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Can HPE's AI and Juniper Bet Offset Slow Server and Hybrid Cloud Sales?
HPE's massive Juniper deal anchors its FY26 outlook, which also highlights key themes of AI infrastructure gains, GreenLake momentum, falling server revenue, and ongoing cost-cutting initiatives.
12/06/2025
By the numbers:
- Non-GAAP Diluted EPS (FY2026 Forecast): $2.20 to $2.40
- Revenue Growth (FY2026 Forecast): 17% to 22% (Year-over-Year, unnormalized)
- Free Cash Flow (FY2026 Forecast): $1.5 billion to $2.0 billion
- Annual Dividend Increase: 10%
- Share Repurchase Capacity: Authorized additional $3 billion
Key Highlights
- The integration of Juniper Networks is the single largest factor shaping the company’s financial trajectory and product portfolio for the coming years.
- While AI infrastructure sales remain strong and the backlog is impressive, the core server segment unexpectedly shrank in the quarter.
- Management’s ambitious FY2026 guidance shows confidence, but the forecast for first-quarter sales came in below what Wall Street expected.
- The strategy pivots heavily on the success of GreenLake, aiming to drive high-margin software and services revenue across the large installed customer base.
- A new, aggressive cost-reduction initiative called "Catalyst" is designed to improve operating leverage and enhance long-term profitability.
The News
Hewlett Packard Enterprise (HPE) wrapped up its fiscal year 2025 with mixed fourth-quarter results and announced its strategic roadmap for fiscal year 2026, headlined by the integration of Juniper Networks. The company delivered adjusted earnings that beat estimates, largely driven by the acquisition-fueled Networking segment, yet its crucial Server segment saw an unexpected decline. Full-year 2026 guidance for revenue and EPS signaled robust growth but still landed slightly below Street consensus, causing some immediate investor hesitation. The path forward is defined by capitalizing on AI, expanding the GreenLake ecosystem, and aggressively cutting operational costs. Find out more about HPE’s FY2026 strategic priorities
Analyst Take
The financial announcement from HPE is not a typical earnings report; it is a declaration of strategic transformation anchored by the acquisition of Juniper Networks. The message from CEO Antonio Neri is clear: HPE is repositioning itself as a leader in AI-native networking and hybrid cloud, while simultaneously optimizing its operational machinery to become faster and leaner.
The market reaction was muted and, in some ways, negative immediately following the announcement, and we must ask why. HPE posted an adjusted EPS beat for Q4, but key components of the business showed underlying weakness. Specifically, the Server segment, which is supposed to be benefiting from the AI infrastructure wave, saw revenue fall. Furthermore, Hybrid Cloud revenue - the core thesis behind the GreenLake transformation - also declined. This makes the ambitious, double-digit revenue growth forecast for FY2026 (17% to 22% without acquisition normalization) look like a high-stakes gamble dependent almost entirely on the success of the Juniper integration and a massive acceleration in high-margin businesses.
The integration of Juniper Networks is genuinely a game-changer, fundamentally changing HPE’s portfolio. HPE is architected to disrupt the legacy networking status quo by infusing AI throughout the stack. This is a necessary move. Networking has become the new IT bottleneck as data processing moves closer to the edge and AI models demand unprecedented bandwidth. By becoming a definitive leader in AI-native networking, HPE is ensuring it controls a more profitable and sticky piece of the digital infrastructure puzzle. The challenge now is moving from paper synergy to execution, selling this combined, AI-driven networking vision to the global installed base.
The momentum in the AI infrastructure market, specifically, is undeniable. HPE is capturing profitable growth by targeting specific, high-value customer segments like sovereign nations and large enterprises building their own models. The company reported a significant backlog in AI systems, showing that demand is present and persistent. However, the unexpected dip in the broader Server segment revenue suggests that the benefits of AI spending are currently focused on a few high-end, discrete GPU cluster deals, and not broadly lifting the traditional compute business. This dichotomy is a major risk: if AI revenue cannot quickly scale to compensate for a softening core compute business, the path to the FY26 revenue target becomes much steeper.
What was Announced
The strategic update detailed several core product and functional areas designed to drive future growth and profitability:
- AI-Native Networking Leadership: The completion of the Juniper Networks acquisition positions HPE as a new industry leader. The combined portfolio is aimed at delivering an AI-native experience across the campus, branch, data center switching, and wide-area routing infrastructure. This is designed to fuel networking innovation with AI and for AI.
- AI Infrastructure Focus: HPE will pursue explosive AI infrastructure growth by leveraging its high-performance compute heritage, specifically targeting sovereign cloud opportunities and large enterprise AI model builders. The company aims to deliver highly optimized AI solutions rather than just general-purpose AI hardware.
- GreenLake Acceleration: HPE is focused on growing its high-margin GreenLake software and services, which aim to deliver a unified cloud platform experience for enterprises. GreenLake creates crucial cross-sell opportunities for the newly combined networking and storage assets across HPE’s large customer base.
- Alletra MP Storage Expansion: HPE is prioritizing the capitalization of unstructured data market growth using its proprietary intellectual property through Alletra MP. This strategy is architected to transition customers to HPE-developed storage solutions, thereby reducing reliance on third-party products and boosting internal profitability.
- Catalyst Program: A new program is dedicated to optimizing the company’s cost structure and enhancing long-term operating leverage. This cost-reduction initiative anticipates delivering at least $350 million in gross savings by fiscal year 2028.
Strategic and Financial Context
The $3.7 billion total share repurchase authorization and the 10% dividend hike are clear signals of management confidence in future cash flow generation, even while integrating a massive acquisition. They are telling investors they believe the difficult restructuring work is behind them and the business is ready to generate substantial capital. The long-term goal of over $3.5 billion in free cash flow by FY2028 supports this narrative.
However, the mixed signals from the immediate guidance, particularly the lower-than-expected first-quarter sales forecast, create a tension point. While the Juniper deal is essential for long-term survival, it introduces near-term integration risk and noise into the financials. The market is looking for evidence that the acquisition-fueled growth is sustainable and that the high-margin GreenLake and AI businesses can quickly compensate for stagnation in traditional areas. This is the main performance anxiety. If the Hybrid Cloud segment continues to struggle, it undermines the central narrative of GreenLake’s value proposition and limits the cross-selling opportunities that justify the entire transition.
The market needs tangible proof points every quarter. Show us the GreenLake margin expansion. Show us that the networking portfolio is winning deals against entrenched rivals. Show us that the Catalyst program savings are real. The story is strong, but the execution window is narrow.
Looking Ahead
Based on what we are observing, HPE is attempting a comprehensive transformation. They have bought a future in networking, but now they must build a future in hybrid cloud and AI delivery. The mixed Q4 results and slightly light forward guidance show that the market is reserving judgment. The success of this story hinges on portfolio execution and aggressive cost control.
The key trend that we are going to be tracking is the performance of the non-GAAP operating profit margins in the networking segment post-Juniper integration. That number will tell us if the company is capturing the value and efficiency they promised. Based on our analysis of the market, our perspective is that HPE is making the right strategic bets, but its execution must be flawless in a competitive landscape where rivals are also aggressively pursuing AI spending. Going forward, we are going to be looking for how the company performs on customer retention and expansion in its GreenLake recurring revenue metrics. When you look at the market as a whole, the announcement today confirms that the future of enterprise IT is hybrid and AI-driven; HPE just paid a high price to secure its seat at the table. HyperFRAME will be closely monitoring how the company does on its promised synergies and free cash flow targets in future quarters.
We believe HPE can bolster its competitive position and AI ecosystem influence over the next 12 months by accelerating the integration of Juniper Networks to create a unified, AI-native networking portfolio that differentiates its full-stack GreenLake-delivered AI solutions against competitors such as Dell and Cisco. To address the decline in its crucial Server segment, HPE must swiftly integrate its leading HPE Private Cloud AI solutions, which combine its compute and storage with NVIDIA's AI software and hardware, directly into the GreenLake platform, which can make it the simplest, most flexible, and secure pay-as-you-go private AI offering for enterprises and sovereign customers.
Concurrently, aggressive cost-cutting measures, such as the Catalyst program and Juniper-related synergies, are vital to expand operating margins, providing the necessary capital to invest in AI-related R&D and potentially offset any near-term investor hesitation caused by the conservative FY26 guidance. This strategy shifts the focus from simple hardware sales to high-margin, recurring revenue services built around an integrated, end-to-end AI infrastructure.
Ron Westfall | VP and Practice Leader for Infrastructure and Networking
Ron Westfall is a prominent analyst figure in technology and business transformation. Recognized as a Top 20 Analyst by AR Insights and a Tech Target contributor, his insights are featured in major media such as CNBC, Schwab Network, and NMG Media.
His expertise covers transformative fields such as Hybrid Cloud, AI Networking, Security Infrastructure, Edge Cloud Computing, Wireline/Wireless Connectivity, and 5G-IoT. Ron bridges the gap between C-suite strategic goals and the practical needs of end users and partners, driving technology ROI for leading organizations.
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Harvy James Espellarga | Analyst In Residence - FinOps and Earnings Coverage
Harvy James Espellarga is a financial analyst with a proven track record of analysing the financial performance of tech companies. He brings a deep understanding of accountancy principles and specializes in FinOps, helping organizations optimize their cloud spending and maximize ROI. His insightful analyses have been featured in publications like Seeking Alpha, where he provides expert commentary on performance and operational strategies for tech companies. He also previously contributed to cutting-edge research on emerging industry trends at The Futurum Group, supporting leading research directors.
Steven Dickens | CEO HyperFRAME Research
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the CEO and Principal Analyst at HyperFRAME Research.
Ranked consistently among the Top 10 Analysts by AR Insights and a contributor to Forbes, Steven's expert perspectives are sought after by tier one media outlets such as The Wall Street Journal and CNBC, and he is a regular on TV networks including the Schwab Network and Bloomberg.