What changed in this filing

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Item 1. Financial Statements

2022-03-03 compared with 2021-09-03 · 308 added, 437 removed, 736 unchanged (50% of the section changed)

Financial Statements

Condensed Consolidated Statements of Earnings for the three and nine months ended July 31, 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended July 31, 2021 and 2020 (Unaudited)

Condensed Consolidated Balance Sheets as of July 31, 2021 (Unaudited) and October 31, 2020 (Audited)

Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended July 31, 2021 and 2020 (Unaudited)

Condensed Consolidated Statements of Earnings for the three months ended January 31, 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income for the three months ended January 31, 2022 and 2021 (Unaudited)

Condensed Consolidated Balance Sheets as of January 31, 2022 (Unaudited) and October 31, 2021 (Audited)

Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity for the three months ended January 31, 2022 and 2021 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

8 unchanged sentences

Stockholders' Equity

Net Earnings (Loss) Per Share

Net Earnings Per Share

Litigation and Contingencies

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

Three Months Ended July 31, Nine Months Ended July 31,

2021 2020 2021 2020

For the three months ended January 31,

In millions, except per share amounts

10 unchanged sentences

Amortization of intangible assets 73 110

Impairment of goodwill — — — 865

Transformation costs 111 311

Disaster charges 5 2 6 24

Acquisition, disposition and other related charges 7 18

Total costs and expenses 6,513 6,611

Earnings (loss) from operations 282 12 782 ( 474 )

Earnings from operations 448 222

Interest and other, net ( 5 ) ( 44 )

2 unchanged sentences

Earnings from equity interests 31 26

Earnings (loss) before taxes 406 ( 34 ) 899 ( 567 )

(Provision) benefit for taxes ( 14 ) 43 ( 25 ) 88

Net earnings (loss) $ 392 $ 9 $ 874 $ ( 479 )

Net earnings (loss) per share:

Earnings before benefit for taxes 493 205

Benefit for taxes 20 18

Net earnings $ 513 $ 223

Net earnings per share:

Basic $ 0.39 $ 0.17

Diluted $ 0.39 $ 0.17

Weighted-average shares used to compute net earnings (loss) per share:

Weighted-average shares used to compute net earnings per share:

Basic 1,304 1,300

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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

July 31, Nine Months Ended

2021 2020 2021 2020

Net earnings (loss) $ 392 $ 9 $ 874 $ ( 479 )

Other comprehensive income (loss) before taxes:

For the three months ended January 31,

Net earnings $ 513 $ 223

Other comprehensive income before taxes:

Change in net unrealized gains (losses) on available-for-sale securities:

Net unrealized gains (losses) arising during the period ( 1 ) 3

(Gains) losses reclassified into earnings — ( 1 ) — ( 8 )

1 5 ( 1 ) ( 8 )

Change in net unrealized gains (losses) on cash flow hedges:

1 unchanged sentence

Net (gains) losses reclassified into earnings ( 201 ) 278

65 ( 214 ) 79 ( 126 )

Change in unrealized components of defined benefit plans:

2 unchanged sentences

Curtailments, settlements and other 1 1

76 49 243 181

Change in cumulative translation adjustment ( 11 ) 21

Other comprehensive income (loss) before taxes 144 ( 159 ) 341 1

Other comprehensive income before taxes 50 45

(Provision) benefit for taxes ( 13 ) ( 2 )

Other comprehensive income (loss), net of taxes 131 ( 131 ) 308 14

Comprehensive income (loss) $ 523 $ ( 122 ) $ 1,182 $ ( 465 )

Other comprehensive income, net of taxes 37 43

Comprehensive income $ 550 $ 266

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

(Unaudited) (Audited)

5 unchanged sentences

Inventory 5,321 4,511

Assets held for sale 1 77

Other current assets 2,913 2,460

21 unchanged sentences

HPE stockholders' equity:

Preferred stock, $ 0.01 par value ( 300 shares authorized;

Common stock, $ 0.01 par value ( 9,600 shares authorized;

1,307 and 1,287 shares issued and outstanding at July 31, 2021 and October 31, 2020, respectively)

1,300 and 1,295 shares issued and outstanding at January 31, 2022 and October 31, 2021, respectively)

Additional paid-in capital 28,422 28,470

6 unchanged sentences

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended July 31,

For the three months ended January 31,

Cash flows from operating activities:

Net earnings (loss) $ 874 $ ( 479 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Net earnings $ 513 $ 223

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 621 674

Impairment of goodwill — 865

Stock-based compensation expense 128 113

1 unchanged sentence

Restructuring charges 37 232

Deferred taxes on earnings (loss) ( 156 ) ( 214 )

Deferred taxes on earnings 37 ( 71 )

Earnings from equity interests ( 31 ) ( 26 )

Dividends received from equity investees 38 35

Other, net ( 27 ) 65

7 unchanged sentences

Other assets and liabilities ( 627 ) ( 62 )

Net cash provided by operating activities 2,915 1,493

Net cash (used in) provided by operating activities ( 76 ) 963

Cash flows from investing activities:

1 unchanged sentence

Proceeds from sale of property, plant and equipment 123 113

Purchases of available-for-sale securities and other investments ( 44 ) ( 78 )

Maturities and sales of available-for-sale securities and other investments 11 29

Purchases of investments ( 21 ) ( 7 )

Proceeds from maturities and sales of investments 44 1

Financial collateral posted ( 10 ) ( 266 )

Financial collateral received 153 20

Payments made in connection with business acquisitions, net of cash acquired ( 133 ) ( 13 )

Net cash used in investing activities ( 335 ) ( 652 )

7 unchanged sentences

Cash dividends paid to shareholders ( 155 ) ( 155 )

Net cash (used in) provided by financing activities ( 167 ) 4,522

Increase in cash, cash equivalents and restricted cash 1,031 4,861

Net cash provided by (used in) financing activities 355 ( 459 )

Decrease in cash, cash equivalents and restricted cash ( 56 ) ( 148 )

Cash, cash equivalents and restricted cash at beginning of period 4,332 4,621

1 unchanged sentence

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Three Months Ended July 31, 2021 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

For the three months ended January 31, 2022 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

Comprehensive

1 unchanged sentence

In millions, except number of shares in thousands

Balance at April 30, 2021 1,304,138 $ 13 $ 28,538 $ ( 8,229 ) $ ( 3,762 ) $ 16,560 $ 51 $ 16,611

Balance at October 31, 2021 1,294,634 $ 13 $ 28,470 $ ( 5,597 ) $ ( 2,915 ) $ 19,971 $ 46 $ 20,017

Net earnings 513 513 1 514

4 unchanged sentences

Issuance of common stock in connection with employee stock plans and other 13,449 26 26 26

Repurchases of common stock ( 7,824 ) ( 120 ) ( 120 ) ( 120 )

Cash dividends declared ($ 0.12 per share)

( 155 ) ( 155 ) ( 155 )

Balance at July 31, 2021 1,307,063 $ 13 $ 28,632 $ ( 7,994 ) $ ( 3,631 ) $ 17,020 $ 53 $ 17,073

Balance at January 31, 2022 1,300,259 $ 13 $ 28,422 $ ( 5,239 ) $ ( 2,878 ) $ 20,318 $ 47 $ 20,365

) Represents the impact of the adoption of the accounting standard on the measurement of credit losses on financial instruments.

Nine Months Ended July 31, 2021 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

For the three months ended January 31, 2021 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

Comprehensive

12 unchanged sentences

( 25 ) ( 25 ) ( 25 )

Balance at July 31, 2021 1,307,063 $ 13 $ 28,632 $ ( 7,994 ) $ ( 3,631 ) $ 17,020 $ 53 $ 17,073

(1) Represents the impact of the adoption of the accounting standard on the measurement of credit losses on financial assets.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Three Months Ended July 31, 2020 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

Comprehensive

Interests Total

In millions, except number of shares in thousands

Balance at April 30, 2020 1,282,253 $ 13 $ 28,207 $ ( 8,385 ) $ ( 3,625 ) $ 16,210 $ 48 $ 16,258

Net earnings 9 9 3 12

Other comprehensive loss ( 131 ) ( 131 ) ( 131 )

Comprehensive income (loss) ( 122 ) 3 ( 119 )

Stock-based compensation expense 55 55 55

Tax withholding related to vesting of employee stock plans ( 7 ) ( 7 ) ( 7 )

Issuance of common stock in connection with employee stock plans and other 3,753 20 ( 1 ) 19 19

Balance at July 31, 2020 1,286,006 $ 13 $ 28,275 $ ( 8,377 ) $ ( 3,756 ) $ 16,155 $ 51 $ 16,206

Nine Months Ended July 31, 2020 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated

Comprehensive

Interests Total

In millions, except number of shares in thousands

Balance at October 31, 2019 1,294,369 $ 13 $ 28,444 $ ( 7,632 ) $ ( 3,727 ) $ 17,098 $ 51 $ 17,149

Net loss ( 479 ) ( 479 ) 7 ( 472 )

Other comprehensive income 14 14 14

Comprehensive income (loss) ( 465 ) 7 ( 458 )

Stock-based compensation expense 216 216 216

Tax withholding related to vesting of employee stock plans ( 85 ) ( 85 ) ( 85 )

Issuance of common stock in connection with employee stock plans and other 16,393 46 46 1 47

Repurchases of common stock ( 24,756 ) ( 346 ) ( 346 ) ( 346 )

Cash dividends declared ($ 0.24 per share)

( 309 ) ( 309 ) ( 8 ) ( 317 )

Effects of adoption of accounting standard updates (1)

43 ( 43 ) — —

Balance at July 31, 2020 1,286,006 $ 13 $ 28,275 $ ( 8,377 ) $ ( 3,756 ) $ 16,155 $ 51 $ 16,206

(1) Represents the impact of the adoption of an accounting standard update that allows for the reclassification of stranded tax effects from accumulated other comprehensive loss to

accumulated deficit.

