AI demand lifts HPE and NetApp to record quarters, but investors sell both
Shares of Hewlett Packard Enterprise Co. and NetApp Inc. both fell in late trading today despite the two compute, storage and networking companies beating Wall Street expectations for their July quarters and raising their full-year outlooks.
For its fiscal third quarter, which ended on July 31, HPE reported adjusted earnings of $1.11 per share, up from 44 cents a year earlier, on revenue of $12.2 billion, up 34% year-over-year. Analysts were expecting 93 cents per share on revenue of $11.91 billion.
Unadjusted diluted earnings came in at $1.06 per share against 21 cents in the same quarter of fiscal 2025. Net earnings attributable to HPE were $1.54 billion, helped by a $444 million gain on the sale of an equity interest. Adjusted operating margin widened 770 basis points to 16.2%. Operating cash flow was $1.6 billion and free cash flow $1 billion, both up from a year ago.
Cloud and AI, the segment that holds the server business, was the larger of the two revenue engines at $9 billion, up 25.4% year-over-year. Servers accounted for $6.8 billion of that and grew 35.3%. Storage revenue rose 10.2% to $1.3 billion. Segment operating margin more than doubled to 17% from 7%.
