What changed in this filing

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Item 1. Financial Statements

2023-03-07 compared with 2022-09-01 · 280 added, 438 removed, 739 unchanged (49% of the section changed)

Financial Statements.

Condensed Consolidated Statements of Earnings for the three and nine months ended July 3 1 , 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended July 3 1 , 2022 and 2021 (Unaudited)

Condensed Consolidated Balance Sheets as of July 3 1 , 2022 (Unaudited) and October 31, 2021 (Audited)

Condensed Consolidated Statements of Cash Flows for the nine months ended July 3 1 , 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended July 3 1 , 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Earnings for the three months ended January 31, 202 3 and 202 2 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income for the three months ended J anuary 31, 202 3 and 202 2 (Unaudited)

Condensed Consolidated Balance Sheets as of J anuary 31, 202 3 (Unaudited) and October 31, 202 2 (Audited)

Condensed Consolidated Statements of Cash Flows for the three months ended J anuary 31, 202 3 and 202 2 (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity for the three months ended J anuary 31, 202 3 and 202 2 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

9 unchanged sentences

Net Earnings Per Share

Litigation and Contingencies

Litigation , Contingencies , and Commitments

E quity Method Investment s

Subsequent Events

Table of Content

1 unchanged sentence

Condensed Consolidated Statements of Earnings

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

In millions, except per share amounts

11 unchanged sentences

Transformation costs 102 111

Disaster charges 30 5 49 6

Disaster charges (recovery) 1 ( 1 )

Acquisition, disposition and other related charges 11 8

5 unchanged sentences

Earnings from equity interests 58 31

Earnings before provision for taxes 464 406 1,233 899

Provision for taxes ( 55 ) ( 14 ) ( 61 ) ( 25 )

Earnings before (provision) benefit for taxes 623 493

(Provision) benefit for taxes ( 122 ) 20

Net earnings $ 501 $ 513

9 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

Net earnings $ 501 $ 513

Other comprehensive (loss) income before taxes:

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

Net unrealized (losses) gains arising during the period ( 3 ) 1 ( 11 ) ( 1 )

( 3 ) 1 ( 11 ) ( 1 )

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

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

Net unrealized gains (losses) arising during the period 5 ( 1 )

Net (gains) losses reclassified into earnings ( 215 ) ( 36 ) ( 680 ) 262

( 52 ) 65 43 79

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

Net unrealized (losses) gains arising during the period ( 518 ) 215

Net losses (gains) reclassified into earnings 247 ( 201 )

Change in unrealized components of defined benefit plans:

1 unchanged sentence

Amortization of net actuarial loss and prior service benefit 35 41

Settlements and other — — 2 2

39 76 128 243

Curtailments, settlements and other — 1

Change in cumulative translation adjustment 20 ( 11 )

7 unchanged sentences

Condensed Consolidated Balance Sheets

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

(Unaudited) (Audited)

29 unchanged sentences

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

1,288 and 1,295 shares issued and outstanding at July 31, 2022 and October 31, 2021, respectively)

1,297 and 1,281 shares issued and outstanding at January 31, 2023 and October 31, 2022, respectively)

Additional paid-in capital 28,259 28,299

9 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the nine months ended July 31,

For the three months ended January 31,

Cash flows from operating activities:

Net earnings $ 501 $ 513

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

Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation and amortization 656 621

4 unchanged sentences

Earnings from equity interests ( 58 ) ( 31 )

Dividends received from equity investees 38 38

Other, net ( 60 ) ( 27 )

7 unchanged sentences

Other assets and liabilities 240 ( 627 )

Net cash provided by operating activities 1,557 2,915

Net cash used in operating activities ( 829 ) ( 76 )

Cash flows from investing activities:

11 unchanged sentences

Payment of debt ( 661 ) ( 633 )

Payments related to stock-based award activities, net ( 46 ) ( 18 )

Net payments related to stock-based award activities ( 107 ) ( 57 )

Repurchase of common stock ( 73 ) ( 129 )

Cash dividends paid to non-controlling interests — ( 8 )

Cash dividends paid to shareholders ( 156 ) ( 155 )