Balance at January 31, 2021 1,300,496 $ 13 $ 28,427 $ ( 8,332 ) $ ( 3,896 ) $ 16,212 $ 47 $ 16,259

(1) Represents the impact of the adoption of the accounting standard on the measurement of credit losses on financial instruments.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

3 unchanged sentences

Hewlett Packard Enterprise enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future.

Hewlett Packard Enterprise's customers range from small- and medium-sized businesses ("SMBs") to large global enterprises and governmental entities.

On November 1, 2015, the Company became an independent publicly-traded company through a pro rata distribution by HP Inc.

("former Parent" or "HPI"), formerly known as Hewlett-Packard Company ("HP Co."), of 100% of the outstanding shares of Hewlett Packard Enterprise Company to HP Inc.'s stockholders (the "Separation").

On July 1, 2021, the Company entered into a definitive agreement to acquire Zerto Ltd., an industry leader in cloud data management and protection, in a transaction valued at $ 374 million.

The transaction closed on August 31, 2021.

Zerto's results of operations will be included within the Company's Storage segment.

This acquisition expands HPE GreenLake and continues to deliver on Storage’s shift to a cloud-native, software-defined data services business.

During the third quarter of fiscal 2021, the Company completed the acquisitions of Determined AI Inc., a leading player in the evolving machine learning software ecosystem and Ampool Inc., an innovative developer of a data platform designed to deliver a cloud-native, high performance Structured Query Language (“SQL”) analytics engine, for a purchase consideration of $ 117 million, which has primarily been allocated to goodwill of $ 86 million and amortizable intangible assets of $ 24 million.

Determined AI’s results of operations have been included with High Performance Computing & Mission-Critical Solutions (HPC & MCS) segment.

HPE will combine Determined AI’s unique software solution with its world-leading artificial intelligence and high performance computing offerings to enable machine learning engineers to easily implement and train machine learning models to provide faster and more accurate insights from their data in almost every industry.

Ampool's results of operations have been included in the HPE Ezmeral software organization within Corporate Investments and Other segment and will play a pivotal role in accelerating hybrid analytics for customers.

Subsequent event

On September 7, 2021, the Company expects to redeem all $ 500 million aggregate principal amount of its outstanding 3.5 % Notes due October 2021, and all $ 800 million aggregate principal amount of its outstanding Floating Rate Notes due October 2021.

Basis of Presentation

Hewlett Packard Enterprise's customers range from small- and medium-sized businesses to large global enterprises and governmental entities.

Basis of Presentation and Consolidation

The Condensed Consolidated Financial Statements of the Company were prepared in accordance with United States ("U.S.") Generally Accepted Accounting Principles ("GAAP").

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements of Hewlett Packard Enterprise contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial position as of July 31, 2021 and October 31, 2020, its results of operations for the three and nine months ended July 31, 2021 and 2020, its cash flows for the nine months ended July 31, 2021 and 2020, and its statements of stockholders' equity for the three and nine months ended July 31, 2021 and 2020.

The results of operations for the three and nine months ended July 31, 2021 and the cash flows for the nine months ended July 31, 2021 are not necessarily indicative of the results to be expected for the full year.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020, including "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures About Market Risk" and the Consolidated Financial Statements and notes thereto included in Items 7, 7A and 8, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries and affiliates in which the Company has a controlling financial interest or is the primary beneficiary.

The Company’s unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries and affiliates in which the Company has a controlling financial interest or is the primary beneficiary.

All intercompany transactions and accounts within the consolidated businesses of the Company have been eliminated.

The Company consolidates a Variable Interest Entity (“VIE”) where it has been determined that the Company is the primary beneficiary of the entity’s operation.

In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its variable interest holders.

The Company also evaluates its economic interests in the VIE.

The Company accounts for investments in companies over which it has the ability to exercise significant influence but does not hold a controlling interest under the equity method of accounting, and the Company records its proportionate share of income or losses in Earnings from equity interests in the Condensed Consolidated Statements of Earnings.

Non-controlling interests are presented as a separate component within Total stockholders' equity in the Condensed Consolidated Balance Sheets.

Net earnings attributable to non-controlling interests are recorded within Interest and other, net in the Condensed Consolidated Statements of Earnings and are not presented separately, as they were not material for any periods presented.

Segment Realignment and Reclassifications

Effective at the beginning of the first quarter of fiscal 2021, HPE implemented certain organizational changes to align its segment financial reporting more closely with its current business structure.

These organizational changes are:

(i) the transfer of the lifecycle event services business, previously reported within the Advisory and Professional Services ("A & PS") reportable segment to Compute, Storage and HPC & MCS reportable segments;

(ii) the transfer of certain software and related services business, previously reported within the Compute, Storage and A & PS reportable segments to the Corporate Investments and Other reportable segment, to form a new Software operating segment;

and (iii) the transfer of the remaining A & PS operating segment, previously reported as a separate reportable segment, to the Corporate Investments and Other reportable segment.

As a result of these changes, the Corporate Investments and Other Segment now includes the A & PS operating segment, the Communications and Media Solutions operating segment, the Software operating segment, and Hewlett Packard Enterprise Labs which is responsible for research and development.

Additionally, effective at the beginning of the first quarter of fiscal 2021, the Company has excluded stock-based compensation expense from its segment earnings from operations.

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue, operating profit and total assets for each of the segments as described above.

These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share ("EPS") or total assets.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements of Hewlett Packard Enterprise contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial position as of January 31, 2022 and October 31, 2021, its results of operations for the three months ended January 31, 2022 and 2021, its cash flows for the three months ended January 31, 2022 and 2021, and its statements of stockholders' equity for the three months ended January 31, 2022 and 2021.

The results of operations for the three months ended January 31, 2022 and the cash flows for the three months ended January 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Securities and Exchange Commission (“SEC”) on December 10, 2021.

Significant Accounting Policies

Except for the change in certain accounting policies upon adoption of the accounting standards described below, there have been no significant changes to the Company's significant accounting policies described in PART II, Item 8, Note 1, "Overview and Summary of Significant Accounting Policies", of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

As of November 1, 2021, the Company increased its expected useful life of new servers and storage equipment assets from four years to five years .

Concurrently, the Company completed an assessment of its existing server and storage equipment assets and extended the remaining useful lives of such assets by one year .

The effects of this change in estimate reduced depreciation expense and increased net income and basic and diluted earnings per share by immaterial amounts for the three months ended January 31, 2022, and are expected to have an immaterial impact on net income and basic and diluted earnings per share for fiscal 2022.

There have been no other changes to the Company's significant accounting policies described in PART II, Item 8, Note 1, "Overview and Summary of Significant Accounting Policies", of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

Recently Adopted Accounting Pronouncements

In January 2021, the FASB issued guidance to clarify that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment can apply certain optional expedients and exceptions mentioned in its reference rate reform guidance even though they do not reference to LIBOR or a rate being discontinued.

This guidance was effective upon issuance.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Condensed Consolidated Financial Statements upon adoption.

In December 2019, the FASB amended the existing accounting standards for income taxes.

The amendments clarify and simplify the accounting for income taxes by eliminating certain exceptions to the general principles.

The Company adopted the

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

guidance in the first quarter of fiscal 2021 and there was no material impact on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued guidance on a customer's accounting for implementation costs incurred in cloud-computing arrangements that are hosted by a vendor.

Certain types of implementation costs should be capitalized and amortized over the term of the hosting arrangement.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no material impact on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurements and defined benefit pension plans.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Condensed Consolidated Financial Statements.

However, the Company expects to have additional disclosures relating to retirement and post-retirement benefit plans in its Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

In June 2016, the FASB amended the existing accounting standards for the measurement of credit losses with additional amendments in 2018, 2019 and 2020.

These amendments primarily require the measurement and recognition of current expected credit losses for financial assets held at amortized cost.

The amended accounting standard replaces the existing incurred loss impairment model with an expected loss model, which requires the use of forward-looking information to calculate credit loss estimates.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

These changes will result in earlier recognition of credit losses.

The Company adopted the Current Expected Credit Losses standard (the “CECL standard”) as of November 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment recorded to the opening balance of Accumulated deficit within stockholders’ equity in the Condensed Consolidated Balance Sheets.

The cumulative effect of adopting the CECL standard resulted in an increase of $ 28 million to the allowance for expected credit losses within financing receivables, and a corresponding increase of $ 25 million, net of $ 3 million of deferred taxes to Accumulated deficit as of November 1, 2020.

The allowance for expected credit losses related to accounts receivables is comprised of a general reserve and a specific reserve.

The Company may record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position.

If there are additional changes in circumstances related to the specific customer, the Company further adjusts estimates of the recoverability of receivables.

The Company maintains an allowance for credit losses for all other customers based on a variety of factors, including the use of third-party credit risk models that generate quantitative measures of default probabilities based on market factors, the financial condition of customers and the length of time receivables are past due.

These qualitative factors are subjective and require a degree of management judgement.

The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable.

The Company establishes an allowance for expected credit losses related to accounts receivable, including unbilled receivables.

The allowance for expected credit losses related to financing receivables is comprised of a general reserve and a specific reserve.

The Company establishes a specific reserve for financing receivables with identified exposures, such as customer defaults, bankruptcy or other events, that make it unlikely the Company will recover its investment.

For individually evaluated receivables, the Company determines the expected cash flow for the receivable, which includes consideration of estimated proceeds from disposition of the collateral and calculates an estimate of the potential loss and the probability of loss.

For those accounts where a loss is considered probable, the Company records a specific reserve.

The Company maintains a general reserve using a credit loss model on a regional basis and bases such percentages on several factors, including consideration of historical credit losses and portfolio delinquencies, trends in the overall weighted-average risk rating of the portfolio, current economic conditions, and forward-looking information, including reasonable and supportable forecasts.

The Company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long term trends.

The Company excludes accounts evaluated as part of the specific reserve from the general reserve analysis.

The Company generally writes off a receivable or records a specific reserve when a receivable becomes 180 days past due, or sooner if the Company determines that the receivable is not collectible.

