting business with us. Other suppliersupply problems that we have faced, and could again face in the future, include component shortages, excess supply, and contractual, relational, and labor risks, each of which isare described below.

•Component shortages.Supply Shortages. We provide demand forecasts for our products to our manufacturers, who order components and plan capacity based on these forecasts. We have in the past experienced, and may experience again in the future, delays and shortages of certain components as a result of strong demand, supplier transitions, raw material or capacity constraints, and other problems experienced by suppliers in certain geographies and markets, resulting in insufficient supply to meet total market demand. In the past, weWe have experienced shortages or delays, which led to higher prices of certain components and exposure to quality issues and delivery delays, whichand may occurexperience againsuch delays and associated impacts in the future. We may not be able to secure enough components at reasonable prices, of acceptable quality, or at all, to build products or provide services in a timely manner in the quantities needed or according to our specifications. Accordingly, our business and financial performance could suffer from a loss of time-sensitive sales, additional freight costs incurred, or the inability to pass on price increases to our customers. If we cannot adequately address supply issues, we may have to reengineer some product or service offerings, which could result in further costs and delays.

•Excess supply.Supply. In order to secure components for our products or services, at times we mayhave makemade advance payments to suppliers or enterentered into long term agreements, non-cancellable commitments, or other inventory management arrangements with vendors. In addition, we mayhave purchasealso, at times, purchased components strategically in advance of demand to take advantage of favorable pricing orpricing, to address concerns about the availability of future components.components, or to prepare to fulfill large orders. If our manufacturers assess charges, we have liabilities for excess inventory or raw materials (each of which could negatively affect our gross margins), we fail to adequately anticipate customer demand properly,and overestimate our requirements, continue to take actions to make strategic purchases in advance of demand, or these dynamics are exacerbated due to order delays or cancellations, a temporary oversupply canmay result in excess or obsolete componentscomponents, (which hasmay happened at timesresult in theadditional past),charges from our manufacturers, or we may have liabilities for excess inventory or raw materials, each of which has at times adversely impacted and could innegatively theaffect futureour adverselygross impactmargins. We have experienced adverse impacts to our business and financial performance.performance due to excess supply and could do so again in the future.

•Single-sourceSingle-Source suppliers.Suppliers. We obtain certain components from single-source suppliers due to technology, availability, price, quality, scale, or customization needs. Certain ofsingle suchsource suppliers have,have in the past decided,discontinued, and may again in the future decide, to discontinuediscontinue, manufacturing components used in our products, which may cause us to discontinue certain products, incur additional costs to redesign our products so as not to incorporate such discontinued components, or incur time and expense to find replacement suppliers. Replacing a single-source supplier has at times delayed, and could delay, production of some products as replacement suppliers may initially be unable to meet demand or be subject to other output limitations. For some components, such as customized components, alternative sources either may not exist or may be unable to produce the quantities of those components necessary to satisfy our production requirements. In addition, we sometimesmay purchase components from single-source suppliers under short-term agreements that contain favorable pricing and other terms for us, but that may be unilaterally modified or terminated byallow the supplier to modify or terminate the contract with limited notice to us and with little or no penalty. The performance of such single-source suppliers under those agreements (and the renewal or extension of those agreements upon similar terms) may affect the quality, quantity, and price of our components. The loss of a single-source supplier, the deterioration of our relationship with a single-source supplier, or any unilateral modification to the contractual terms under which we are suppliedreceive components byfrom a single-source supplier could adversely affect our business and financial performance.

•Trends and Uncertainties. A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment ofand supplyheightening chainglobal constraintstrade (though easing),restrictions, uneven demand across our portfolio, increased demand for and adoption of new technologies, increased inventory levels, conservative customer spending environment (though recovering) customer spending environment,, persistent inflation, foreign exchange pressures, recent tax developments, and pendingcompetitive mergerpricing with Juniper Networks, Inc. (“Juniper Networks”).pressures.

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards artificial intelligence (“AI”),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. IncreasingSecure demandnetworking that is purpose-built for AI workloads is alsothe contributingfoundation that enables users to changesseamlessly 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 competitivegrowing landscape.market Ouropportunities 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.

Macroeconomic Uncertainty: The effect of the evolving macroeconomic environment has been impactingimpacted industry-wide demand, as customers takehave been taking longer to work through prior orders andand, to this day, have been adopting a more conservativestrategic approach to discretionary IT spending. ThisWhile 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. WeAdditionally, 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 such a mixed macroeconomic environment to largely continue (though ease slightly) and possibly limit revenue and margin growth in the near term.

