Hewlett Packard Enterprise Co. beat Wall Street’s expectations as it delivered its third-quarter financial results today, and its stock moved slightly higher even though its revenue guidance for the current quarter came up short.

The computer server and networking firm reported earnings before certain costs such as stock compensation of 44 cents per share on revenue of $9.14 billion, with sales rising 19% from a year earlier. Those results were better-than-expected, with analysts looking for earnings of just 41 cents on revenue of $8.84 billion.

The strong results boosted HPE’s bottom line, and it reported net income for the quarter of $276 million, reversing from a loss of $1.07 billion in the year-ago quarter. HPE President and Chief Executive Antonio Neri (pictured) said the improvement in profitability was due to its record-breaking quarter revenue. “Customer demand stretched broadly across our portfolio and was particularly strong in our server and networking segments,” he said.

The lion’s share of HPE’s revenue came from its server business, where it has enjoyed a lot of momentum thanks to demand for artificial intelligence servers equipped with graphics processing units that can handle large language models. The segment delivered $4.94 billion in revenue during the quarter, up 16% from a year earlier and well ahead of the Street’s consensus estimate of $4.72 billion.

During the quarter, HPE achieved a major milestone when it finally closed on its long and drawn-out $14 billion acquisition of Juniper Networks Inc. The deal represented a merger of the second- and third-largest wireless networking providers in the U.S., and analysts believe it will put the newly combined company in a much better position to take on market leader Cisco Systems Inc.

With that acquisition done and dusted, HPE saw fit to rename its “Intelligent Edge” business segment. It’s now known as the Networking business, and it was the best-performing segment during the quarter, with revenue rising 54% from a year earlier, to $1.7 billion. The numbers were boosted because they include the consolidation of Juniper’s financial results from the period between July 2 and July 31.

HPE’s two other business segments were less impressive, but they did grow. Hybrid cloud revenue came to $1.5 billion, up 12% from one year earlier, while the smaller financial services unit delivered $886 million in sales, inching up just 1% from last year.

Constellation Research Inc. analyst Holger Mueller said the closing of the Juniper acquisition marks the beginning of a new chapter in HPE’s long story, giving it a second significant growth driver in networking to go alongside its server segment.

“Growth in server sales was fueled by the incessant demand for AI and related systems, while the networking segment was driven almost entirely by the addition of Juniper,” the analyst said. “What works in HPE’s favor is that the networking segment’s profitability is about three times that of the server segment, where margins are low. So going forward, Juniper will help HPE to become not only much larger, but also much more profitable than it was before.”

The results were all the more impressive because they come at a time when there’s still plenty of uncertainty and speculation around U.S. President Donald Trump’s continuously evolving tariff policies, which could yet have a detrimental impact on HPE’s business. For now, some technology hardware is temporarily exempted from the heftiest tariffs due to the ongoing Section 232 investigations into electronic products such as semiconductors. The government is reportedly looking into whether or not imports of certain products could be a threat to its national security.

On a conference call with analysts, Neri said he thinks it will still be some time before those investigations are resolved. “In the context of the next quarter, which is really the next two months, we see no impact,” he told analysts.

Despite that, HPE’s guidance for the current quarter was mixed. It’s looking for earnings of between 56 and 60 cents per share, ahead of the Street’s forecast of 56 cents, but in terms of revenue, it’s targeting $9.7 billion to $10.1 billion, which is lower than the analysts’ $10.11 billion target.

For the full year, the company raised its earnings guidance to a range of $1.88 to $1.92 per share, up from an earlier forecast of $1.78 to $1.90 per share. In terms of revenue, it’s forecasting growth of between 14% and 16%, up from an earlier range of 7% to 9%. The reason for that change is simple. “We are raising our guidance because we are consolidating the Juniper results into our numbers,” Neri explained.

HPE’s stock initially declined 2%, but later reversed that trend and was up just over 1% in extended trading. In the year to date, the stock has gained just over 7%, trailing the broader S&P 500, which has gained more than 9% for the year.

Photo: SiliconANGLE