The Company’s debt securities are generally considered available-for-sale and are reported at fair value with unrealized gains and losses, net of applicable taxes, recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.

Realized gains and losses for available-for-sale securities are calculated based on the specific identification method and included in Interest and other, net in the Condensed Consolidated Statements of Earnings.

The Company monitors its investment portfolio for potential impairment on a quarterly basis.

When the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be due to credit-related factors, the Company recognizes the impairment by way of an allowance for credit loss in Interest and other, net in the Condensed Consolidated

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Statement of Earnings while the impairment that is not credit related is recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.

Recently Enacted Accounting Pronouncements

In July 2021, the Financial Accounting Standards Board ("FASB") issued guidance that requires lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease, if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss.

The Company adopted the guidance in the first quarter of fiscal 2022 on a prospective basis, and there was no material impact on the Company’s Condensed Consolidated Financial Statements.

In January 2020, the FASB issued guidance to clarify certain interactions between the guidance to account for equity securities, the guidance to account for investments under the equity method of accounting, and the guidance to account for derivatives and hedging.

The new guidance clarifies the application of measurement alternatives and the accounting for certain forward contracts and purchased options to acquire investments.

The Company is required to adopt the guidance in the first quarter of fiscal 2022, though early adoption is permitted.

The Company does not expect the impact on adoption of these amendments on its Consolidated Financial Statements to be material.

The Company adopted the guidance in the first quarter of fiscal 2022, and there was no material impact on the Company's Condensed Consolidated Financial Statements.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Segment Information

As described in Note 1, "Overview and Summary of Significant Accounting Policies", effective at the beginning of the first quarter of fiscal 2021, the Company implemented certain organizational changes to align its segment financial reporting more closely with its current business structure.

Hewlett Packard Enterprise's operations are now organized into six reportable segments for financial reporting purposes:

Compute, HPC & MCS, Storage, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other.

Hewlett Packard Enterprise's operations are organized into six reportable segments for financial reporting purposes:

Compute, High Performance Computing & Artificial Intelligence ("HPC & AI"), Storage, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other.

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), who is the Chief Executive Officer ("CEO"), uses to evaluate, view, and run the Company's business operations, which include, but are not limited to, customer base and homogeneity of products and technology.

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A summary description of each segment follows.

Compute portfolio offers both general purpose servers for multi-workload computing and workload optimized servers to

offer the best performance and value for demanding applications.

This portfolio of products includes the HPE Proliant rack and

tower servers;

HPE BladeSystem, and HPE Synergy.

Compute offerings also include related operational and support services.

High Performance Computing & Mission-Critical Solutions portfolio offers specialized compute servers designed to support specific workloads.

The HPC portfolio of products includes the HPE Apollo and Cray high performance computing products that are often sold as supercomputing systems, including exascale supercomputers.

The MCS portfolio includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines.

The HPC & MCS segment also includes the Converged Edge Systems business which consists of the HPE Moonshot and HPE Edgeline products.

HPC & MCS offerings also include related operational and support services

Storage portfolio offers workload optimized storage product and service offerings which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage dHCI and HPE SimpliVity.

The portfolio also includes HPE Primera, HPE Nimble Storage, HPE Alletra and HPE 3PAR Storage for mission-critical and general-purpose workloads, HPE Recovery Manager Central, HPE StoreOnce, HPE Cloud Volumes Backup and Big Data solutions.

Compute includes both general purpose servers for multi-workload computing and workload optimized servers to offer the best performance and value for demanding applications.

This portfolio of products includes the HPE Proliant rack and tower servers, HPE Synergy, and HPE BladeSystems.

Compute offerings also include operational and support services and HPE GreenLake for Compute as-a-service.

High Performance Computing & Artificial Intelligence offers standard and custom hardware and software solutions designed to address customer workloads to power innovation.

The HPC hardware solutions are segmented into several categories:

High Performance Computing (“HPC”), Data Solutions, and Edge Compute.

The HPC portfolio of products includes the HPE Apollo and Cray products that are often sold as supercomputing systems, including exascale supercomputers.

The Data Solutions portfolio (formerly named Mission Critical Solutions) includes the HPE Superdome Flex, HPE Nonstop, and HPE Integrity product lines.

Edge Compute primarily offers HPE Edgeline products.

HPC & AI offerings also include operational and support services and solutions delivered as-a-service through HPE GreenLake.

Storage provides workload optimized storage product and service offerings, which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage dHCI and HPE SimpliVity;

primary storage with HPE Alletra, HPE Primera, HPE Nimble Storage, and HPE 3PAR Storage for mission-critical and general-purpose workloads;

data protection services and software with HPE Backup and Recovery Service;

The portfolio also includes HPE Recovery Manager Central, HPE StoreOnce, HPE Cloud Volumes Backup and Big Data solutions running on Apollo servers.

Storage also provides solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE Modular Storage Arrays ("MSA") and HPE XP.

Storage offerings also include related operational and support services.

Intelligent Edge portfolio offers wired and wireless local area network ("LAN"), campus and data center switching, software-defined wide-area-networking, security, and associated services to enable secure connectivity for businesses of any size.

The Intelligent Edge product portfolio includes products such as Wi-Fi access points, switches, routers, and sensors.

The Intelligent Edge software and services portfolio includes software products for cloud-based management, network management, network access control, analytics and assurance, location services software and professional and support services, as well as as-a Service ("aaS") and consumption models for the Intelligent Edge portfolio of products.

Storage offerings also include operational and support services, software subscription services, and solutions delivered as-a-service through HPE GreenLake.

Intelligent Edge offers wired and wireless local area network ("LAN"), campus and data center switching, software-defined wide-area-network (from the Silver Peak acquisition), network security, and associated services to enable secure connectivity for businesses of any size.

The HPE Aruba product portfolio includes products such as Wi-Fi access points, switches, routers, and sensors.

The HPE Aruba software and services portfolio includes cloud-based management, network management, network access control, analytics and assurance, location services software, and professional and support services, as well as as-a-service and consumption models through HPE GreenLake for the Intelligent Edge portfolio of products.

Intelligence Edge also offers an Edge Service Platform ("Aruba ESP") to help customers meet their connectivity, security, and financial requirements across campus, branch, data center, and remote worker environments, covering all aspects of wired, wireless LAN, and wide area networking.

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software, and services from Hewlett Packard Enterprise and others.

Corporate Investments and Other includes the Communications and Media Solutions business ("CMS") which primarily offers software and related services to the telecommunications industry;

the Software business which offers HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric, and incubates other software related technology innovation;

the A & PS business which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities;

and the Hewlett Packard Labs which is responsible for research and development.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

FS also supports financial solutions for on-premise flexible consumption models, such as HPE GreenLake.

Corporate Investments and Other includes the Advisory and Professional Services ("A & PS") business which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities;

the Communications and Media Solutions business ("CMS"), which primarily offers software and related services to the telecommunications industry;

the HPE Software business which offers HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric;

and Hewlett Packard Labs which is responsible for research and development.

Segment Policy

There have been no changes to the Company's segment accounting policies disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020, except for the organizational changes and the change in allocation of stock based compensation expense described in Note 1, "Overview and Summary of Significant Accounting Policies".

Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level.

These unallocated operating costs include certain corporate costs and eliminations, stock-based compensation expense, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges, acquisition, disposition and other related charges.

These unallocated operating costs include certain corporate costs and eliminations, stock-based compensation

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

expense, amortization of initial direct costs, amortization of intangible assets, transformation costs, acquisition, disposition and other related charges.

Segment Operating Results

Segment net revenue and operating results were as follows:

Compute HPC & MCS Storage Intelligent Edge Financial

Compute HPC & AI Storage Intelligent Edge Financial

Services Corporate

Investments and Other Total

Three months ended July 31, 2021

Net revenue $ 3,033 $ 671 $ 1,154 $ 865 $ 842 $ 332 $ 6,897

Intersegment net revenue 71 70 22 2 2 — 167

Total segment net revenue $ 3,104 $ 741 $ 1,176 $ 867 $ 844 $ 332 $ 7,064

Segment earnings (loss) from operations $ 347 $ 29 $ 178 $ 137 $ 94 $ ( 28 ) $ 757

Three months ended July 31, 2020

Net revenue $ 3,265 $ 650 $ 1,109 $ 682 $ 807 $ 303 $ 6,816

Intersegment net revenue 144 17 23 2 4 — 190

Total segment net revenue $ 3,409 $ 667 $ 1,132 $ 684 $ 811 $ 303 $ 7,006

Segment earnings (loss) from operations $ 318 $ 47 $ 170 $ 71 $ 66 $ ( 68 ) $ 604

Nine months ended July 31, 2021

Three months ended January 31, 2022

Net revenue $ 2,976 $ 776 $ 1,144 $ 900 $ 840 $ 325 $ 6,961

2 unchanged sentences

Segment earnings (loss) from operations $ 416 $ ( 7 ) $ 168 $ 157 $ 104 $ ( 11 ) $ 827

Nine months ended July 31, 2020

Three months ended January 31, 2021

Net revenue (1)

$ 2,928 $ 745 $ 1,173 $ 807 $ 859 $ 321 $ 6,833

Intersegment net revenue 56 16 19 3 1 — 95

1 unchanged sentence

Segment earnings (loss) from operations (1)

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The reconciliation of segment operating results to Hewlett Packard Enterprise Condensed Consolidated Financial statements was as follows:

Three Months Ended

July 31, Nine Months Ended

$ 341 $ 43 $ 234 $ 154 $ 84 $ ( 31 ) $ 825

(1) Effective at the beginning of the first quarter of fiscal 2022, the Company’s implemented minor organizational changes to align its segment financial reporting more closely with its current business structure resulting in immaterial changes to certain prior period segment revenue and segment earnings (loss) from operations amounts.

These changes had no impact to the Company’s previously reported consolidated GAAP results.