Supply Chain: During fiscal 2024, weWe experienced supply chain constraints for certain components, including graphics processing units (“GPUs”) and accelerated processing units,units. butThough they have sinceeased eased,at times during the fiscal year, we are once again experiencing such constraints and expect such dynamics to continue in partthe medium term. The future remains uncertain due to increasedthe availabilitymacroeconomic dynamics discussed above, which have thus far impacted our ability to import and export components and finished products and the costs of supplydoing so. Additionally, logistics costs have been, and lowermay materialcontinue andto logisticsremain, costs.high Logisticswith costssuch decreased from previously elevated levels as a result of declineschanges in bothtrade expedited shipments and overall rate costs in the freight network.policies. We have, in fact,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;orders. While we expecthave thisbeen trendworking to continuereduce ininventory, any or all of the mediumaforementioned term.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 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.management and supply chain diversification; however, such actions may not be successful.

Recent Tax Developments: TheProposals to reform U.S. and foreign tax laws could significantly impact how U.S. multinational corporations are taxed on foreign earnings and could increase the U.S. corporate tax rate. Several of the proposals currently being considered, if enacted into law, could have an adverse 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, 4360 countries have enacted portions, or all, of the OECD proposal and a further 22 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules.proposal. Where enacted, the rules begin to beare 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. As a result, there was no impact to our fiscal 2024 results. 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. WeThere currently dowas not expect a material impact to our fiscal 2025 results.results from Pillar Two legislation. 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.

The following “Executive Overview,” “Results of OperationsOperations,” and “Liquidity” discussions and analysis compare fiscal 20242025 to fiscal 2023,2024, unless otherwise noted. The “Capital Resources” and,and “Cash Requirements and Commitments” sections present information as of October 31, 2024,2025, unless otherwise noted.

Net revenue of $30.1$34.3 billion represented an increase of 3.4% (increased 3.3% on a constant currency basis)13.8%, primarily due to higher revenue in the Networking segment from the Merger and higher average unit prices (“AUPs”) in the Server segment, moderated by lower volume and product mix effect in the Intelligent Edge segment. The gross profit margin of 32.8%30.3% (or $9.9$10.4 billion) represents a decrease of 2.32.5 percentage points from the prior-year periodperiod, primarily due to declinean increase in revenuecost of sales in the IntelligentServer, Edge segmentNetworking, and higherHybrid mixCloud of lower margin products in the Server segment.segments. The operating profit margin of 7.3%(1.3)%, wasrepresents relativelya flatdecrease asof compared8.6 percentage points from the prior-year period, primarily due to the prior-yearimpairment period.of goodwill and costs associated with the Merger.

(1)For purposes of calculating diluted net EPS,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 averageweighted-average share calculation assumes the preferredPreferred stockStock 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.

ARR represents the annualized revenue of all net HPE GreenLake cloud services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service (“SaaS”),software-as-a-service, software consumption revenue, and other aaS offerings, by taking such revenue recognized during a quarter and multipliedmultiplying by four. To better align the calculation of ARR with Juniper Networks’ business and offerings, beginning with the quarter ended July 31, 2025, we also included revenue from software licenses support and maintenance in our ARR calculation, and will continue to do so going forward. The impact of this change was not material to the current and prior periods presented. We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our aaS business. We also believe ARR provides investors with greater transparency to our financial information and of the performance metric used in our financial and operational decision making and allows investors to see our results “through the eyes of management.” We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it.

The 49%63% year over year increase in ARR was primarily due to growth in ourthe HybridNetworking Cloud, Server and Intelligent Edge segments, which wassegment due to the Merger and an expanding customer installed base,base. The ARR attributed to the Hybrid Cloud and Server segments increased due to an expanded range of HPE GreenLake Flex Solutions, Server aaS,Solutions and Intelligentincreased EdgeServer aaS activity.

Capital Returns to ShareholdersStockholders

Returning capital to our shareholdersstockholders remains an important part of our capital allocation framework, which also consists of strategic investments. We believe our existing balance of cash and cash equivalents, along with commercial paper and other short-term liquidity arrangements, are sufficient to satisfy our working capital needs, capital asset purchases, dividends, debt repayments, and other liquidity requirements associated with our existing operations. As of October 31, 2024,2025, our cash, cash equivalents and restricted cash were $15.1$5.9 billion, compared to $4.6$15.1 billion as of October 31, 2023,2024, representing ana increasedecrease of $10.5$9.2 billion.

