To The Moon

$Hewlett Packard Enterprise(HPE)$ is scheduled to report its fiscal Q3 2025 earnings after the market closes on Wednesday, September 3, 2025. This report comes at a crucial time for the company, as it navigates a competitive market and aims to capitalize on the growing demand for AI infrastructure.

Revenue: Approximately $8.85 billion to $8.88 billion, which would represent a significant year-over-year increase of around 14-15%. This anticipated growth is largely driven by a strong order backlog and demand for AI servers.

Earnings Per Share (EPS): The consensus for adjusted EPS is in the range of $0.18 to $0.44. The wide range and the fact that most analysts expect a decline in EPS year-over-year suggest concern about profitability and margins.

Hewlett Packard Enterprise (HPE) Fiscal Q2 2025 Earnings Summary

Hewlett Packard Enterprise (HPE) reported its fiscal Q2 2025 earnings on June 3, 2025, with a mixed report that showed strong top-line performance but continued pressure on profitability. The company beat analyst expectations on non-GAAP EPS and revenue.

Key Financial Highlights:

Revenue: HPE reported revenue of $7.6 billion, representing a 7% year-over-year increase, and slightly exceeding the high end of its guidance. This growth was broad-based, with every product segment contributing.

Adjusted Earnings Per Share (EPS): The company’s non-GAAP diluted net EPS was $0.38, which was well above its guidance range of $0.28 to $0.34.

GAAP Results: On a GAAP basis, HPE reported a net loss per share of $(0.82), which was driven by a significant one-time, non-cash goodwill impairment charge. This highlights the importance of looking at both GAAP and non-GAAP figures to understand the company's operational performance.

Segmental Performance:

Server Business: Server revenue was up 7% year-over-year, but the segment's operating profit margin was a concern, down to 5.9% from 11.0% in the prior-year period. This was attributed to an unfavorable product mix and execution challenges.

Intelligent Edge: This segment was a standout, with revenue growing 8% year-over-year and an operating profit margin of 23.6%.

Hybrid Cloud: This segment saw the highest growth, with a 15% increase in revenue, while also improving its operating margin.

Cash Flow: HPE reported a negative free cash flow of $(847) million, a significant decline from the prior year, primarily due to inventory buildup and investments to support AI server demand.

AI Momentum: HPE announced that it had signed $1.1 billion in new AI systems orders during the quarter, bringing its cumulative AI order backlog to $3.2 billion. It also converted over $1 billion of that backlog into revenue.

Lessons Learned from the Guidance

The guidance provided by HPE for the rest of fiscal 2025 offered several key lessons for investors:

AI Is a Double-Edged Sword: While AI is a powerful growth driver for HPE, it comes with a significant challenge: profitability. The company’s guidance and commentary made it clear that while it has a massive AI order backlog, the high costs of AI components are severely impacting margins in the near term. The lesson here is that a large backlog is not enough; investors must scrutinize a company's ability to turn that backlog into profitable revenue.

Focus on Operational Discipline: Management explicitly stated that they are addressing the operational challenges that led to the weak server margins in Q2. They reiterated a target of reaching a 10% server operating margin by Q4, signaling a commitment to improving profitability through cost reduction programs and supply chain management. The lesson for investors is that a company’s ability to execute on its operational promises is just as important as its ability to secure new business.

Forward-Looking Metrics are Critical: The negative free cash flow was a concern, but management's guidance pointed to a projected improvement in the second half of the year as they fulfill the large AI orders and reduce inventory. This highlights the importance of looking at forward-looking metrics like backlog and guidance rather than just focusing on a single quarter’s cash flow.

Juniper Acquisition Is a Key Catalyst: HPE's management highlighted that the planned acquisition of Juniper Networks is on track to close by the end of fiscal year 2025. They see this as a strategic move that will strengthen their portfolio and contribute to long-term profitable revenue growth by shifting the business mix toward higher-margin networking solutions. This demonstrates that for companies in a consolidating industry, strategic acquisitions are a key part of their growth and profitability strategy.

Key Metrics and Analyst Expectations

Analysts are expecting a mixed quarter, with a decline in earnings despite an increase in revenue.

Beyond the headline numbers, investors should closely monitor the following:

AI Server Demand: This is the primary driver of optimism for HPE. Investors will be looking for specific details on the revenue contribution from its AI server business, the size of the backlog, and the company's ability to fulfill these orders in a timely manner.

