HPE beats, AI demand holds

Gross margins jumped sharply in the quarter — GAAP gross margin rose to 35.9% (up 670 basis points YoY) and non‑GAAP gross margin reached 36.6% (up 720 basis points YoY) — while cash flow from operations was $1.2 billion and free cash flow was $0.7 billion. (investors.hpe.com)) Networking emerged as the quarter’s profit engine, with reported networking revenue of $2.7 billion (up 151.5% YoY) and a networking operating margin of 23.7%; within that segment Campus & Branch sales were $1.2 billion and Data Center Networking was $444 million. (investors.hpe.com)) HPE said Cloud & AI revenue totaled $6.3 billion, down 2.7% year over year, but operating profit margin for that segment improved to 10.2% from 8.4% a year earlier. (investors.hpe.com)) Management reported a record AI‑systems backlog of about $5 billion and said AI systems orders in the quarter were roughly $1.2 billion and “largely enterprise‑driven,” with enterprise and sovereign customers accounting for a large share of demand. (bloomberg.com)) HPE raised its full‑year non‑GAAP EPS outlook to a $2.30–$2.50 range and lifted its Networking revenue growth target to roughly 68%–73% while reaffirming FY revenue growth of about 17%–22%. (streetinsider.com)) The company flagged ongoing component constraints, saying memory shortages and tight supply persist and that it has used pricing discipline and selective fulfillment to protect margins — comments management tied directly to the AI‑server backlog conversion timelines. (bloomberg.com)) HPE returned $348 million to shareholders in the quarter via dividends and share repurchases, and the board declared a regular cash dividend of $0.1425 per share payable around April 23, 2026 to holders of record on March 24, 2026. (investors.hpe.com))