The majority of our revenue is derived from sales of products and services and the associated support and maintenance, and such revenue is recognized when, or as, control of promised products or services is transferred to the customer at the transaction price. Transaction price is adjusted for variable considerationconsideration, including rebates, which may be offered in contracts with customers, partners, and distributors and may include rebates, volume-based discounts, price protection, and other incentive programs.distributors.

We are subject to income taxes in the U.S. and approximately 80 other countries, and we are subject to routine corporate income tax audits in manythe ofU.S. theseand numerous foreign jurisdictions. We believe that positions taken on our tax returns are fully supported, but tax authorities may challenge these positions, which may not be fully sustained on examination by the relevant tax authorities. Accordingly, our income tax provision includes amounts intended to satisfy assessments that may result from these challenges. Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our ProvisionBenefit (provision) for taxes, Net earnings and cash flows. Our accrual for uncertain tax positions is attributable primarily to uncertainties concerning the tax treatment of our international operations, including the allocation of income among different jurisdictions, intercompany transactions and related interest, and uncertain tax positions from acquired companies. For further discussion on taxes on earnings, refer to Note 6, “Taxes on Earnings,” to the Consolidated Financial Statements in Item 8 of Part II.

We review goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter, or whenever events or circumstances indicate the carrying amount of goodwill may not be recoverable. We are permitted to conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. We performed interim goodwill impairment tests as of November 1, 2024 and April 30, 2025 and our annual impairment test as of August 1, 2025.

As of October 31, 2024,2025, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, “Segment InformationInformation,” to the Consolidated Financial Statements in Item 8 of Part II,II of this Annual Report on Form 10-K, with the exception of Server, which contains two reporting units: Compute and High Performance Computing & AI (“HPC & AI”),Networking and Corporate Investments and Other whichsegments. The Networking segment contains two reporting units: AdvisoryIntelligent Edge and ProfessionalJuniper Services,Networks. The Corporate Investments and legacyOther Communicationssegment andcontains Mediathe Solutions.A & PS reporting unit.

2025 Interim and Annual Goodwill Impairment Reviews

Our interim 2024 goodwill impairment•Impairment test performed as of November 1, 20232024 based on organizational changes impacting the composition of reporting units as of that date did not result in anyan impairment charges.;

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal period ended October 31, 2025, and Part II, Item IA, “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal period ended April 30, 2026, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock, including certain risks, which have been modified as follows:stock.

The financial discussion and analysis in the following MD&A compares the three and sixnine months ended AprilJuly 30,31, 2026 to the comparable prior-year period and where appropriate, as of AprilJuly 30,31, 2026, unless otherwise noted.

•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, the conservative customer spending environment (though recovering), customer spending environment, persistent inflation, foreign exchange pressures, recent tax developments, and competitive pricing pressures.

During the first sixnine months of fiscal 2026, the effects of the evolving macroeconomic environment on demand for information technology products and supply for components persisted and certain significant developments impacted our operations, as follows:

Macroeconomic Uncertainty: The evolving macroeconomic environment has impactedbeen impacting 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 hashas, at times, 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, tariff repeals and refunds, 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 andchain, implementing pricing measures, and securing sufficient supply in advance of orders, we nevertheless expect the current macroeconomic environment to continue with the potential to impact revenue and margin growth in the near term.

Supply Chain: We have 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 half ofthroughout fiscal year 2026 primarily due to the accelerating growth in AI usage and demand and the related rapid expansion in AI data centers and compute refresh cycles. In the first half ofThroughout 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 continuepersist until memory vendors transition greater production allocations towards high performance memory components required by AI.AI The future remains uncertain due to the macroeconomic environment and dynamics discussed above, which have thus far impacted our ability to import and export components and finished products and increased our costs.workloads. Additionally, logistics costs have been, and may continue to remain, high due to changes in trade policies and ongoing geopolitical uncertainties and tensions. 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 in advance 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. WeThe havefuture experienced,remains and expect to continue experiencing, rising input component costsuncertain due to variousthe factors,macroeconomic includingenvironment butand notdynamics limiteddiscussed above, which have thus far impacted our ability to global trade uncertaintiesimport and theexport competitivecomponents pricingand environment,finished allproducts ofand which may impactincreased our financial results.costs. We are taking actions through continued disciplined cost and 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.