Hewlett Packard Enterprise (HPE) is capitalising on the surging demand for artificial intelligence (AI)-driven technology with the release of its latest $NVIDIA(NVDA)$ Blackwell-powered graphics processing unit (GPU) servers.

Segmental Performance:

Server Business: The core of HPE's hardware business. A strong performance here is essential for meeting revenue targets. With a 13% market share, HPE is making significant strides in the server industry. The company reported an astonishing 29% increase in server revenue in the first quarter of fiscal 2025, fueled by its investments in hybrid cloud solutions, intelligent edge computing, and high-performance enterprise servers. HPE’s ability to cater to modern data centers and its aggressive expansion in AI-driven infrastructure make it a formidable contender.

Intelligent Edge: This segment, which includes Aruba networking, has been a key growth area. Investors will watch for continued momentum and strong operational earnings.

Hybrid Cloud and Financial Services: How these segments are performing will also provide insight into the company's diversification strategy and profitability.

Margins: A major point of concern. The high cost of components, particularly for AI servers, combined with competitive pricing pressures, has been squeezing margins for the entire industry (as evidenced by a recent disappointing report from competitor Dell). Investors will be focused on whether HPE can improve its gross and operating margins.

Guidance for Q4 2025 and FY 2026: The company’s outlook is the most important factor. Commentary on the full-year guidance, particularly concerning its AI-related sales and margin forecasts, will likely be the primary driver of stock movement.

Hewlett Packard Enterprise (HPE) Price Target

Based on 15 analysts from Tiger Brokers offering 12 month price targets for Hewlett Packard Enterprise in the last 3 months. The average price target is $23.29 with a high forecast of $29.00 and a low forecast of $16.00. The average price target represents a 3.18% change from the last price of $22.57.

Short-Term Trading Opportunities

HPE's stock has shown significant volatility around earnings. The post-earnings reaction can be strong, but not always positive, even with a beat.

Potential for a Sell-Off: A negative post-earnings reaction is a real possibility. Given the recent concerns about margins and the high cost of components (a theme highlighted by Dell's earnings), any miss on profitability or a weak outlook could lead to a sharp decline. Traders could consider a short position or bearish options strategies if they believe the company's margins will disappoint.

Potential for a Breakout: If HPE can demonstrate that it is successfully managing its costs and that the massive demand for its AI servers is translating into profitable growth, the stock could see a significant rally. A strong Q3 report combined with an optimistic forecast for the rest of the year could be a catalyst for a breakout.

Volatility Plays: For traders who want to capitalize on the potential for a large price swing without predicting the direction, options strategies like a straddle or strangle could be a viable option.

Hewlett Packard Enterprise Company (HPE) had 180-Day Historical Volatility (Parkinson) of 0.3958 for 2025-08-29.

It is important to note that the stock's recent price has been volatile. Due diligence is crucial, and any trading strategy should be based on a thorough understanding of the risks involved.

Technical Analysis - Exponential Moving Average (EMA)

As we can see that HPE is still making a positive momentum despite a pullback last week, and there is no significant downside in its share price, and if the AI optimism for AI server continued to grow strong, we could see HPE making a short price rally if the earnings comes in positive or even an earnings beat.

One thing we need to take note is the recent volatile price movement from HPE, if we could see a positive outlook and also a strong earnings, we could see a recovery of the AI related stocks as well.

Summary

Hewlett Packard Enterprise (HPE) is scheduled to report its fiscal Q3 2025 earnings after the market closes on September 3, 2025. The report is highly anticipated due to the company's significant AI server backlog and investor concerns about profitability.

Analysts expect a mixed report: revenue is projected to be around $8.85 billion, an increase of roughly 14% year-over-year, driven by strong AI server demand. However, adjusted EPS is anticipated to be between $0.18 and $0.44, representing a year-over-year decline.

Key metrics to watch are:

AI Server Revenue and Backlog: The company’s ability to turn its substantial AI orders into profitable revenue.

Margins: How HPE is managing high component costs for its AI servers, as this has been a concern for the entire industry.

Guidance: The company's outlook for Q4 and the full fiscal year will be the most crucial factor, especially regarding profitability and the timeline for the Juniper acquisition.

Given the mixed outlook and recent volatility, the stock's post-earnings movement will likely hinge on the profitability commentary and updated guidance. A positive surprise on margins could lead to a rally, while a disappointment could trigger a sell-off.

Appreciate if you could share your thoughts in the comment section whether you think HPE could provide a short rally if there is a positive outlook and also AI server demand fueled a positive earnings or even an earnings beat.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.