This article first appeared on GuruFocus.
HPE (NYSE:HPE) fell 3.14% premarket after third quarter revenue rose 34% to a record $12.2 billion, ahead of the $11.97 billion consensus, while orders grew 42%. Non-GAAP diluted EPS came in at $1.11 against $0.93 expected. GAAP diluted EPS of $1.06 included a $444 million gain on the sale of HPE's remaining H3C equity interest, worth $0.31 a share.
Cloud and AI revenue rose 25.4% to $9.0 billion and its operating margin more than doubled to 17.0% from 7.0%. GAAP gross margin reached 40.1%, up 1,090 basis points from a year earlier, and non-GAAP operating margin hit 16.2% against 8.5%. Networking revenue grew 74.9% to $2.9 billion, with routing up 270%, though segment operating margin held at 22.0% against 22.1%.
Inventory stood at $11.82 billion at quarter end against $6.35 billion at the October year-end, with accounts payable at $13.73 billion from $7.73 billion. Free cash flow came in at $958 million.
Chief financial officer Marie Myers cited "our order backlog at a record level" in raising the outlook. HPE lifted fiscal 2026 revenue growth guidance to 34% to 37%, non-GAAP EPS to $3.75 to $3.85, and free cash flow to at least $3.75 billion. Fiscal 2027 revenue growth is now framed at 13% to 17%.