HPE Falls After Outlook Disappoints on Slower Server Deals

(Bloomberg) — Hewlett Packard Enterprise Co. shares dropped in premarket trading on Friday after the company gave an outlook for sales in the current quarter that fell short of high expectations for the AI server business.

Revenue will be $9 billion to $9.4 billion and profit, excluding some items, will be 57 cents to 61 cents in the period ending in January, HPE said Thursday in a statement. Analysts, on average, projected sales of $9.88 billion and profit of 53 cents, according to data compiled by Bloomberg.

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Sales in the fiscal fourth quarter, which ended Oct. 31, also missed analysts’ estimates as some deals for servers to power artificial intelligence workloads were pushed into 2026, Chief Executive Officer Antonio Neri said in an interview. One transaction in Europe is running late because of issues with a data center not being ready, he said, and agreements with the US government were delayed by the federal government shutdown.

“We feel good about that conversion” of the deal in Europe, he said. “It was just a timing issue.”

Still, investors appeared concerned by the outlook. The shares dropped as much as 9.3% in premarket trading on Friday after closing at $22.90 in New York. The stock had gained 6.7% this year through Thursday’s close.

HPE continues to see “substantial interest” in its AI servers, particularly from governments and business customers, Chief Financial Officer Marie Myers said in a conference call with analysts after the results were released. “It is worth noting that we expect demand to remain uneven, as some of our largest sovereign customers are placing orders with extended lead times, which may defer shipments to future periods,” she said.

The Texas-based company, one of the largest makers of computing equipment, also is betting on networking as a major prong of its future expansion with the July acquisition of Juniper Networks Inc. for about $13 billion.

Margins have improved as a result of cost-cutting measures and because the company is selling more profitable networking gear since the completion of the Juniper purchase. “We are now at the core a networking-centric company,” Neri said.

HPE booked another $2 billion in orders for AI servers in the quarter. Quarterly revenue increased 14% to $9.68 billion, compared with an average estimate of $9.9 billion. Profit was 62 cents a share. Analysts, on average, estimated 58 cents.