QS Research · Michael Burry's Scion Capital analyst template · 2006
Hewlett Packard Enterprise Co (HPE)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +15% · downside -21% · upside +41%
The market has re-rated HPE from AI momentum to value after a 39% drawdown even though Q3 FY2026 was a record with raised guidance; that leaves a possible mispricing but not a margin-of-safety long. On the section 13 TTM base (EBITDA $6.09B, net debt $14.02B, 1,327.46M shares), 13.5x EV/EBITDA gives $51.4 (+15%), 10x gives $35.3 (-21%), and 16.1x gives $63.3 (+41%), so reward/risk is roughly 2:1 but the base case is below the +30% long hurdle. The earnings are also fresh and adjusted: TTM net income $2.67B follows an FY2025 loss, P/E is 22.2x and EV/EBIT 28.2x, and the company has no demonstrated moat and carries Juniper debt. Watch, not long, until Q4 confirms sustainable margins and cash conversion or the price gives a real discount.
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 an enterprise IT infrastructure vendor that ended FY2025 (10-K dated 2025-12-18) with five reportable segments — Server, Hybrid Cloud, Networking, Financial Services and Corporate Investments and Other — having posted $34.30B of revenue versus $26.98B in FY2020, but with FY2025 operating income of -$437.0M and net income of -$59.0M after the Juniper Networks acquisition expanded networking and added debt. From Q1 FY2026 the structure collapses to three segments: Networking, Cloud & AI (Server + Hybrid Cloud + Financial Services merged) and Corporate Investments and Other. Financial Services leases and finances customer purchases, so operating cash flow ($2.92B in FY2025 versus $4.34B in FY2024) moves with that financing book and is not owner earnings; the business must be judged on earnings and on the financing book.
- ✓ 2. Competitive advantage
HPE competes as one vendor among many in every segment it serves, and the record shows scale without pricing power: revenue rose from $26.98B (FY2020) to $34.30B (FY2025) while operating income swung from -$329M to $2.19B and back to -$437M, never reaching an 8% operating margin. The only advantages the 10-K asserts (broad end-to-end portfolio, IP, R&D, global reach, partner ecosystem) are stated in identical boilerplate for two segments and are backed by no share, retention, or price-premium figure. Multiyear aaS contracts are the closest thing to switching costs, but the 10-K presents them as a revenue-recognition and renewals risk, not a moat. Verdict: no demonstrated durable advantage; a capital-intensive scale player in price-competitive markets.
- ✓ 3. 10-Q takeaways
The 10-Q for the quarter ended July 31, 2026 (filed September 3, 2026) shows revenue of $12,213 million, up 33.7% y/y, with gross margin at 40.1% (+10.9 pts) and GAAP operating margin at 11.4% (+8.7 pts) — growth is heavily M&A-driven (Networking +74.9% on Juniper) plus higher average selling prices in Cloud & AI (+25.4%). GAAP net earnings of $1,540 million include a $444 million one-off gain on the H3C equity sale, so the operating improvement should be read off the $1,393 million earnings from operations and the $1,979 million non-GAAP operating figure, not net income. Cash from operations was $1,641 million in the quarter and $4,229 million for nine months, but HPE carries a Financial Services lending book, so the reported $958 million quarterly free cash flow is not clean owner earnings. The 10-Q gives no numeric guidance; management only flags continued macro, tariff and memory-supply pressure on near-term revenue and margin.
- ✓ 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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