The reconciliation of segment operating results to Condensed Consolidated Financial statements was as follows:

For the three months ended January 31,

Total segments $ 7,030 $ 6,928

Eliminations of intersegment net revenue ( 69 ) ( 95 )

Total Hewlett Packard Enterprise consolidated net revenue $ 6,897 $ 6,816 $ 20,430 $ 19,774

Total consolidated net revenue $ 6,961 $ 6,833

Earnings before taxes:

5 unchanged sentences

Transformation costs ( 111 ) ( 311 )

Disaster charges ( 5 ) ( 2 ) ( 6 ) ( 24 )

Acquisition, disposition and other related charges ( 7 ) ( 18 )

Impairment of goodwill — — — ( 865 )

Interest and other, net ( 5 ) ( 44 )

2 unchanged sentences

Earnings from equity interests 31 26

Total Hewlett Packard Enterprise consolidated earnings (loss) before taxes $ 406 $ ( 34 ) $ 899 $ ( 567 )

Total assets by segment and the reconciliation of segment assets to Hewlett Packard Enterprise consolidated total assets were as follows:

July 31, 2021 October 31, 2020

Total earnings before benefit for taxes $ 493 $ 205

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Segment Assets

Hewlett Packard Enterprise allocates assets to its business segments based on the segments primarily benefiting from the assets.

Total assets by segment and the reconciliation of segment assets to total assets as per Consolidated Balance Sheets were as follows:

January 31, 2022 October 31, 2021

Compute $ 16,343 $ 16,000

HPC & MCS 6,502 6,245

HPC & AI 6,764 6,667

Storage 7,211 7,325

3 unchanged sentences

Corporate and unallocated assets 7,235 7,191

Total Hewlett Packard Enterprise consolidated total assets $ 56,437 $ 54,015

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The Company’s net revenue by geographic region was as follows:

Three Months Ended July 31, Nine Months Ended July 31,

2021 2020 2021 2020

Total assets $ 57,873 $ 57,699

Geographic Information

Net revenue by geographic region was as follows:

For the three months ended January 31,

United States $ 2,318 $ 2,178

Americas excluding U.S.

461 395 1,357 1,273

Total Americas $ 2,779 $ 2,613

1 unchanged sentence

Asia Pacific and Japan 1,626 1,600

Total Hewlett Packard Enterprise consolidated net revenue $ 6,897 $ 6,816 $ 20,430 $ 19,774

Total consolidated net revenue $ 6,961 $ 6,833

Transformation Programs

Transformation programs are comprised of the cost optimization and prioritization plan and the HPE Next initiative.

During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan which focuses on realigning the workforce to areas of growth, including a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy.

The changes to the workforce will vary by country, based on business needs, local legal requirements and consultations with employee works councils and other employee representatives, as appropriate.

During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan, which focuses on realigning the workforce to areas of growth, a new hybrid workforce model called Edge-to-Office, real estate strategies, and simplifying and evolving our product portfolio strategy.

The implementation period of the cost optimization and prioritization plan is through fiscal 2023.

During this time the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments, design and execution charges and real estate initiatives.

During the remaining implementation period, the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments, design and execution charges and real estate initiatives.

During the third quarter of fiscal 2017, the Company launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where it participates.

1 unchanged sentence

The implementation period of the HPE Next initiative is through fiscal 2023.

As of October 31, 2020, the headcount exits under HPE Next Plan are complete.

During the remaining implementation period, the Company expects to incur transformation costs predominantly related to IT infrastructure costs for streamlining, upgrading and simplifying back-end operations, and real estate initiatives.

During the remaining implementation period, the Company expects to incur predominantly IT infrastructure costs for streamlining, upgrading, and simplifying back-end operations, and real estate initiatives.

These costs are expected to be partially offset by gains from real estate sales.

Transformation Costs

During the three and nine months ended July 31, 2021, the Company incurred $ 147 million and $ 552 million, respectively, of charges related to the cost optimization and prioritization plan of which $ 146 million and $ 549 million were recorded within Transformation costs, and $ 1 million and $ 3 million, respectively, was recorded within Non-service net periodic benefit credit in the Condensed Consolidated Statements of Earnings.

During the three and nine months ended July 31, 2020, the Company incurred $ 238 million of charges related to the cost optimization and prioritization plan which was recorded within Transformation costs in the Condensed Consolidated Statements of Earnings, the components of which were as follows:

Three months ended July 31, Nine months ended July 31,

2021 2020 2021 2020

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Cost Optimization and Prioritization Plan

During the three months ended January 31, 2022 and 2021, the Company incurred $ 53 million and $ 252 million, respectively, of charges related to the cost optimization and prioritization plan, which was recorded within Transformation costs in the Condensed Consolidated Statements of Earnings, the components of which were as follows:

For the three months ended January 31,

Program management $ 8 $ 37

IT Costs 6 4 9 4

Restructuring charges 37 215

Total $ 53 $ 252

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

During the three and nine months ended July 31, 2021, the Company incurred $ 67 million and $ 184 million, respectively, and during the three and nine months ended July 31, 2020, the Company incurred $ 119 million and $ 408 million, respectively, of net charges associated with HPE Next which were recorded within Transformation costs in the Condensed Consolidated Statements of Earnings.

During the three months ended January 31, 2022 and 2021, the Company incurred $ 58 million and $ 59 million, respectively, in net charges associated with HPE Next, which were recorded within Transformation costs in the Condensed Consolidated Statements of Earnings.

The components of Transformation costs relating to HPE Next were as follows:

Three months ended July 31, Nine months ended July 31,

2021 2020 2021 2020

For the three months ended January 31,

Program management $ 3 $ 2

2 unchanged sentences

Gain on real estate sales ( 8 ) ( 1 )

Impairment on real estate assets — — 4 —

Other 6 7 26 21

Impairment of real estate assets 11 —

Total $ 58 $ 59

9 unchanged sentences

Non-cash items ( 6 ) ( 4 ) ( 2 ) —

Liability as of July 31, 2021

Liability as of January 31, 2022

$ 183 $ 169 $ 30 $ 26

Total costs incurred to date, as of July 31, 2021

Total costs incurred to date, as of January 31, 2022

$ 523 $ 441 $ 1,261 $ 247

Total expected costs to be incurred as of July 31, 2021

Total expected costs to be incurred as of January 31, 2022

$ 700 $ 600 $ 1,261 $ 255

The current restructuring liability related to the transformation programs, reported in Condensed Consolidated Balance Sheets as of July 31, 2021 and October 31, 2020, was $ 263 million and $ 359 million, respectively, in accrued restructuring, and $ 29 million and $ 24 million, respectively, in Other accrued liabilities.

The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Condensed Consolidated Balance Sheets as of July 31, 2021 and October 31, 2020, was $ 183 million and $ 91 million, respectively.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The current restructuring liability related to the transformation programs, reported in Condensed Consolidated Balance Sheets as of January 31, 2022 and October 31, 2021, was $ 223 million and $ 287 million, respectively, in accrued restructuring, and $ 30 million and $ 27 million, respectively, in Other accrued liabilities.

The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Condensed Consolidated Balance Sheets as of January 31, 2022 and October 31, 2021, was $ 155 million and $ 180 million, respectively.

Retirement Benefit Plans

The Company's net pension benefit (credit) cost for defined benefit plans recognized in the Condensed Consolidated Statements of Earnings was as follows:

Three months ended July 31, Nine months ended July 31,

2021 2020 2021 2020

For the three months ended January 31,

Service cost $ 20 $ 24

7 unchanged sentences

Settlement loss (1)

Special termination benefits (1)

Total net benefit (credit) cost $ ( 16 ) $ 6

2 unchanged sentences

Provision for Taxes

For the three and nine months ended July 31, 2021, the Company recorded income tax expense of $ 14 million and $ 25 million, respectively, which reflect an effective tax rate of 3.4 % and 2.8 %, respectively.

For the three and nine months ended July 31, 2020, the Company recorded income tax benefit of $ 43 million and $ 88 million, respectively, which reflect an effective tax rate of 126.5 % and 15.5 %, respectively.

For the three months ended January 31, 2022 and 2021, the Company recorded income tax benefit of $ 20 million and $ 18 million, respectively, which reflects an effective tax rate of ( 4.1 )% and ( 8.8 )%, respectively.

The effective tax rate generally differs from the U.S.

federal statutory rate of 21% due to favorable tax rates associated with certain earnings from the Company’s operations in lower tax jurisdictions throughout the world but are also impacted by discrete tax adjustments during each fiscal period.

The effective tax rate for the nine months ended July 31, 2020 also included the effects of the non-deductible goodwill impairment.

For the three and nine months ended July 31, 2021, the Company recorded $ 99 million and $ 222 million of net income tax benefits, respectively, related to various items discrete to the period.

For the three months ended July 31, 2021, this amount primarily included $ 88 million of deferred income tax benefits related to tax law changes and $ 31 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, partially offset by income tax charges related to the recovery of two social contribution taxes in Brazil ("PIS" and "COFINS") of $ 5 million and $ 23 million, respectively.

For the nine months ended July 31, 2021, this amount primarily included $ 138 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 88 million of deferred income tax benefits related to tax law changes, and $ 30 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which we share joint and several liability with HP Inc.

and for which we are indemnified by HP Inc., partially offset by income tax charges related to the recovery of PIS and COFINS of $ 5 million and $ 23 million, respectively.

For the three and nine months ended July 31, 2020, the Company recorded $ 86 million and $ 253 million of net income tax benefits, respectively, related to various items discrete to the period.

For the three months ended July 31, 2020, the amount primarily included $ 72 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges and $ 30 million of income tax benefits related to tax rate changes on deferred taxes.

For the nine months ended July 31, 2020, the amount primarily included $ 120 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 57 million of income tax benefits related to Indian distribution tax rate changes, $ 56 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shares joint and several liability with HP Inc.

and for which the Company is indemnified by HP Inc., and $ 30 million of income tax benefits related to tax rate changes on deferred taxes.

For the three months ended January 31, 2022, the Company recorded $ 83 million of net income tax benefits related to various items discrete to the period.