Recurring Revenue and Consumption Models: We continue to strengthen our core server and storage-oriented offerings and expand our offerings on the HPE GreenLake cloud,cloud platform, to deliver our entire portfolio as-a-service (“aaS”) and become the edge-to-cloud company of choice for our customers and partners. We expect that such flexible consumption model will continue to strengthen our customer relationships and contribute to growth in recurring revenue.

The Internal Revenue Service (“IRS”) is conducting audits of our fiscal 2020 through 2022 U.S. federal income tax returns. During the first quarter of fiscal 2026, the IRS issued notices of proposed adjustments (“NOPAs”) for fiscal 2020, 2021, and 2022 relating to our intercompany transfer pricing. During the second quarter of fiscal 2026, we submitted a formal settlement offer to the IRS to facilitate the closing of the audit and recorded increased reserves for unrecognized tax benefits of $318 million. The impact of the increase in reserves is almost entirely offset with a valuation allowance release, and the net impact to income tax expense for the three and sixnine months ended AprilJuly 30,31, 2026 was not material. It is reasonably possible that the IRS audit for fiscal 2020 through 2022 may be concluded in the next 12 months, and it is reasonably possible that existing unrecognized tax benefits related to these years may be reduced by an amount up to $369$366 million within the next 12 months; the majority of these unrecognized tax benefits are offset by adjustments to foreign tax credits that carry a full valuation allowance, which does not affect our effective tax rate.

Trade and Tariffs Update: On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). TheDuring the three months ended July 31, 2026, we have received certain tariff refunds. We have also applied for and expect to receive more in the future. Such amounts received, and any such amounts applied for, are not nor do we expect they will be material to our financial statements or financial position. However, the ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

On July 2, 2025, we completed the Juniper Networks Merger.merger (the “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 (the “Merger Agreement,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.

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 $30$31 million and $53$84 million for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, and $146$2 million and $148 million for the three and sixnine months ended AprilJuly 30,31, 2025.2025, respectively.

In addition, the Company expects to achieve at least $600 million in cost savings from synergies by fiscal 2028, related to the integration of Juniper Networks. These synergies are expected to require approximately $800 million of investment, primarily tied to headcount, supply chain optimization, and portfolio rationalization. In connection with the integration of Juniper Networks, we incurred acquisition costs of $108$69 million and $231$300 million, for the three and sixnine months ended AprilJuly 30,31, 2026, respectively.

Net revenue of $10.7$12.2 billion represented an increase of 40.0%,33.7%, primarily due to higher revenue in the Networking segment from the Merger, and an increase in the average selling price in the Cloud & AI segment.segment, and higher revenue in the Networking segment from the Merger. The gross profit margin of 36.5%40.1% (or $3.9$4.9 billion), represents an increase of 8.110.9 percentage points from the prior-year period, primarily due to higher revenue in the Networking and Cloud & AI and Networking segments. The operating profit margin of 7.0%11.4% represents an increase of 21.58.7 percentage points from the prior-year period, primarily due to aforementioned gross margin improvement and the absence of goodwill impairment recorded in the prior-year period.improvement.

Net revenue of $20.0$32.2 billion represented an increase of 29.1%,30.8%, primarily due to higher revenue in the Networking segment from the Merger, and an increase in the average selling price in the Cloud & AI segment. The gross profit margin of 36.2%37.7% (or $7.2$12.1 billion), represents an increase of 7.48.7 percentage points from the prior-year period, primarily due to higher revenue in the Networking and Cloud & AI segments. The operating profit margin of 6.1%8.1% represents an increase of 10.59.8 percentage points from the prior-year period, primarily due to aforementioned gross margin improvement and the absence of goodwill impairment recorded in the prior-year period.improvement.

N/M - Not meaningful (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 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.

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 secondthird quarter of fiscal 2026, we paid a quarterly dividend of $0.1425 per share of common stock. On JuneSeptember 1,2, 2026, we declared a regular cash dividend of $0.1425 per share of our common stock, payable on or about JulyOctober 15,16, 2026, to our holders of record as of the close of business on JuneSeptember 16,17, 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 JuneSeptember 1, 2026, to holders of record as of the close of business on MayAugust 15, 2026.

As of AprilJuly 30,31, 2026, we had a remaining authorization of approximately $3.3$3.2 billion for future share repurchases.

