QS Research · Michael Burry's Scion Capital analyst template · 2006
Hewlett Packard Enterprise Co (HPE)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -21% · upside +20%
The market is not missing the record Q3 FY2026; it is refusing to pay a full hardware multiple for AI-server revenue that may be partly component-cost-driven and for a balance sheet levered by Juniper. On the section 13 base of TTM EBITDA $6.09B, today's 12.1x is the $44.77 price, the 10.0x downside is $35.31 (-21%) and the 14.0x upside is $53.66 (+20%), so the risk/reward is roughly 1:1, not a deep-value long. The operating catalysts are real (2026-11-23 Q4 report, raised FY2026/FY2027 guidance, Q4 cash return), but the rule is not met; this is a watch, not a pass. A long needs either a price closer to the $35 downside or evidence that the $6.09B TTM EBITDA base is trough and can grow without multiple expansion.
Key numbers
- Share price: $44.77
- Market cap: $59.43B
- Latest financial period: TTM to Jul 31, 2026
- Revenue (TTM): $41.87B
- EV / EBITDA (TTM): 12.1x
- P/E (TTM): 22.2x
- Price / book: 2.24x
The 15 boxes
- ✓ 1. Long-form business notes
HPE is a $34.30B-revenue (FY2025) enterprise IT vendor organized in FY2025 into five segments — Server, Hybrid Cloud, Networking, Financial Services and Corporate Investments and Other — and re-organizing into three (Networking, Cloud & AI, Corporate Investments and Other) starting Q1 fiscal 2026 after the Juniper Networks acquisition. Versus the FY2020 10-K's seven segments (Compute, HPC & MCS, Storage, A&PS, Intelligent Edge, FS, Corporate Investments), the portfolio has been consolidated and re-mixed toward Server and Networking products, with an in-house financing arm (FS) that funds customer purchases and GreenLake consumption. FY2025 revenue rose to $34.30B from $30.13B in FY2024, but operating income was -$437.0M and net income to common -$59.0M, with amortization of intangibles jumping to $511.0M from $267.0M and debt described as larger than normal because of Juniper.
- ✓ 2. Competitive advantage
HPE claims a broad end-to-end portfolio, IP/R&D and global reach/partner ecosystem as advantages, but the profit record shows no durable margin edge: operating income was -$437.0M in FY2025 after $2.19B in FY2024, on revenue of $34.30B, and was also negative in FY2020. Competition is broad and price-based, with Dell, Super Micro, Cisco, Lenovo, Broadcom, IBM, Nutanix, Pure Storage, AWS, Azure, Arista and Huawei among the named rivals. Multiyear GreenLake/networking contracts give recurring revenue, but the 10-K says results still depend on customers continuing to purchase over the contract life. I see no durable competitive advantage from these sources.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (quarter ended July 31, 2026) was a record quarter: revenue $12,213 million, up 33.7% year over year, GAAP gross margin 40.1% (+10.9 pts) and GAAP operating margin 11.4% (+8.7 pts), driven by higher average selling prices in Cloud & AI and the Juniper Networks merger in Networking. GAAP EPS of $1.06 and net earnings of $1,540 million include a $444 million H3C equity-sale gain booked in the quarter, so operating strength is better read off non-GAAP operating margin of 16.2% and non-GAAP EPS of $1.11. Q3 operating cash flow was $1,641 million and free cash flow $958 million; capital returns to common shareholders were $324 million with roughly $3.2 billion of repurchase authorization left at July 31, 2026. Management raised FY2026 and FY2027 guidance, but flagged elevated inventory from GPU transitions and memory-component shortages.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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