The amount primarily included $ 43 million of net income benefits related to the settlement of U.S.

tax audit matters, $ 24 million of income tax benefits related to transformation costs and acquisition, disposition and other related charges, and $ 16 million of net income tax benefits related to the settlement of foreign tax audit matters.

For the three months ended January 31, 2021, the Company recorded $ 90 million of net income tax benefits related to various items discrete to the period.

The amount primarily included $ 66 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, and $ 30 million of income tax benefits related to tax liabilities for which the Company shared joint and several liability with HP Inc.

and for which the Company was indemnified by HP Inc.

Uncertain Tax Positions

As of January 31, 2022 and October 31, 2021, the amount of unrecognized tax benefits was $ 597 million and $ 2.1 billion, respectively, of which up to $ 331 million and $ 688 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.

During the three months ended January 31, 2022, the Company effectively settled with the U.S.

Internal Revenue Service ("IRS") for fiscal 2016, primarily contributing to the reduction in the Company's unrecognized tax benefits of $ 1.5 billion, which was predominantly related to the timing of intercompany royalty revenue recognition which does not affect the Company’s effective tax rate.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Uncertain Tax Positions

As of July 31, 2021 and October 31, 2020, the amount of unrecognized tax benefits was $ 2.1 billion and $ 2.2 billion, respectively, of which up to $ 709 million and $ 731 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.

For tax liabilities pertaining to unrecognized tax benefits, the Company recognizes interest income from favorable settlements and interest expense and penalties in (Provision) benefit for taxes in the Condensed Consolidated Statements of Earnings.

As of July 31, 2021 and October 31, 2020, the Company had accrued $ 127 million and $ 119 million, respectively, for interest and penalties in the Condensed Consolidated Balance Sheets.

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.

The Company does not expect complete resolution of any U.S.

Internal Revenue Service ("IRS") audit cycle within the next 12 months.

The Company recognized interest income of $ 40 million and $ 8 million for the three months ended January 31, 2022 and 2021, respectively.

The increase in interest income resulted from the release of reserves as a result of the effective settlement of the IRS audit for fiscal 2016.

As of January 31, 2022 and October 31, 2021, the Company had accrued $ 96 million and $ 136 million, respectively, for interest and penalties in the Condensed Consolidated Balance Sheets.

The Company engages in continuous discussion and negotiation with tax authorities regarding tax matters in various jurisdictions.

The Company does not expect complete resolution of any IRS audit cycle within the next 12 months.

However, it is reasonably possible that certain federal, foreign, and state tax issues may be concluded in the next 12 months, including issues involving resolution of certain intercompany transactions, joint and several tax liabilities, and other matters.

2 unchanged sentences

Deferred tax assets and liabilities included in the Condensed Consolidated Balance Sheets were as follows:

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Deferred tax assets $ 1,968 $ 2,023

4 unchanged sentences

Cash, cash equivalents and restricted cash

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Cash and cash equivalents $ 3,861 $ 3,996

1 unchanged sentence

Total $ 4,276 $ 4,332

(1) Restricted cash is included within Other current assets in the accompanying Condensed Consolidated Balance Sheets and is primarily related to cash received under the Company's collateral securities agreements for its derivative instruments and cash restricted under the fixed-term securitization program for the issuance of asset-backed debt securities.

July 31, 2021 October 31, 2020

(1) The Company includes restricted cash in Other current assets in the accompanying Condensed Consolidated Balance Sheets.

January 31, 2022 October 31, 2021

Finished goods $ 1,825 $ 1,684

1 unchanged sentence

Total $ 5,321 $ 4,511

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

1 unchanged sentence

Property, Plant and Equipment

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Land $ 75 $ 76

4 unchanged sentences

Total $ 5,498 $ 5,613

The Company's aggregate product warranty liability as of July 31, 2021, and changes were as follows:

Nine Months Ended

July 31, 2021

The Company's aggregate product warranty liability and changes thereto were as follows:

For the three months ended January 31, 2022

Balance at beginning of period $ 327

6 unchanged sentences

A summary of accounts receivable, net, including unbilled receivables was as follows:

July 31, 2021 October 31, 2020

Accounts receivable, net

January 31, 2022 October 31, 2021

Accounts receivable $ 3,256 $ 3,796

3 unchanged sentences

The allowances for credit losses related to accounts receivable and changes therein were as follows:

July 31, 2021 October 31, 2020

Balance at beginning of the period $ 46 $ 31

January 31, 2022 October 31, 2021

Balance at beginning of period $ 23 $ 46

Provision for credit losses 3 11

Write off's, net of recoveries ( 5 ) ( 34 )

Balance at end of the period $ 42 $ 46

Balance at end of period $ 21 $ 23

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

2 unchanged sentences

The Company has third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers.

During the three and nine months ended July 31, 2021, the Company sold $ 1 billion and $ 3.1 billion of trade receivables, respectively.

During the three months ended January 31, 2022, the Company sold $ 1 billion of trade receivables.

During the fiscal year ended October 31, 2021, the Company sold $ 4.2 billion of trade receivables.

The Company recorded an obligation of $ 66 million and $ 75 million in Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of July 31, 2021 and October 31, 2020 respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.

The Company recorded an obligation of $ 97 million and $ 65 million in Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of January 31, 2022 and October 31, 2021 respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.

Contract Liabilities

Contract liabilities consist of deferred revenue.

The aggregate balance of current and non-current deferred revenue was $ 6.4 billion and $ 6.2 billion as of July 31, 2021 and October 31, 2020, respectively.

During the nine months ended July 31, 2021, approximately $ 2.7 billion of the deferred revenue as of October 31, 2020 was recognized as revenue.

The aggregate balance of current and non-current deferred revenue was $ 6.4 billion as of January 31, 2022 and October 31, 2021.

During the three months ended January 31, 2022, approximately $ 1.2 billion of the deferred revenue as of October 31, 2021 was recognized as revenue.

Remaining Performance Obligations

2 unchanged sentences

Remaining performance obligations consist of deferred revenue.

As of July 31, 2021, the aggregate amount of remaining performance obligations was $ 6.4 billion.

As of January 31, 2022, the aggregate amount of remaining performance obligations was $ 6.4 billion.

The Company expects to recognize approximately 45 % of this amount as revenue over the remainder of the fiscal year.

Costs to Obtain a Contract

As of July 31, 2021, the current and non-current portions of the capitalized costs to obtain a contract were $ 60 million and $ 86 million, respectively.

As of January 31, 2022, the current and non-current portions of the capitalized costs to obtain a contract were $ 67 million and $ 102 million, respectively.

As of October 31, 2021, the current and non-current portions of the capitalized costs to obtain a contract were $ 64 million and $ 95 million, respectively.

The current and non-current portions of the capitalized costs to obtain a contract were included in Other current assets, and Long-term financing receivables and other assets, respectively, in the Condensed Consolidated Balance Sheet.

For the three and nine months ended July 31, 2021, the Company amortized $ 16 million and $ 48 million respectively, of capitalized costs to obtain a contract.

For the three and nine months ended July 31, 2020, the Company amortized $ 15 million and $ 43 million respectively, of capitalized costs to obtain a contract.

For the three months ended January 31, 2022, and 2021, the Company amortized $ 20 million and $ 15 million respectively, of capitalized costs to obtain a contract.

The amortized capitalized costs to obtain a contract are included in Selling, general and administrative expense in the Condensed Consolidated Statement of Earnings.

5 unchanged sentences

The components of financing receivables were as follows:

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Minimum lease payments receivable $ 9,308 $ 9,526

7 unchanged sentences

Amounts due after one year, net $ 4,939 $ 5,038

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

As of July 31, 2021 and October 31, 2020, scheduled maturities of the Company's minimum lease payments receivable were as follows:

July 31, 2021 October 31, 2020

As of January 31, 2022 and October 31, 2021, scheduled maturities of the Company's minimum lease payments receivable were as follows:

January 31, 2022 October 31, 2021

Fiscal year In millions

2 unchanged sentences

2024 1,717 1,567

2024 1,326 720

Thereafter 121 84

4 unchanged sentences

The Company enters into arrangements to transfer the contractual payments due under certain financing receivables to third party financial institutions.

During the three and nine months ended July 31, 2021 the Company sold $ 30 million and $ 110 million of financing receivables, respectively.

During the three months ended January 31, 2022, the Company did no t sell any financing receivables.

During the fiscal year ended October 31, 2021, the Company sold $ 142 million of financing receivables.

5 unchanged sentences

Such variables include the underlying value and liquidity of the collateral, the essential use of the equipment, the term of the lease, and the inclusion of credit enhancements, such as guarantees, letters of credit or security deposits.

The credit risk profile of financing receivables, based on internal risk ratings as of July 31, 2021, presented on amortized cost basis by year of origination was as follows:

As of July 31, 2021

The credit risk profile of gross financing receivables, based on internal risk ratings as of January 31, 2022, presented on amortized cost basis by year of origination was as follows:

As of January 31, 2022

Low Moderate High

6 unchanged sentences

Total $ 4,699 $ 3,914 $ 368

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2020, was as follows:

October 31, 2020

Moderate 4,091

The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2021, presented on amortized cost basis by year of origination was as follows:

As of October 31, 2021

Low Moderate High

Fiscal Year In millions

2021 $ 1,978 $ 1,542 $ 49

2020 1,441 1,061 87

2019 829 771 85

2018 364 407 78

2017 and prior 169 234 103

Total $ 4,781 $ 4,015 $ 402

1 unchanged sentence

The Company classifies accounts as high risk when it considers the financing receivable to be impaired or when management believes there is a significant near-term risk of impairment.

Effective November 1, 2020, under the new guidance for credit losses, the Company discloses its credit quality by year of origination.

The credit quality indicators do not reflect any mitigation actions taken to transfer credit risk to third parties.

Allowance for Credit Losses

The allowance for credit losses for financing receivables as of July 31, 2021 and October 31, 2020 and the respective changes during the nine and twelve months then ended were as follows:

July 31, 2021 October 31, 2020

The allowance for credit losses for financing receivables as of January 31, 2022 and October 31, 2021 and the respective changes during the three and twelve months then ended were as follows:

January 31, 2022 October 31, 2021

Balance at beginning of period $ 228 $ 154

6 unchanged sentences

The following table summarizes the aging and non-accrual status of gross financing receivables:

July 31, 2021 October 31, 2020

Current 1-30 days $ 347 $ 340

January 31, 2022 October 31, 2021

Current and past due 1-30 days $ 365 $ 410

Past due 31-60 days 34 35

7 unchanged sentences

(2) Includes billed operating lease receivables and billed and unbilled sales-type and direct-financing lease receivables.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

2 unchanged sentences

Operating lease assets included in Property, plant and equipment in the Condensed Consolidated Balance Sheets were as follows:

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Equipment leased to customers $ 6,807 $ 7,039

2 unchanged sentences

Minimum future rentals on non-cancelable operating leases related to leased equipment were as follows:

July 31, 2021

January 31, 2022

Fiscal year In millions

Remainder of fiscal 2022 $ 1,319

Thereafter 11

Total $ 3,243

2 unchanged sentences

The following table presents amounts included in the Condensed Consolidated Statement of Earnings related to lessor activity:

Three Months Ended July 31, Nine Months Ended July 31,

2021 2020 2021 2020

Sales-type leases and direct financing leases:

Interest income $ 125 $ 115 $ 371 $ 343

Lease income - operating leases 598 588 1,797 1,821

For the three months ended January 31,

Interest income from sales-type leases and direct financing leases $ 122 $ 122

Lease income from operating leases 572 604

Total lease income $ 694 $ 726

3 unchanged sentences

fixed-term financing receivables and leased equipment in the offering, which is held by a Special Purpose Entity (“SPE”).

The SPE meets the definition of a VIE and is consolidated, along with the associated debt, into the Condensed Consolidated Financial Statements as the Company is the primary beneficiary of the VIE.

The SPE meets the definition of a Variable Interest Entity ("VIE") and is consolidated, along with the associated debt, into the Condensed Consolidated Financial Statements as the Company is the primary beneficiary of the VIE.

The SPE is a bankruptcy-remote legal entity with separate assets and liabilities.

1 unchanged sentence

The Company’s risk of loss related to securitized receivables and leased equipment is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The following table presents the assets and liabilities held by the consolidated VIE as of July 31, 2021, which are included in the Condensed Consolidated Balance Sheets.

The following table presents the assets and liabilities held by the consolidated VIE as of January 31, 2022 and October 31, 2021, which are included in the Condensed Consolidated Balance Sheets.

The assets in the table below include those that can be used to settle the obligations of the VIE.

Additionally, general creditors do not have recourse to the assets of the VIE.

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Assets held by VIE In millions

7 unchanged sentences

Long-term debt, net of unamortized debt issuance costs $ 1,349 $ 950

The following table represents the carrying value of goodwill, by reportable segment as of October 31, 2020 and July 31, 2021:

Compute HPC & MCS Storage Intelligent Edge Financial Services Corporate Investments and Other Total

Financing receivables transferred via securitization through the SPE were $ 664 million for the three months ended January 31, 2022 and $ 1.1 billion for the fiscal year ended October 31, 2021.

Leased equipment transferred via securitization through the SPE was $ 445 million for the three months ended January 31, 2022 and $ 720 million for the fiscal year ended October 31, 2021.

The following table represents the carrying value of goodwill, by reportable segment as of October 31, 2021 and January 31, 2022:

Compute HPC & AI Storage Intelligent Edge Financial Services Corporate Investments and Other Total

Balance at October 31, 2021 (1)

$ 7,532 $ 3,702 $ 4,160 $ 2,555 $ 144 $ 213 $ 18,306

Goodwill from current period acquisitions — 86 — — — — 86

Goodwill adjustments — — ( 3 ) — — — ( 3 )

Balance at July 31, 2021 (2)

Balance at January 31, 2022 (1)

$ 7,532 $ 3,702 $ 4,157 $ 2,555 $ 144 $ 213 $ 18,303

(1) As a result of the organizational realignments which were effective as of November 1, 2020, (described in Note 1, "Overview and Summary of Significant Accounting Policies"), $ 213 million of goodwill was reallocated from Storage segment to Corporate Investments and Other segment as of the beginning of the period using a relative fair value approach.

(1) Goodwill is net of accumulated impairment losses of $ 953 million.

Of this amount, $ 865 million related to the HPC & MCS reporting unit was recorded during the second quarter of 2020 and $ 88 million related to the CMS reporting unit within Corporate Investments and Other was recorded during the fourth quarter of fiscal 2018.

Of this amount, $ 865 million related to the HPC & AI reporting unit was recorded during fiscal 2020 and $ 88 million related to the CMS reporting unit within Corporate Investments and Other was recorded during fiscal 2018.

There is no goodwill remaining in the CMS reporting unit.

Effective at the beginning of the first quarter of fiscal 2021, the Company's operations were realigned into six segments for financial reporting purposes.

The Company's reporting units containing goodwill are consistent with the reportable segments identified in Note 2, "Segment Information" with the exception of Corporate Investments and Other which is made up of three reporting units, A & PS, CMS, and Software, of which only Software has goodwill.

As a result of this realignment, the Company performed an interim quantitative goodwill impairment test for all of its reporting units as of November 1, 2020, which did not result in any goodwill impairment charges.

The fair value of all reporting units continued to exceed the carrying value of their net assets.

The excess of fair value over carrying value for our reporting units ranged from approximately 8 % to 37 % of the respective carrying values.

In order to evaluate the sensitivity of the estimated fair value of our reporting units in the goodwill impairment test, the Company applied a hypothetical 10% decrease to the fair value of each reporting unit.

Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying value, with the exception of HPC & MCS reporting unit.

As of the interim test date, the HPC & MCS reporting unit has goodwill of $ 3.6 billion and an excess of fair value over carrying value of net assets of 8 %.

The fair value of the HPC & MCS reporting unit was based on a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

The HPC & MCS business is facing challenges on the current and projected future results as the revenue growth is dependent on timing of delivery and related achievement of customer acceptance milestones.

If the Company is not successful in addressing these challenges, the

Goodwill is tested for impairment at the reporting unit level.

As of January 31, 2022, the Company's reporting units are consistent with the reportable segments identified in Note 2, with the exception of Corporate Investments and Other, which contains three reporting units:

Software, CMS, and A & PS.

The Company will continue to evaluate the recoverability of goodwill on an annual basis as of the beginning of its fourth fiscal quarter and whenever events or changes in circumstances indicate there may be a potential impairment.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

projected revenue growth rates or operating margins could decline resulting in a decrease in the fair value of the HPC & MCS reporting unit.

The fair value of the HPC & MCS reporting unit could also be negatively impacted by changes in its weighted average cost of capital, changes in management's business strategy or significant and sustained declines in the stock price, which could result in an indicator of impairment.

In addition, should economic conditions deteriorate, estimates of future cash flows for each of the Company's reporting units may be insufficient to support the carrying value and the goodwill assigned to them, requiring impairment charges.

Further impairment charges, if any, may be material to the results of operations and financial position.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis:

As of July 31, 2021 As of October 31, 2020

As of January 31, 2022 As of October 31, 2021

Measured Using Fair Value

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Derivative Instruments:

Interest rate contracts $ — $ — $ — $ — $ — $ 2 $ — $ 2

Foreign exchange contracts — 113 — 113 — 127 — 127

3 unchanged sentences

Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Other Fair Value Disclosures

Short-Term and Long-Term Debt:

As of July 31, 2021 and October 31, 2020, the estimated fair value of the Company's short-term and long-term debt was $ 17.6 billion and $ 17.1 billion, respectively.

As of July 31, 2021 and October 31, 2020, the carrying value of the Company's short-term and long-term debt was $ 16.2 billion and $ 15.9 billion, respectively.

If measured at fair value in the Consolidated Balance Sheets, short-term and long-term debt would be classified in Level 2 of the fair value hierarchy.

As of January 31, 2022 and October 31, 2021, the estimated fair value of the Company's short-term and long-term debt was $ 14.9 billion and $ 14.6 billion, respectively.

As of January 31, 2022 and October 31, 2021, the carrying value of the Company's short-term and long-term debt was $ 14.1 billion and $ 13.4 billion, respectively.

If measured at fair value in the Condensed Consolidated Balance Sheets, short-term and long-term debt would be classified in Level 2 of the fair value hierarchy.

Equity investments without readily determinable fair value:

Equity Investments are recorded at cost and measured at fair value, when they are deemed to be impaired or when there is an adjustment from observable price changes.

During the nine months ended July 31, 2021, the Company recognized a gain of $ 25 million, in Interest and other, net in the Condensed Consolidated Statements of Earnings, based on observable price changes for certain equity investments without readily determinable fair value.

If measured at fair value in the Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

The Company did not recognize any impairments on these equity investments during the three months ended January 31, 2022 and 2021.

If measured at fair value in the Condensed Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

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Notes to Condensed Consolidated Financial Statements (Continued)

Non-Financial Assets:

2 unchanged sentences

Fair value adjustments are made to these non-financial assets in the period an impairment charge is recognized.

During the three and nine months ended July 31, 2021, the Company recorded a ROU asset impairment charge of $ 4 million and $ 72 million, respectively in Transformation costs in the Condensed Consolidated Statements of Earnings as the carrying value of certain ROU assets exceeded its fair value.

During the three months ended January 31, 2022 and 2021, the Company recorded a ROU asset impairment charge of $ 6 million and $ 49 million, respectively, in Transformation costs in the Condensed Consolidated Statements of Earnings as the carrying value of certain ROU assets exceeded its fair value.

If measured at fair value in the Condensed Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

In the second quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $ 865 million associated with the HPC & MCS reporting unit.

The fair value of the Company's reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information.

For more information on the goodwill impairment, see Note 8 "Goodwill".