Three and sixnine months ended AprilJuly 30,31, 2026 compared with the three and sixnine months ended AprilJuly 30,31, 2025

For the three months ended AprilJuly 30,31, 2026, total net revenue of $10.7$12.2 billion represented an increase of $3.1 billion, or 40.0%.33.7%. U.S. net revenue increased by $1.2$0.5 billion, or 44.3%,11.9%, to $4.0$4.8 billion, and net revenue from outside of the U.S. increased by $1.8$2.6 billion, or 37.6%,52.9%, to $6.7$7.4 billion.

For the sixnine months ended AprilJuly 30,31, 2026, total net revenue of $20.0$32.2 billion represented an increase of $4.5$7.6 billion, or 29.1%.30.8%. U.S. net revenue increased by $2.0$2.5 billion, or 38.3%,26.4%, to $7.3$12.1 billion, and net revenue from outside of the U.S. increased by $2.5$5.1 billion, or 24.3%,33.5%, to $12.7$20.1 billion.

For the three months ended AprilJuly 30,31, 2026, the total gross profit margin of 36.5%,40.1% represents an increase of 8.110.9 percentage points, as compared to the respective prior year period. For the sixnine months ended AprilJuly 30,31, 2026, the total gross profit margin of 36.2%,37.7% represents an increase of 7.48.7 percentage points, as compared to the respective prior year period. The increases were primarily due to the favorable mix of higher-margin revenues in the Networking and Cloud & AI and Networking segments and the acquisition of Juniper Networks.

For the three months ended AprilJuly 30,31, 2026, R&D expense increased by $382$536 million, or 70.7%,86.2%, primarily due to increased operating expenses associated with Juniper Networks and higher variable employee costs, which contributed 61.180.0 percentage points to the change.

For the sixnine months ended AprilJuly 30,31, 2026, R&D expense increased by $651$1,187 million, or 64.1%,72.5%, primarily due to increased operating expenses associated with Juniper Networks and higher variable employee costs, which contributed 54.764.3 percentage points to the change.

For the three months ended AprilJuly 30,31, 2026, SG&A expense increased by $532$466 million, or 41.0%,31.1%, primarily due to higher variable employee costs and increased operating expenses associated with Juniper Networks, which contributed 35.324.7 percentage points to the change.

For the sixnine months ended AprilJuly 30,31, 2026, SG&A expense increased by $962$1,428 million, or 37.5%,35.2%, primarily due to increased operating expenses associated with Juniper Networks and higher variable employee costs, which contributed 31.228.8 percentage points to the change.

For the three and sixnine months ended AprilJuly 30,31, 2026, amortization of intangible assets increased by $286$189 million, or 773.0%,150.0%, and $559$748 million, or 745.3%,372.1%, respectively, primarily due to the amortization expense of the acquired intangibles as a result of the Merger.

Impairment charges for the three and sixnine months ended AprilJuly 30,31, 2025 represents a partial goodwill impairment charge of $1.4 billion, as it was determined that the fair value of the Cloud & AI (excluding Financial Services) reporting unit was below the carrying value of its net assets.

For the three and sixnine months ended AprilJuly 30,31, 2026, acquisition, disposition and other charges increaseddecreased by $36$110 million or 85.7%,60.8%, and $72$38 million or 58.5%,12.5%, respectively, primarily due to higher costs incurred in connection with the Merger.Merger in prior year periods.

For the three and six months ended AprilJuly 30,31, 2026, interest and other, net expense increased by $112$83 million, or 287.2%, and $205 million, or 262.8%, respectively,1,037.5%, primarily due to higher net interest expense of $108$51 million and $232the million,absence respectively.of a $52 million prior year gain related to the settlement to resolve claims solely against Sushovan Hussain in the ongoing Autonomy litigation.

(Provision) benefit for taxes

For the three months ended AprilJuly 30,31, 2026 and 2025, we recorded income tax expense of $75$222 million and $5income tax benefit of $17 million, respectively, which reflects an effective tax rate of 10.7%12.6% and (0.56.5)%, respectively. For the sixnine months ended AprilJuly 30,31, 2026 and 2025, we recorded income tax expense of $56$278 million and $111$94 million, respectively, which reflects an effective tax rate of 4.9%9.6% and (35.6359.9)%, 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. For the three and sixnine months ended AprilJuly 30,31, 2025, the effective tax rate also included the effects of the non-deductible goodwill impairment.

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended AprilJuly 30,31, 2026, as compared to the prior-year period:

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the sixnine months ended AprilJuly 30,31, 2026, as compared to the prior-year period:

(1)Segment earnings (loss) from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, H3Cstock-based divestiturecompensation relatedexpense, severanceacquisition, costs,disposition, and other charges, and severance costs related to the cost reduction program, acquisition, disposition and other charges, and impairment charges.program.

Cloud & AI segment net revenue increased by $1,436$1.8 million,billion, or 22.9%,25.4%, primarily due to an increase in Server net revenue. Server net revenue increased by $1,345$1.8 million,billion, or 32.7%,35.3%, predominantly due to an increase in the average selling price. The increase in average selling price was dueprimarily todriven by commodity price increases, especially memory and SSDs.

Cloud & AI gross profit increased by $728$1.5 million,billion, or 48.2%,89.8%, primarily driven by increased net revenue. This increase was due to favorable mix of higher-margin revenues, partially offset by higher commodity and input costs.revenues.

Cloud & AI earnings from operations increased by $540$1.0 million,billion, or 130.4%,205.4%, primarily driven by higher gross profit, partially offset by an increase in operating expenses of $188$0.5 million,billion, or 17.1%,40.2%, primarily due to higher variable employee costs.

Cloud & AI segment net revenue increased by $1,259$3.1 million,billion, or 9.8%,15.4%, primarily due to an increase in Server net revenue. Server net revenue increased by $1,229$3.0 million,billion, or 14.5%,22.3%, predominantly due to an increase in the average selling price. The increase in average selling price was dueprimarily todriven by commodity price increases, especially memory and SSDs.

Cloud & AI gross profit increased by $851$2.4 million,billion, or 27.6%,49.6%, primarily driven by increased net revenue. This increase was due to favorable mix of higher-margin revenues, partially offset by higher commodity and input costs.

Cloud & AI earnings from operations increased by $638$1.7 million,billion, or 66.4%,114.2%, primarily driven by higher gross profit, partially offset by an increase in operating expenses of $213$0.7 million,billion, or 10.1%,20.8%, primarily due to higher variable employee costs.

As of AprilJuly 30,31, 2026, 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, 2025.

Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S. as of AprilJuly 30,31, 2026. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $312$447 million, during the first sixnine months of fiscal 2026. As of AprilJuly 30,31, 2026, we had a remaining authorization of approximately $3.3$3.2 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.

OnIn November 17, 2025 and November 28, 2025, we announced plans to divest our remaining investment in H3C’s issued share capital for approximately $1.4 billion. OnIn May 13, 2026, we closed on the sale and disposition of 13.8% of the total issued share capital of H3C for approximately $987 million. On May 28, 2026, the Company closed oncompleted the sale of theour remainingequity 5.2%interest ofin the total issued share capital of H3C for approximately $370 million.H3C. For more information, see Note 7, “Acquisitions and Dispositions” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

(1) The maximum borrowing amounts available under the commercial paper programs and revolving credit facility are $5.75 billion and $5.25 billion, respectively, as of both AprilJuly 30,31, 2026 and October 31, 2025. The combined borrowings between both sources cannot exceed $5.75 billion.

For the sixnine months ended AprilJuly 30,31, 2026, net cash provided by operating activities increased by $3.4$3.8 billion, as compared to the corresponding period in fiscal 2025. The increase was primarily due to the timing of vendor payments and higher net cash generated from operations, primarily due to the acquisition of Juniper Networks.operations.

DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue. Compared to the corresponding three-month period in fiscal 2025, the increasedecrease in DSO in the current period was primarily due to astronger decrease in early payments, along with the impact of the Merger.collections.

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 decreaseincrease in DOS in the current period was primarily due to higher inventory purchases to fulfill planned future shipments.

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 decreaseincrease in DPO in the current period was primarily due to higher paymentspurchases to contractsecure manufacturers.strategic component supply and fulfill backlog.

For the sixnine months ended AprilJuly 30,31, 2026, net cash used in financing activities increased by $0.6$6.3 billion, as compared to the corresponding period in fiscal 2025. This increase was primarily due to higher repayments of debt of $2.3$3.0 billion, partially offset by higherlower proceeds from debt, net of issuance costs of $2.0$2.8 billion,billion and higher cash utilized for stock-based award activities and share repurchases of $0.2$0.5 billion, as compared to the prior-year period.

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 sixnine months ended AprilJuly 30,31, 2026, FCF increased by $3.3$3.5 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.

Significant funding and liquidity activities for the sixnine months ended AprilJuly 30,31, 2026 were as follows: