Last Update 09 Dec 25

Fair value Decreased 0.84%

HPE: Networking And Supercomputing Partnerships Will Shape Outlook Amid Merger And Margin Risks

Analysts have modestly reduced their fair value estimate for Hewlett Packard Enterprise to $26.28 from $26.50, reflecting tempered expectations for revenue growth and profit margins, even as confidence in the companys networking and data center positioning supports a higher future earnings multiple.

Analyst Commentary

Recent research updates on Hewlett Packard Enterprise reflect a mixed but generally constructive view, with modestly higher price targets and one notable downgrade balancing out improving sentiment around networking and data center growth.

Bullish Takeaways

Bullish analysts are incrementally raising price targets into the mid to high $20s, suggesting room for upside relative to current trading levels as execution in networking improves.
Several firms highlight growing confidence in the company’s networking and data center switching outlook, particularly following the Juniper acquisition, which supports a higher long-term growth profile.
Expectations for mid single-digit revenue growth and EPS approaching the mid-$2 range over the next couple of years underpin the view that earnings power is underappreciated in the current valuation.
Improved sentiment and checks from the field are framed as evidence that the company is gaining momentum in strategic segments, potentially justifying a more premium multiple versus legacy hardware peers.

Bearish Takeaways

Bearish analysts are concerned that a memory supercycle will pressure hardware margins heading into 2026, driving downside risk to earnings and limiting multiple expansion.
Soft demand in non–artificial intelligence hardware is viewed as a headwind, raising the risk that growth outside of networking may undershoot current expectations.
Some research maintains only Neutral or Market Perform stances, signaling that while the long-term story is credible, near-term execution and margin resilience still need to be proven.
The prospect of lower gross margins across the broader hardware complex is cited as a factor that could trigger negative estimate revisions and valuation compression if cost pressures persist.

What's in the News

The U.S. forms a $1 billion partnership with AMD, HPE, Oracle and Oak Ridge National Laboratory to build two DOE supercomputers, including Lux, an AI focused system based on AMD MI355X chips and HPE infrastructure, expected online within six months (Reuters)
A federal judge allows state attorneys general to seek more information on the DOJ antitrust settlement over HPE’s $14 billion Juniper acquisition and to request a pause on further integration while the deal undergoes additional public interest review (Bloomberg)
HPE raises full year fiscal 2026 GAAP EPS guidance to a range of $0.62 to $0.82 and reaffirms a revenue growth outlook of 17% to 22% along with sharply higher operating profit growth
The board approves a 10% increase to HPE’s fiscal 2026 annual dividend and separately boosts the share repurchase authorization by $3 billion, lifting total buyback capacity to about $3.7 billion
HPE issues first quarter fiscal 2026 guidance calling for $9.0 billion to $9.4 billion in revenue and GAAP diluted EPS of $0.09 to $0.13, which frames expectations for near term growth and profitability

Valuation Changes

The fair value estimate has edged down slightly to $26.28 from $26.50, reflecting modestly softer assumptions for growth and profitability.
The discount rate has decreased slightly to about 10.16 percent from 10.55 percent, implying a marginally lower perceived risk profile.
Revenue growth has been revised down moderately to about 9.20 percent from 10.49 percent, signaling tempered expectations for top-line expansion.
The net profit margin has fallen meaningfully to about 5.29 percent from 6.50 percent, indicating a more conservative view on future profitability.
The future P/E has risen notably to about 19.8x from 16.4x, suggesting a higher expected earnings multiple despite the more cautious fundamental outlook.

Strategic moves in AI, high-performance networking, and cloud services are enhancing HPE's market position, driving more predictable, higher-margin revenue streams.
Operational efficiencies and cost-saving initiatives are expected to further improve margins, boost free cash flow, and support long-term earnings growth.
Heavy reliance on legacy hardware, acquisition risks, fierce competition, rising debt, and regulatory pressures threaten profitability, growth, and strategic flexibility.

Catalysts

About Hewlett Packard Enterprise

Provides solutions that allow customers to capture, analyze, and act upon data seamlessly in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan.What are the underlying business or industry changes driving this perspective?

The rapid adoption of AI and machine learning across industries is driving a significant increase in demand for high-performance compute and networking infrastructure, and Juniper's leading position in data center and AI networking (now part of HPE) is expected to expand HPE's total addressable market and support multi-year topline revenue growth and margin expansion in higher-value segments.
The ongoing acceleration of digital transformation is prompting enterprises to modernize IT architectures with hybrid and multi-cloud deployments; HPE's growth in hybrid cloud (e.g., GreenLake) and recurring software/services revenue positions it to capture more predictable, higher-margin revenues, improving overall earnings quality and visibility.
HPE's transition to an as-a-service model continues to succeed: annualized recurring revenue (ARR) and software/services ARR both rose sharply, leading to a greater mix of recurring, higher-margin revenue, which enhances net margins and supports EPS and free cash flow growth over time.
Strategic acquisitions and expansion in high-growth technologies-including the integration of Juniper, launches of next-gen Gen12 servers, and AI-driven management platforms-are enhancing HPE's competitive positioning in edge, networking, and AI, laying the groundwork for continued share gains and outsized revenue growth relative to traditional industry averages.
Ongoing cost optimization and operational efficiency initiatives (such as the Catalyst program and expected $600M+ in synergies from Juniper) are forecast to drive net margin improvement and increase free cash flow, strengthening HPE's long-term earnings power and potential for shareholder returns.

Hewlett Packard Enterprise Earnings and Revenue Growth

Hewlett Packard Enterprise Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Hewlett Packard Enterprise's revenue will grow by 10.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.4% today to 6.0% in 3 years time.
Analysts expect earnings to reach $2.7 billion (and earnings per share of $1.96) by about September 2028, up from $1.1 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $4.1 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.6x on those 2028 earnings, down from 27.7x today. This future PE is lower than the current PE for the US Tech industry at 24.3x.
Analysts expect the number of shares outstanding to grow by 1.6% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.02%, as per the Simply Wall St company report.

Hewlett Packard Enterprise Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Higher exposure to traditional server and hardware segments and only gradual scaling in higher-margin software and services means HPE remains vulnerable to the secular trend of enterprise workloads shifting to hyperscale public cloud providers, potentially exerting long-term downward pressure on revenue growth and net margins.
Successful integration of Juniper is critical-execution risk surrounding cost synergies, product harmonization, and salesforce unification threatens anticipated margin expansion and could result in higher operating expenses or revenue disruption in the medium term, delaying earnings growth and free cash flow improvements.
Competitive pressures in networking and AI-centric infrastructure, including rapid industry commoditization, cloud-native technology adoption, and pricing competition, may compress margins and restrict HPE's ability to maintain or grow market share, impacting both revenue and long-term earnings power.
Higher debt levels post-acquisition increase financial risk and the need for free cash flow generation to prioritize debt reduction over shareholder returns; adverse industry cycles or weaker-than-expected margin realization could compromise the company's ability to meet leverage targets, impacting net earnings.
Regulatory and macroeconomic risks-including increasing ESG scrutiny, potential new energy efficiency mandates for data centers, and ongoing global supply chain/geopolitical tensions-could elevate operating costs and disrupt hardware availability, eroding HPE's overall competitiveness and future profits.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $25.514 for Hewlett Packard Enterprise based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $19.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $44.4 billion, earnings will come to $2.7 billion, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 10.0%.
Given the current share price of $23.88, the analyst price target of $25.51 is 6.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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