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HPE Stock Slides on Margin and Supply Chain Concerns Despite Record Q3 Revenue
Hewlett Packard Enterprise (HPE) stock fell sharply in after-hours trading Tuesday, as investor concerns over future profitability and supply chain issues outweighed a report of record quarterly revenue and an earnings beat.
Shares were down approximately 5.4% in extended trading after the company released its fiscal third-quarter 2026 results. The negative reaction highlights market sensitivity to forward-looking challenges, even in the face of strong current performance.
Strong Results Mask Underlying Concerns
Hewlett Packard Enterprise reported strong top- and bottom-line results for the quarter, handily beating analyst expectations. The company also posted its highest-ever quarterly revenue, driven by strong demand.
Key figures from the report include:
- Adjusted Earnings Per Share (EPS): $1.11, compared to a consensus estimate of $0.92.
- Revenue: $12.21 billion, surpassing the expected $11.93 billion and representing a 34% year-over-year increase.
- Order Growth: Orders grew 42% year-over-year, outpacing revenue growth and leading to a record-high order backlog.
Margin and Supply Headwinds
AdDuring the subsequent earnings call, management flagged two primary issues that appeared to spook investors. The company acknowledged that operating margins are likely to moderate in the fiscal fourth quarter due to a product mix shift toward lower-margin AI systems.
Furthermore, HPE continues to face supply chain bottlenecks. Management cited ongoing shortages of key components—including DDR5, DDR4, NAND flash, and wafer capacity—as a significant factor limiting its ability to convert its massive order backlog into recognized revenue. The gap between 42% order growth and 34% revenue growth underscored this challenge.
Updated Outlook and Oracle Partnership
Despite the headwinds, HPE provided an optimistic outlook. The company raised its full-year fiscal 2026 adjusted EPS guidance to a range of $3.75 to $3.85, up from a previous forecast of $3.35 to $3.45.
HPE also lifted its fiscal 2027 revenue growth outlook to a range of 13% to 17%. In a separate announcement, the company revealed an expanded multi-year partnership with Oracle, which will see HPE Juniper networking platforms deployed across Oracle's global AI data centers.
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