Financial Instruments

1 unchanged sentence

Cash equivalents and available-for-sale debt investments were as follows:

As of July 31, 2021 As of October 31, 2020

As of January 31, 2022 As of October 31, 2021

Cost Gross Unrealized Gain Fair

9 unchanged sentences

Total cash equivalents and available-for-sale debt investments $ 2,248 $ 14 $ 2,262 $ 2,450 $ 15 $ 2,465

As of July 31, 2021 and October 31, 2020, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity.

As of January 31, 2022 and October 31, 2021, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity.

Time deposits were primarily issued by institutions outside of the U.S.

as of July 31, 2021 and October 31, 2020.

as of January 31, 2022 and October 31, 2021.

The estimated fair value of the available-for-sale debt investments may not be representative of values that will be realized in the future.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Contractual maturities of available-for-sale debt investments were as follows:

July 31, 2021

As of January 31, 2022

Amortized Cost Fair Value

3 unchanged sentences

These non-marketable equity investments are carried either at fair value or under the measurement alternative.

The carrying amount of those non-marketable equity investments accounted for under the measurement alternative amounted to $ 252 million and $ 295 million as of July 31, 2021 and October 31, 2020, respectively.

During the nine months ended July 31, 2021, the Company recorded an unrealized gain of $ 25 million on these investments.

The carrying amount of those non-marketable equity investments accounted for under the fair value option amounted to $ 92 million as of July 31, 2021.

During the nine months ended July 31, 2021, the Company recorded an unrealized gain of $ 34 million on these investments.

The carrying amount of those non-marketable equity investments accounted for under the measurement alternative was $ 166 million and $ 253 million as of January 31, 2022 and October 31, 2021, respectively.

The carrying amount of those non-marketable equity investments accounted for under the fair value option was $ 264 million and $ 129 million as of January 31, 2022 and October 31, 2021, respectively.

During the three months ended January 31, 2022, the Company recorded an unrealized gain of $ 59 million on these investments.

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Notes to Condensed Consolidated Financial Statements (Continued)

Equity investments with readily determinable fair values are included in Long-term financing receivables and other assets in the Condensed Consolidated Balance Sheets.

The carrying amount of these investments was $ 42 million as of January 31, 2022 and $ 57 million as of October 31, 2021, respectively.

During the three months ended January 31, 2022, the Company recorded an unrealized loss of $ 14 million on these investments.

Investments in equity securities that are accounted for using the equity method are included in Investments in equity interests in the Condensed Consolidated Balance Sheets.

These amounted to $ 2.3 billion and $ 2.2 billion as of July 31, 2021 and October 31, 2020.

For the three and nine months ended July 31, 2021, the Company recorded earnings from equity interests of $ 79 million and $ 109 million, respectively.

The carrying amount of these investments was $ 2.3 billion and $ 2.2 billion as of January 31, 2022 and October 31, 2021, respectively.

For the three months ended January 31, 2022 and 2021, the Company recorded earnings from equity interests of $ 31 million and $ 26 million on these investments, respectively.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets

The gross notional and fair value of derivative instruments in the Condensed Consolidated Balance Sheets were as follows:

As of July 31, 2021 As of October 31, 2020

As of January 31, 2022 As of October 31, 2021

Fair Value Fair Value

11 unchanged sentences

Foreign currency contracts 7,871 190 86 32 16 7,664 125 68 49 32

Interest rate contracts — — — — — 500 — — 2 —

Net investment hedges:

6 unchanged sentences

Total derivatives $ 19,632 $ 280 $ 160 $ 85 $ 33 $ 20,481 $ 202 $ 205 $ 77 $ 50

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Offsetting of Derivative Instruments

3 unchanged sentences

The information related to the potential effect of the Company's use of the master netting agreements and collateral security agreements were as follows:

As of July 31, 2021

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Notes to Condensed Consolidated Financial Statements (Continued)

As of January 31, 2022

In the Condensed Consolidated Balance Sheets

19 unchanged sentences

(2) Represents the collateral posted by the Company in cash or through the re-use of counterparty cash collateral as of the respective reporting date for the Company's liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.

As of July 31, 2021, of the $ 30 million of collateral posted, $ 5 million was in cash and $ 25 million was through re-use of counterparty collateral.

As of October 31, 2020, $ 55 million of collateral posted was entirely by way of re-use of counterparty collateral.

As of January 31, 2022 and October 31, 2021, the entire amount of the collateral posted of $ 5 million was through the re-use of counterparty collateral.

The amounts recorded on the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges were as follows:

Carrying amount of the hedged assets/ (liabilities) Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/ (liabilities)

July 31, 2021 October 31, 2020 July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021 January 31, 2022 October 31, 2021

In millions In millions

Notes payable and short-term borrowings $ ( 1,358 ) $ ( 1,365 ) $ ( 9 ) $ ( 15 )

Long-term debt $ ( 2,525 ) $ ( 2,573 ) $ ( 32 ) $ ( 80 )

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Gains (Losses) Recognized in OCI on Derivatives

Three months ended July 31, 2021 Three months ended July 31, 2020 Nine months ended July 31, 2021 Nine months ended July 31, 2020

For the three months ended January 31,

Derivatives in Cash Flow Hedging relationship

Foreign exchange contracts $ 215 $ ( 329 )

Interest rate contracts — — ( 6 )

Derivatives in Net Investment Hedging relationship

1 unchanged sentence

Total $ 226 $ ( 403 )

As of July 31, 2021, the Company expects to reclassify an estimated net accumulated other comprehensive gain of approximately $ 42 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions associated with cash flow hedges.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

As of January 31, 2022, the Company expects to reclassify an estimated net accumulated other comprehensive gain of approximately $ 88 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions associated with cash flow hedges.

Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings

1 unchanged sentence

Gains (Losses) Recognized in Income

Three months ended July 31, 2021 Three months ended July 31, 2020 Nine months ended July 31, 2021 Nine months ended July 31, 2020

Net revenue Interest and other, net Net revenue Interest and other, net Net revenue Interest and other, net Net revenue Interest and other, net

For the three months ended January 31,

Net revenue Interest and other, net Net revenue Interest and other, net

Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Earnings in which the effects of fair value hedges, cash flow hedges and derivatives not designated as hedging instruments are recorded $ 6,961 $ ( 5 ) $ 6,833 $ ( 44 )

12 unchanged sentences

Total gains (losses) $ 65 $ 87 $ ( 64 ) $ ( 254 )

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2 unchanged sentences

Notes payable, short-term borrowings, including the current portion of long-term debt, and long-terms debt were as follows:

July 31, 2021 October 31, 2020

January 31, 2022 October 31, 2021

Current portion of long-term debt (1)

FS commercial paper 694 677

$ 2,868 $ 2,613

Commercial paper 693 705

Notes payable to banks, lines of credit and other 234 234

2 unchanged sentences

Total Debt $ 14,072 $ 13,448

Unsecured Senior Notes

In March 2021, the Company repaid $ 500 million of three-month USD LIBOR plus 0.68 % Senior Notes on their original maturity date.

(1) As of January 31, 2022, the Current portion of long-term debt, net of discount and issuance costs, includes $ 1.5 billion associated with the asset-backed debt securities issued by the Company.

Asset-backed Debt Securities

In June 2021, the Company issued $ 753 million of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 0.58 %, payable monthly from August 2021 with a stated final maturity date of March 2029.

In March 2021, the Company issued $ 1.0 billion of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 0.49 %, payable monthly from April 2021 with a stated final maturity date of March 2031.

In January 2022, the Company issued $ 1.0 billion of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.51 %, payable monthly from March 2022 with a stated final maturity date of November 2029.

Commercial Paper

Hewlett Packard Enterprise maintains two commercial paper programs, "the Parent Programs", and a wholly-owned subsidiary maintains a third program.

Hewlett Packard Enterprise's U.S.

program provides for the issuance of U.S.

The Parent Program in the U.S.

provides for the issuance of U.S.

dollar-denominated commercial paper up to a maximum aggregate principal amount of $ 4.75 billion.

Hewlett Packard Enterprise's euro commercial paper program provides for the issuance of commercial paper outside of the U.S.

denominated in U.S.

The Parent Program outside the U.S.

provides for the issuance of commercial paper denominated in U.S.

dollars, euros, or British pounds up to a maximum aggregate principal amount of $ 3.0 billion or the equivalent in those alternative currencies.

1 unchanged sentence

In addition, the Hewlett Packard Enterprise subsidiary's euro Commercial Paper/Certificate of Deposit Program provides for the issuance of commercial paper in various currencies of up to a maximum aggregate principal amount of $ 1.0 billion.

As of July 31, 2021 and October 31, 2020, no borrowings were outstanding under the Parent Programs, and $ 694 million and $ 677 million, respectively, were outstanding under the subsidiary’s program.

As of January 31, 2022 and October 31, 2021, no borrowings were outstanding under the Parent Programs, and $ 693 million and $ 705 million, respectively, were outstanding under the subsidiary’s program.

Revolving Credit Facility

In December 2021, the Company terminated its prior senior unsecured revolving credit facility and entered into a new senior unsecured revolving credit facility with an aggregate lending commitment of $ 4.75 billion for a period of five years .

As of January 31, 2022 and October 31, 2021, no borrowings were outstanding under this credit facility.

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1 unchanged sentence

Stockholders' Equity

The components of Accumulated other comprehensive loss, net of taxes as of July 31, 2021, and changes during the nine months ended July 31, 2021 were as follows:

The components of Accumulated other comprehensive loss, net of taxes as of January 31, 2022, and changes during the three months ended January 31, 2022 were as follows:

Net unrealized

12 unchanged sentences

Balance at end of period $ 14 $ 93 $ ( 2,508 ) $ ( 477 ) $ ( 2,878 )

The components of Accumulated other comprehensive loss, net of taxes as of July 31, 2020, and changes during the nine months ended July 31, 2020 were as follows:

The components of Accumulated other comprehensive loss, net of taxes as of January 31, 2021, and changes during the three months ended January 31, 2021 were as follows:

Net unrealized

8 unchanged sentences

Balance at beginning of period $ 18 $ ( 7 ) $ ( 3,473 ) $ ( 477 ) $ ( 3,939 )

Effect of change in accounting principle (1)

— ( 10 ) — ( 33 ) ( 43 )

Other comprehensive income (loss) before reclassifications 3 ( 329 ) — 21 ( 305 )

2 unchanged sentences

Balance at end of period $ 21 $ ( 53 ) $ ( 3,406 ) $ ( 458 ) $ ( 3,896 )

(1) Reflects the impact of the adoption of an accounting standard update that allows for the reclassification of stranded tax effects from accumulated other comprehensive loss to accumulated deficit.

Share Repurchase Program

On April 6, 2020, the Company announced that it suspended purchases under its share repurchase program in response to the global economic uncertainty that resulted from the worldwide spread of COVID-19.

As of July 31, 2021, the Company had a remaining authorization of $ 2.1 billion for future share repurchases.

Net Earnings (Loss) Per Share

The Company calculates basic net EPS using net earnings and the weighted-average number of shares outstanding during the reporting period.

For the three months ended January 31, 2022, the Company repurchased and settled a total of 8.5 million shares under its share repurchase program through open market repurchases, which included 0.8 million shares that were unsettled open market repurchases as of October 31, 2021.

Additionally, as of January 31, 2022, the Company had unsettled open market repurchases of 0.1 million shares.

Shares repurchased during the three months ended January 31, 2022 were recorded as a $ 120 million reduction to stockholders' equity.

As of January 31, 2022, the Company had a remaining authorization of $ 1.8 billion for future share repurchases.

Net Earnings Per Share

The Company calculates basic net earnings per share ("EPS") using net earnings and the weighted-average number of shares outstanding during the reporting period.

Diluted net EPS includes the weighted-average dilutive effect of outstanding restricted stock units, stock options, and performance-based awards.

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1 unchanged sentence

The reconciliations of the numerators and denominators of each of the basic and diluted net EPS calculations were as follows:

Three Months Ended July 31, Nine Months Ended July 31,

2021 2020 2021 2020

For the three months ended January 31,

In millions, except per share amounts

Net earnings (loss) $ 392 $ 9 $ 874 $ ( 479 )

Net earnings $ 513 $ 223

Weighted-average shares used to compute basic net EPS 1,304 1,300

1 unchanged sentence

Weighted-average shares used to compute diluted net EPS 1,325 1,315

Net earnings (loss) per share:

Net earnings per share:

Basic $ 0.39 $ 0.17

4 unchanged sentences

Hewlett Packard Enterprise is involved in various lawsuits, claims, investigations and proceedings including those consisting of intellectual property, commercial, securities, employment, employee benefits, and environmental matters, which arise in the ordinary course of business.

In addition, as part of the Separation and Distribution Agreement, Hewlett Packard Enterprise and HP Inc.

(formerly known as "Hewlett-Packard Company") agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses.

In addition, as part of the Separation and Distribution Agreement (the "Separation and Distribution Agreement") entered into in connection with Hewlett Packard Enterprise's spin-off from HP Inc.

(formerly known as "Hewlett-Packard Company") (the "Separation"), Hewlett Packard Enterprise and HP Inc.

agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses.

The Separation and Distribution Agreement included provisions that allocate liability and financial responsibility for pending litigation involving the parties, as well as provide for cross-indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party.

7 unchanged sentences

Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies.

Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of July 31, 2021, it was not reasonably possible that a material loss had been incurred in connection with such matters in excess of the amounts recognized in its financial statements.

Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of January 31, 2022, it was not reasonably possible that a material loss had been incurred in connection with such matters in excess of the amounts recognized in its financial statements.

Litigation, Proceedings and Investigations

5 unchanged sentences

On July 2, 2019, the court denied HPE’s demurrer as to the claims of the putative class and granted HPE’s demurrer as to the claims of the individual plaintiffs.

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35 unchanged sentences

Plaintiffs also seek to certify a Rule 23 class under California law comprised of all persons 40 years or older employed by Defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012.

Following the filing of Plaintiffs' Fourth Amended Complaint, Plaintiffs filed a Motion for Preliminary Class Certification on December 30, 2020.

On April 14, 2021, Plaintiffs’ Motion for Conditional Class Certification was granted.

The conditionally

Following the filing of Plaintiffs' Fourth Amended Complaint, Plaintiffs filed a Motion for Preliminary Class Certification on

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Notes to Condensed Consolidated Financial Statements (Continued)

certified collective action consists of all individuals who had their employment terminated by Defendants pursuant to a WFR Plan on or after November 1, 2015, and who were 40 years or older at the time of such termination.

December 30, 2020.

On April 14, 2021, Plaintiffs’ Motion for Conditional Class Certification was granted.

The conditionally certified collective action consists of all individuals who had their employment terminated by Defendants pursuant to a WFR Plan on or after November 1, 2015, and who were 40 years or older at the time of such termination.

The collective action excludes all individuals who signed a Waiver and General Release Agreement or an Agreement to Arbitrate Claims.

The Court-approved notice has been issued to potential class members.

Hewlett-Packard Company v.

23 unchanged sentences

On July 26, 2021, Oracle filed a Petition for Review with the California Supreme Court.

filed an Answer to the Petition for Review on August 16, 2021.

Pursuant to the terms of the Separation and Distribution Agreement, HP Inc.

and Hewlett Packard Enterprise will share equally in any recovery from Oracle once Hewlett Packard Enterprise has been reimbursed for all costs incurred in the prosecution of the action prior to the HP Inc.

/Hewlett Packard Enterprise separation on November 1, 2015.

The California Supreme Court denied the petition on September 29, 2021, and the California Court of Appeal issued the remittitur on September 30, 2021.

On October 12, 2021, Oracle paid $ 4.66 billion, reflecting all amounts owed on the judgment plus accrued interest.

Pursuant to the terms of the Separation and Distribution Agreement between HP Inc.

and HPE, this amount was split evenly between the parties following the reimbursement of approximately $ 48 million in pre-separation legal costs incurred by HPE in prosecution of the litigation.

In total, HPE has received payment of approximately $ 2.35 billion, which was recognized as a gain from litigation judgment during the year ended October 31, 2021.

On October 27, 2021, HP Inc.

filed an acknowledgement of full satisfaction of judgment.

On January 27, 2022, Oracle filed a petition for writ of certiorari asking the United States Supreme Court to grant review.

HPE's response to the petition is due April 1, 2022.

Review by the United States Supreme Court is discretionary, and we believe the likelihood the award of damages will be reduced or reversed is remote.

Oracle America, Inc., et al.

10 unchanged sentences

On June 4, 2021, the Court issued an order denying HPE’s motion for summary judgment and granting-in-part Oracle’s motion for partial summary judgment as to a certain of HPE’s defenses.

The Court has set trial to begin on November 29, 2021.

Network-1 Technologies, Inc.

Alcatel-Lucent USA Inc., et al.

This patent infringement action was filed on September 15, 2011 in the United States District Court for the Eastern District of Texas, alleging that various Hewlett Packard Enterprise switches and access points infringe Network-1’s patent relating to the 802.3af and 802.3at “Power over Ethernet” standards.

Network-1 seeks damages, attorneys’ fees and costs, and declaratory and injunctive relief.

A jury trial was conducted beginning on November 6, 2017.

On November 13, 2017, the jury returned a verdict in favor of HPE, finding that HPE did not infringe Network-1’s patent and that the patent was invalid.

On August 29, 2018, the court denied Network-1's motion for a new trial on infringement and entered the jury's verdict finding that HPE does not infringe the relevant Network-1 patent.

The court also granted Network-1's motion for Judgment as a Matter of Law on validity.

Network-1 appealed the jury verdict of non-infringement to the United States Court of Appeals for the Federal Circuit.

HPE cross-appealed the court’s decision to grant Network-1's motion for Judgment as a Matter of Law on validity.

On September 24, 2020, the Federal Circuit issued its ruling, affirming-in-part and reversing-in-part the jury's verdict, and finding that an erroneous claim construction was presented to the jury that prejudiced Network-1.

The matter has been remanded back to United States District Court for the Eastern District of Texas for further proceedings consistent with the Federal Circuit's ruling.

On May 7, 2021, the District Court issued

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

an order granting Network-1's motion for a new trial.

The parties have agreed to the terms of a settlement that resolves the litigation with no material financial statements impact.

The lawsuit was dismissed on August 13, 2021 and the matter is now closed.

The Court has rescheduled the start of trial to May 23, 2022.

Q3 Networking Litigation.

On September 21 and September 22, 2020, Q3 Networking LLC filed complaints against HPE, Aruba Networks, Commscope and Netgear in the United States District Court for the District of Delaware and the United States International Trade Commission (“ITC”).

Both complaints allege infringement of four patents, and the ITC complaint defines the “accused products” as “routers, access points, controllers, network management servers, other networking products, and hardware and software components thereof.” The ITC action was instituted on October 23, 2020.

The evidentiary hearing before the ITC has been completed and an initial determination is expected in 2021.

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

and hardware and software components thereof.” The ITC action was instituted on October 23, 2020.

The District of Delaware action has been stayed pending resolution of the ITC action.

The evidentiary hearing before the ITC has been completed.

On December 7, 2021, the Administrative Law Judge issued his initial determination finding no violation of section 337 of the Tariff Act.

The ITC must decide whether to adopt the Administrative Law Judge’s findings or grant review of the initial determination no later than March 15, 2022.

Shared Litigation with HP Inc., DXC and Micro Focus

5 unchanged sentences

This includes legislation that makes producers of electrical goods, including servers and networking equipment, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products (sometimes referred to as "product take-back legislation").

The Company could incur substantial costs, its products could be restricted from entering certain jurisdictions, and it could face other sanctions, if it were to violate or become liable under environmental laws, including those related to addressing climate change and other environmental, social, and governance-related issues, or if its products become non-compliant with such environmental laws.

The Company's potential exposure includes impacts on revenue, fines and civil or criminal sanctions, third-party property damage or personal injury claims and clean-up costs.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements