HPE Tops Q2 Estimates as Revenues Jump 40% on Networking Strength

Hewlett Packard Enterprise HPE reported better-than-expected results for second-quarter fiscal 2026. The company’s non-GAAP earnings of 79 cents per share beat the Zacks Consensus Estimate by 46.3% and increased 107.9% year over year.HPE posted revenues of $10.6 billion for the quarter, beating the Zacks Consensus Estimate by 8.7%. The company’s revenues increased 40.0% year over year. HPE’s quarterly performance was supported by strong demand across the portfolio, with orders more than doubling year over year and driving a record backlog. Management also highlighted progress in Juniper integration and the Catalyst initiative, which remained ahead of schedule.HPE’s Segment-Wise PerformanceHewlett Packard’s Networking segment generated $2.7 billion in revenues in the second quarter of fiscal 2026, up 148.2% year over year. The segment’s operating profit margin was 21.6%, down from 25.0% in the year-ago quarter.           Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company QuoteWithin Networking, Campus & Branch revenues were $1.3 billion, up 50.2% year over year. Data Center Networking revenues were $320 million, up 233.3%, and Security revenues were $273 million, up 155.1%. Routing revenues were $775 million compared with $1 million in the year-ago quarter. The Cloud & AI segment reported $7.7 billion in revenues, up 22.9% year over year, with an operating profit margin of 12.4%, up from 6.6% in the prior-year period. Within Cloud & AI, Server revenues were $5.5 billion, up 32.7% year over year. Storage revenues totaled $1.2 billion, up 2.4%, while Financial Services contributed $0.9 billion, up 5.6% year over year. HPE’s Corporate Investments and Other revenues came in at $281 million, up 3.3% from the prior-year period.HPE’s Operating ResultsHewlett Packard’s non-GAAP gross profit for the second quarter of fiscal 2026 was $3.93 billion compared with $2.24 billion in the year-ago quarter, while the non-GAAP gross margin expanded to 36.9%, up 750 basis points year over year.The company’s non-GAAP operating profit was $1.4 billion compared with $613 million in the year-ago quarter. The non-GAAP operating margin improved to 13.3%, up 530 basis points from the year-ago quarter.HPE’s Balance Sheet and Cash FlowHewlett Packard ended the second quarter with $5.29 billion in cash and cash equivalents compared with $4.84 billion at the end of the previous quarter.In the second quarter, HPE generated $1.4 billion in cash from operating activities and produced $915 million in free cash flow, an increase of $1.8 billion from the prior-year period. The company returned $343 million through dividends and share repurchases during the quarter.HPE Updates FY26 and Q3 GuidanceHewlett Packard raised its outlook following the strong quarter and improved second-half visibility. For the third quarter of fiscal 2026, HPE expects revenues in the range of $11.5-$12.1 billion. The Zacks Consensus Estimate is pegged at $10.68 billion, indicating year-over-year growth of 16.92%.It anticipates GAAP earnings per share in the range of 84-89 cents and non-GAAP earnings per share of 88-93 cents. The Zacks Consensus Estimate is pegged at 57 cents per share, indicating year-over-year growth of 29.5%.For full-year fiscal 2026, HPE raised its revenue growth outlook to 29-33% and expects non-GAAP earnings per share of $3.35-$3.45. The Zacks Consensus Estimate is pegged at $2.41 per share, indicating year-over-year growth of 24.2%.The company also lifted its free cash flow outlook and now expects free cash flow to be at least $3.5 billion. Separately, HPE introduced a fiscal 2027 framework calling for revenue growth of 8-12% and free cash flow of at least $4.5 billion.Zacks Rank and Stocks to ConsiderHPE currently carries a Zacks Rank #3 (Hold).Micron Technology MU, Ciena CIEN and Amphenol APH are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. MU and CIEN each sport a Zacks Rank #1 (Strong Buy), while APH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Micron Technology shares have soared 262.8% in the year-to-date period. The company is scheduled to release third-quarter fiscal 2026 results on June 24. Ciena shares have returned 143.6% in the year-to-date period. The company is set to report second-quarter fiscal 2026 results on June 4.   Amphenol shares have gained 8.3% in the year-to-date period. 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