Net cash used in financing activities ( 216 ) ( 167 )

Increase in cash, cash equivalents and restricted cash 117 1,031

Net cash provided by financing activities 9 355

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 138 —

Decrease in cash, cash equivalents and restricted cash ( 1,919 ) ( 56 )

Cash, cash equivalents and restricted cash at beginning of period 4,763 4,332

4 unchanged sentences

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

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

For the three months ended January 31, 2023 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, 2022 1,298,924 $ 13 $ 28,473 $ ( 5,145 ) $ ( 2,809 ) $ 20,532 $ 50 $ 20,582

Balance at October 31, 2022 1,281,037 $ 13 $ 28,299 $ ( 5,350 ) $ ( 3,098 ) $ 19,864 $ 45 $ 19,909

Net earnings 501 501 7 508

7 unchanged sentences

( 156 ) ( 156 ) ( 156 )

Balance at July 31, 2022 1,288,219 $ 13 $ 28,351 $ ( 4,891 ) $ ( 2,862 ) $ 20,611 $ 53 $ 20,664

Balance at January 31, 2023 1,296,884 $ 13 $ 28,259 $ ( 5,005 ) $ ( 3,256 ) $ 20,011 $ 52 $ 20,063

) Represents the impact of the adoption of the accounting standard on the s on financial instruments.

For the nine months ended July 31, 2022 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

11 unchanged sentences

( 155 ) ( 155 ) ( 155 )

Balance at July 31, 2022 1,288,219 $ 13 $ 28,351 $ ( 4,891 ) $ ( 2,862 ) $ 20,611 $ 53 $ 20,664

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

For the three months ended July 31, 2021 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, 2021 1,304,138 $ 13 $ 28,538 $ ( 8,229 ) $ ( 3,762 ) $ 16,560 $ 51 $ 16,611

Net earnings 392 392 2 394

Other comprehensive income 131 131 131

Comprehensive income 523 2 525

Stock-based compensation expense 86 86 86

Tax withholding related to vesting of employee stock plans ( 11 ) ( 11 ) ( 11 )

Issuance of common stock in connection with employee stock plans and other 2,925 19 19 19

Cash dividends declared ($ 0.12 per share)

( 157 ) ( 157 ) ( 157 )

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

For the nine months ended July 31, 2021 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, 2020 1,287,010 $ 13 $ 28,350 $ ( 8,375 ) $ ( 3,939 ) $ 16,049 $ 47 $ 16,096

Net earnings 874 874 6 880

Other comprehensive income 308 308 308

Comprehensive income 1,182 6 1,188

Stock-based compensation expense 304 304 304

Tax withholding related to vesting of employee stock plans ( 72 ) ( 72 ) ( 72 )

Issuance of common stock in connection with employee stock plans and other 20,053 50 50 50

Cash dividends declared ($ 0.36 per share)

( 468 ) ( 468 ) ( 468 )

Effects of adoption of ASC 326, Current expected credit losses ( 25 ) ( 25 ) ( 25 )

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

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

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

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, 2022 and October 31, 2021, its results of operations for the three and nine months ended July 31, 2022 and 2021, its cash flows for the nine months ended July 31, 2022 and 2021, and its statements of stockholders' equity for the three and nine months ended July 31, 2022 and 2021.

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

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, 2023 and October 31, 2022, its results of operations for the three months ended January 31, 2023 and 2022, its cash flows for the three months ended January 31, 2023 and 2022, and its statements of stockholders' equity for the three months ended January 31, 2023 and 2022.

The results of operations and the cash flows for the three months ended January 31, 2023 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, 2022, as filed with the U.S.

Securities and Exchange Commission ("SEC") on December 8, 2022.

Segment Realignment

Effective at the beginning of the first quarter of fiscal 2023, in orde r to align its segment financial reporting more closely with its current business structure, the Company implemented an organizational change with the transfer of certain storage networking products, previously reported within the Storage reportable segment, to the Compute reportable segment.

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue and operating profit 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.

Significant Accounting Policies

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 nine months ended July 31, 2022, and is 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.

Subsequent Event

On August 15, 2022, the Company redeemed $ 1.35 billion of 4.40 % Senior Notes with an original maturity date of October 15, 2022, utilizing the par call option on the debt, with no redemption penalties.

Russia/Ukraine Conflict

The conflict between Russia and Ukraine and the related sanctions imposed by the U.S., European Union (E.U.) and other countries in response have negatively impacted the Company's operations in both countries and increased economic and political uncertainty across the world.

In response to the sanctions imposed, in February 2022, the Company suspended all new sales and shipments to Russia and Belarus and implemented compliance measures to address the continuously changing regulatory landscape.

Based on a further assessment of business risks and needs, in June 2022, the Company determined that it is no longer tenable to maintain its operations in Russia and Belarus and is proceeding with an orderly, managed exit of its remaining business in these countries.

There have been no 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, 2022.

Recently Enacted Accounting Pronouncements

Although there are new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") that the Company will adopt, as applicable, the Company does not believe any of these accounting pronouncements will have a material impact on its Condensed Consolidated Financial Statements.

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Notes to Condensed Consolidated Financial Statements (Continued)

During the three months ended July 31, 2022, the Company recorded total pre-tax charges of $ 36 million primarily related to employee severance and abandoned assets, $ 6 million of which was included in Cost of services and $ 30 million in Disaster charges in the Condensed Consolidated Statement of Earnings.

The Company recorded $ 16 million of net income tax charges, primarily as a result of recording a valuation allowance on deferred taxes, in the Provision for taxes in the Condensed Consolidated Statement of Earnings in connection with these charges.

During the nine months ended July 31, 2022, the Company recorded total pre-tax charges of $ 162 million primarily related to expected credit losses of financing and trade receivables, employee severance and abandoned assets, $ 99 million of which was included in Financing cost, $ 12 million in Cost of services and $ 51 million in Disaster charges in the Condensed Consolidated Statements of Earnings.

The Company recorded $ 9 million of net income tax benefit in the Provision for taxes in the Condensed Consolidated Statement of Earnings related to these charges.

The Company continues to monitor the social, political, regulatory and economic environment in Russia and Ukraine, and will consider further actions as appropriate.

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

Recently Enacted Accounting Pronouncements

In March 2022, the FASB issued guidance related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables.

The amendments eliminate current recognition and measurement guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

The Company is required to adopt the guidance in the first quarter of fiscal 2024, though early adoption is permitted.

The Company is currently evaluating the impact of these amendments on its Condensed Consolidated Financial Statements.

Segment Information

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

Hewlett Packard Enterprise's operations are organized into six 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.

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, 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.

The six segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

A summary description of each segment follows.

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.

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:

HPC, Data Solutions, and Edge Compute.

The HPC portfolio of products includes the HPE Apollo and HPE 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

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Edge compute primarily offers HPE Edgeline products.

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

Storage provides workload optimized storage product and service offerings, which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage Disaggregated HCI 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, including Zerto.

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 operational and support services, software subscription services, and solutions delivered as-a-service through the HPE GreenLake edge-to-cloud platform.

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

This portfolio of products includes the HPE ProLiant Compute rack and tower servers and HPE Synergy servers.

Compute offerings also include operational and support services and HPE GreenLake for Compute that provides flexible Compute as-a-service ("aaS") IT infrastructure on a consumption basis through the HPE GreenLake edge-to-cloud platform.

HPC & AI offers integrated systems comprised of software and hardware designed to address HPC, AI, Data Analytics, and Transaction Processing workloads for government and commercial customers globally.

The solutions are segmented into HPC and Data Solutions.

The HPC portfolio of products includes HPE Cray Supercomputing, HPE Apollo and Converged Edge Systems (formerly known as Edge Compute) hardware, software, and data management appliances that are often sold as supercomputing systems, including exascale supercomputers.

The Data Solutions portfolio includes the mission critical compute portfolio and HPE NonStop.

The mission critical compute portfolio includes the HPE Superdome Flex and HPE Integrity product lines for critical applications including large enterprise software applications and data analytics platforms.

The HPE Nonstop portfolio includes high-availability, fault-tolerant, software and appliances that power applications such as credit-card transaction processing that require large scale and high availability.

HPC & AI offerings also include operational and support services sold with its systems and as standalone services, and also offers most of its solutions aaS on a consumption basis through the HPE GreenLake edge-to-cloud platform.

Storage provides primary storage product and service offerings, which include software-powered hyperconverged infrastructure ("HCI") with HPE Nimble Storage Disaggregated HCI and HPE SimpliVity, cloud-native primary storage with HPE Primera and HPE Alletra Storage, storage aaS with HPE GreenLake for Block Storage, disaster recovery and ransomware recovery with Zerto, backup aaS with HPE Backup and Recovery Service, and big data solutions running on HPE Alletra 4000 Data Storage Servers.

Storage also provides solutions for unstructured data and analytics workloads and traditional tape, storage networking, and disk products, such as HPE MSA and HPE XP.

Storage also provides data-driven intelligence with HPE InfoSight and HPE CloudPhysics along with operational and support services, software subscription services, and data infrastructure portfolio and solutions delivered aaS on a consumption basis through the HPE GreenLake edge-to-cloud platform.

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

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

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 the HPE GreenLake edge-to-cloud platform for the Intelligent Edge portfolio of products.

Intelligence Edge offerings are consolidated in the Edge Service Platform ("Aruba ESP") which provides customers a unified framework to meet their connectivity and security requirements across campus, branch, data center, and remote worker environments.

The HPE Aruba Networking product portfolio includes hardware products such as Wi-Fi access points, switches and gateways.

The HPE Aruba Networking 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 aaS and consumption models through the HPE GreenLake edge-to-cloud platform for the Intelligent Edge portfolio of products.

Intelligence Edge offerings are consolidated in the Edge Service Platform which takes a cloud-native approach that provides customers a unified framework to meet their connectivity, security, and financial needs across campus, branch, data center, and remote worker environments .

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.

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

FS also supports financial solutions for on-premise flexible consumption models, such as the HPE GreenLake edge-to-cloud platform.

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 the HPE Ezmeral container platform and HPE Ezmeral Data Fabric;

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

Segment Policy

Hewlett Packard Enterprise does not allocate certain operating expenses to its segments, 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, transformation costs, disaster charges, and acquisition, disposition and other related charges.

the HPE Software business which offers the HPE Ezmeral Software

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Notes to Condensed Consolidated Financial Statements (Continued)

Container Platform and HPE Ezmeral Software Data Fabric;

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

Segment Policy

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, transformation costs, disaster charges (recovery), and acquisition, disposition and other related charges.

Segment Operating Results

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Investments and Other Total

Three months ended July 31, 2022

Net revenue $ 2,955 $ 806 $ 1,137 $ 940 $ 813 $ 300 $ 6,951

Intersegment net revenue 49 24 15 1 4 — 93

Total segment net revenue $ 3,004 $ 830 $ 1,152 $ 941 $ 817 $ 300 $ 7,044

Segment earnings (loss) from operations $ 400 $ 28 $ 169 $ 155 $ 96 $ ( 31 ) $ 817

Three months ended July 31, 2021

Net revenue (1)

$ 3,031 $ 670 $ 1,153 $ 869 $ 842 $ 332 $ 6,897

Intersegment net revenue 71 70 22 2 2 — 167

Total segment net revenue $ 3,102 $ 740 $ 1,175 $ 871 $ 844 $ 332 $ 7,064

Segment earnings (loss) from operations (1)

$ 346 $ 28 $ 177 $ 140 $ 94 $ ( 28 ) $ 757

Nine months ended July 31, 2022

Three months ended January 31, 2023

Net revenue $ 3,367 $ 993 $ 1,168 $ 1,121 $ 867 $ 293 $ 7,809

2 unchanged sentences

Segment earnings (loss) from operations $ 609 $ 1 $ 142 $ 247 $ 82 $ ( 55 ) $ 1,026

Nine months ended July 31, 2021

Three months ended January 31, 2022

Net revenue $ 3,004 $ 776 $ 1,116 $ 900 $ 840 $ 325 $ 6,961

$ 8,883 $ 2,078 $ 3,453 $ 2,477 $ 2,536 $ 1,003 $ 20,430

Intersegment net revenue 40 14 12 1 2 — 69

1 unchanged sentence

Segment earnings (loss) from operations $ 427 $ ( 7 ) $ 157 $ 157 $ 104 $ ( 11 ) $ 827

$ 1,021 $ 89 $ 602 $ 420 $ 269 $ ( 84 ) $ 2,317

(1) Effective at the beginning of the first quarter of fiscal 2022, the Company 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 earnings from operations.

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Notes to Condensed Consolidated Financial Statements (Continued)

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

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

The reconciliation of segment operating results to Condensed Consolidated Statements of Earnings was as follows:

For the three months ended January 31,

Total segments $ 7,992 $ 7,030

8 unchanged sentences

Transformation costs ( 102 ) ( 111 )

Disaster charges (1)

( 36 ) ( 5 ) ( 160 ) ( 6 )

Disaster (charges) recovery ( 1 ) 1

Acquisition, disposition and other related charges ( 11 ) ( 8 )

4 unchanged sentences

Total earnings before provision for taxes $ 623 $ 493

(1) During the three and nine months ended July 31, 2022, the Company recorded total pre-tax charges of $ 36 million and $ 162 million, respectively, primarily related to the Company's exit from its Russia and Belarus businesses.

During the nine months ended July 31, 2022, Disaster charges also included a recovery of $ 2 million, related to COVID-19.

Refer to Note 1, "Overview and Summary of Significant Accounting Policies", for further information.

Disaster charges were excluded from segment operating results .

Segment Assets

1 unchanged sentence

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

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Compute $ 15,616 $ 16,881

11 unchanged sentences

Net revenue by geographic region was as follows:

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

United States $ 2,885 $ 2,318

Americas excluding U.S.

481 461 1,409 1,357

Total Americas 3,454 2,779

5 unchanged sentences

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.

The implementation period of the primary elements of the cost optimization and prioritization plan is anticipated to be through fiscal 2023.

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.

Through this program, the Company is simplifying the operating model, and streamlining our offerings, business processes and business systems to improve our execution.

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

Through this program, the Company is simplifying the operating model, and streamlining its offerings, business processes and business systems to improve its strategy execution.

The implementation period of primary elements of the HPE Next initiative is anticipated to be through fiscal 2023.

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.

These costs are expected to be offset by gains from real estate sales and sublease income from inactive office space.

Cost Optimization and Prioritization Plan

The components of the expense relating to the cost optimization and prioritization plan were as follows:

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

The components of transformation costs relating to the cost optimization and prioritization plan were as follows:

For the three months ended January 31,

Program management $ 1 $ 8

IT costs 1 6 19 9

Restructuring charges 71 37

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

During the three and nine months ended July 31, 2022, $ 43 million and $ 131 million, respectively, were recorded within Transformation costs and no Non-service net periodic benefit credit related to Cost Optimization and Prioritization Plan was recorded in the Condensed Consolidated Statements of Earnings.

During the three and nine months ended July 31, 2021, $ 146 million and $ 549 million, respectively, were recorded within Transformation costs, and $ 1 million and $ 3 million, respectively, were recorded within Non-service net periodic benefit credit in the Condensed Consolidated Statements of Earnings.

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

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

Program management $ — $ 3

3 unchanged sentences

Impairment of real estate assets — 11

Other 3 6 11 26

Total $ 22 $ 58

6 unchanged sentences

Liability as of October 31, 2022

$ 185 $ 122 $ 11 $ 25

Charges 53 18 — 1

1 unchanged sentence

Non-cash items 12 1 1 —

Liability as of July 31, 2022

Liability as of January 31, 2023

$ 179 $ 123 $ 8 $ 24

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

Total costs incurred to date, as of January 31, 2023

$ 698 $ 501 $ 1,261 $ 261

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

Total expected costs to be incurred as of January 31, 2023

$ 750 $ 550 $ 1,261 $ 265

As of July 31, 2022, restructuring actions related to employee severance, infrastructure and other under the HPE Next plan are substantially complete.

The current restructuring liability related to the transformation programs, reported in Condensed Consolidated Balance Sheets as of July 31, 2022 and October 31, 2021, was $ 158 million and $ 287 million, respectively, in accrued restructuring, and $ 25 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 July 31, 2022 and October 31, 2021, was $ 119 million and $ 180 million, respectively.

The current restructuring liability related to the transformation programs, reported in the Condensed Consolidated Balance Sheets as of January 31, 2023 and October 31, 2022, was $ 184 million and $ 191 million, respectively, in Accrued restructuring, and $ 25 million and $ 28 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, 2023 and October 31, 2022, was $ 125 million and $ 124 million, respectively.

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

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

Service cost $ 13 $ 20

11 unchanged sentences

Provision for Taxes

For the three months ended July 31, 2022 and 2021, the Company recorded income tax expense of $ 55 million and $ 14 million, respectively, which reflects an effective tax rate of 11.9 % and 3.4 %, respectively.

For the nine months ended July 31, 2022 and 2021, the Company recorded income tax expense of $ 61 million and $ 25 million, respectively, which reflects an effective tax rate of 5.0 % and 2.8 %, respectively.

For the three months ended January 31, 2023 and 2022, the Company recorded income tax expense of $ 122 million and income tax benefit of $ 20 million, respectively, which reflects an effective tax rate of 19.6 % and ( 4.1 )%, 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.

For the three and nine months ended July 31, 2022, the Company recorded $ 71 million and $ 192 million of net income tax benefits, respectively, related to various items discrete to the period.

For the three months ended July 31, 2022, this amount primarily included $ 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., $ 18 million of income tax benefits related to transformation costs, acquisition, disposition and other related charges, $ 12 million of income tax benefits as a result of the fiscal 2021 U.S.

tax return filing primarily from the decrease in Global Intangible Low Taxed Income ("GILTI"), and $ 6 million of net income tax benefits related to the settlement of foreign tax audit matters, partially offset by $ 16 million of net income tax charges related to the Company's exit from its Russia business, primarily as a result of recording a valuation allowance on deferred taxes.

For the nine months ended July 31, 2022, this amount primarily included $ 64 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 43 million of net income tax benefits related to the settlement of U.S.

tax audit matters, $ 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., $ 12 million of net income tax benefits related to the settlement of foreign tax audit matters, $ 12 million of income tax benefits as a result of the fiscal 2021 U.S.

tax return filing primarily from the decrease in GILTI, and $ 9 million of net income tax benefits on pre-tax charges incurred related to the Russia/Ukraine conflict.

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 social contribution taxes in Brazil of $ 28 million.

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 tax liabilities, primarily those for which the Company shared joint and several liability with HP

For the three months ended January 31, 2023, the Company recorded $ 11 million of net income tax benefits related to various items discrete to the period.

The amount primarily included $ 22 million of income tax benefits related to transformation costs, acquisition, disposition and other related charges and $ 13 million of net excess tax benefits related to stock-based compensation, partially offset by $ 23 million of net income tax charges related to tax audit settlements and changes in uncertain tax positions.

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 tax 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.

Uncertain Tax Positions

As of January 31, 2023 and October 31, 2022, the amount of unrecognized tax benefits was $ 720 million and $ 674 million, respectively, of which up to $ 419 million and $ 386 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.

The Company recognized interest expense of $ 1 million and interest income of $ 40 million for the three months ended January 31, 2023 and 2022, respectively.

The Company recognized interest income in the first quarter of fiscal 2022 due to the release of reserves as a result of the effective settlement of the IRS audit for fiscal 2016.

As of January 31, 2023 and October 31, 2022, the Company had accrued $ 82 million and $ 81 million, respectively, for interest and penalties in the Condensed Consolidated Balance Sheets.

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Notes to Condensed Consolidated Financial Statements (Continued)

and for which the Company was indemnified by HP Inc., partially offset by income tax charges related to the recovery of social contribution taxes in Brazil of $ 28 million.

Uncertain Tax Positions

As of July 31, 2022 and October 31, 2021, the amount of unrecognized tax benefits was $ 600 million and $ 2.1 billion, respectively, of which up to $ 350 million and $ 688 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.

During the first quarter of the current year, 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.

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

The Company recognized interest income of $ 4 million and interest expense of $ 5 million for the three months ended July 31, 2022 and 2021, respectively, and interest income of $ 41 million and interest expense of $ 17 million for the nine months ended July 31, 2022 and 2021, respectively.

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

As of July 31, 2022 and October 31, 2021, the Company had accrued $ 95 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, and other matters.

The Internal Revenue Service is conducting an audit of the Company's fiscal 2017, 2018, and 2019 U.S.

federal income tax returns.

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 and other matters.

Accordingly, the Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $ 44 million within the next 12 months.

1 unchanged sentence

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

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Deferred tax assets $ 2,231 $ 2,127

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Balance Sheet Details

Balance sheet details were as follows:

Cash, cash equivalents and restricted cash

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Cash and cash equivalents $ 2,530 $ 4,163

1 unchanged sentence

Total $ 2,844 $ 4,763

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

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2022 October 31, 2021

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

January 31, 2023 October 31, 2022

Finished goods $ 1,999 $ 2,187

2 unchanged sentences

Property, Plant and Equipment

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Land $ 74 $ 74

1 unchanged sentence

Machinery and equipment, including equipment held for lease 10,075 9,729

11,296 11,562

Gross property, plant and equipment 11,673 11,306

Accumulated depreciation ( 5,683 ) ( 5,522 )

Total $ 5,626 $ 5,613

Net property, plant and equipment $ 5,990 $ 5,784

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

For the nine months ended July 31, 2022

For the three months ended January 31, 2023

Balance at beginning of period $ 360

6 unchanged sentences

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

July 31, 2022 October 31, 2021

Accounts receivable $ 3,157 $ 3,796

January 31, 2023 October 31, 2022

Unbilled receivables $ 286 $ 245

Accounts receivable 3,942 3,881

Allowances ( 27 ) ( 25 )

Total $ 4,201 $ 4,101

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The allowances for credit losses related to accounts receivable and changes during the nine months ended July 31, 2022 and the year ended October 31, 2021 were as follows:

July 31, 2022 October 31, 2021

The allowances for credit losses related to accounts receivable and changes during the three months ended January 31, 2023 and the year ended October 31, 2022 were as follows:

January 31, 2023 October 31, 2022

Balance at beginning of period $ 25 $ 23

Provision for credit losses 5 25

Write off's, net of recoveries ( 18 ) ( 34 )

Adjustments to existing allowances, including write offs ( 3 ) ( 23 )

Balance at end of period $ 27 $ 25

1 unchanged sentence

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

During the three months ended July 31, 2022 and the fiscal year ended October 31, 2021, the Company sold $ 1 billion and $ 4.2 billion of trade receivables, respectively.

The Company recorded an obligation of $ 123 million and $ 65 million within Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of July 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 as of July 31, 2022 and October 31, 2021.

During the nine months ended July 31, 2022, approximately $ 2.6 billion of the deferred revenue as of October 31, 2021 was recognized as revenue.

Remaining Performance Obligations

During the three months ended January 31, 2023 and the fiscal year ended October 31, 2022, the Company sold $ 1.1 billion and $ 4.1 billion of trade receivables, respectively.

The Company recorded an obligation of $ 95 million and $ 88 million within Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of January 31, 2023 and October 31, 2022 respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.

Contract Liabilities and Remaining Performance Obligations

As of January 31, 2023 and October 31, 2022, current deferred revenue of $ 3.5 billion and $ 3.4 billion, respectively, were recorded in Deferred revenue, and non-current deferred revenue of $ 3.1 billion and $ 3.0 billion, respectively, were recorded in Other non-current liabilities in the Condensed Consolidated Balance Sheets.

During the three months ended January 31, 2023, approximately $ 1.2 billion of revenue was recognized relating to contract liabilities recorded as of October 31, 2022.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Revenue allocated to remaining performance obligations represents contract work that has not yet been performed and does not include contracts where the customer is not committed.

Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations, changes in the scope of contracts, adjustments for revenue that has not materialized and adjustments for currency.

Remaining performance obligations consist of deferred revenue.

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

The Company expects to recognize approximately 21 % of this amount as revenue over the remainder of the fiscal year.

As of January 31, 2023, the aggregate amount of remaining performance obligations, or deferred revenue, was $ 6.6 billion.

The Company expects to recognize approximately 48 % of this balance over fiscal 2023 with the remainder to be recognized thereafter.

Costs to Obtain a Contract

As of July 31, 2022, the current and non-current portions of the capitalized costs to obtain a contract were $ 72 million and $ 115 million, respectively.

As of January 31, 2023, the current and non-current portions of the capitalized costs to obtain a contract were $ 77 million and $ 126 million, respectively.

As of October 31, 2022, the current and non-current portions of the capitalized costs to obtain a contract were $ 76 million and $ 124 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, 2022, the Company amortized $ 21 million and $ 62 million respectively, of capitalized costs to obtain a contract.

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 months ended January 31, 2023 and 2022 the Company amortized $ 22 million and $ 20 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.

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The components of financing receivables were as follows:

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Minimum lease payments receivable $ 9,256 $ 8,686

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Amounts due after one year, net $ 4,800 $ 4,512

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

July 31, 2022 October 31, 2021

Fiscal year In millions

Remainder of fiscal 2022 $ 1,498 $ 4,338

2023 3,141 2,557

2024 2,149 1,567

2025 1,236 747

Thereafter 250 84

Total undiscounted cash flows $ 8,861 $ 9,526

Present value of lease payments (recognized as finance receivables) $ 8,170 $ 8,808

Unearned income $ 691 $ 718

Sale of Financing Receivables

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

During the nine months ended July 31, 2022 and the fiscal year ended October 31, 2021, the Company sold $ 31 million and $ 142 million of financing receivables, respectively.

During the three months ended January 31, 2023 and the fiscal year ended October 31, 2022, the Company sold $ 39 million and $ 183 million of financing receivables, respectively.

Credit Quality Indicators

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

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

As of July 31, 2022

The credit risk profile of gross financing receivables, based on internal risk ratings as of January 31, 2023, presented on amortized cost basis by year of origination was as follows:

As of January 31, 2023

Low Moderate High

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Allowance for Credit Losses

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

July 31, 2022 October 31, 2021

The allowance for credit losses for financing receivables as of January 31, 2023 and October 31, 2022 and the respective changes during the three and twelve months then ended were as follows.

January 31, 2023 October 31, 2022

Balance at beginning of period $ 325 $ 228

Adjustment for adoption of the new credit loss standard — 28

Provision for credit losses (1)

2 unchanged sentences

Balance at end of period $ 333 $ 325

(1) The nine months ended July 31, 2022, includes a provision of $ 99 million related to expected credit losses due to the Company's exit from its Russia and Belarus businesses.

(1) Fiscal 2022 included a provision of $ 99 million related to expected credit losses due to the Company's exit from its Russia and Belarus businesses.

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

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Current and past due 1-30 days $ 396 $ 372

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

Operating Leases

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

July 31, 2022 October 31, 2021

Equipment leased to customers $ 6,755 $ 7,039

Accumulated depreciation ( 2,786 ) ( 3,038 )

Total $ 3,969 $ 4,001

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

July 31, 2022

Fiscal year In millions

Remainder of fiscal 2022 $ 484

Total $ 3,310

If a lease is classified as an operating lease, the Company records lease revenue on a straight-line basis over the lease term.

At commencement of an operating lease, initial direct costs are deferred and are expensed over the lease term on the same basis as the lease revenue is recorded.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

Interest income from sales-type leases and direct financing leases $ 123 $ 122

9 unchanged sentences

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.

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

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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 January 31, 2023 and October 31, 2022, 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, 2022 October 31, 2021

Assets held by VIE In millions

January 31, 2023 October 31, 2022

Assets held by VIE:

Other current assets $ 178 $ 203

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Long-term debt, net of unamortized debt issuance costs $ 1,128 $ 1,415

Financing receivables transferred via securitization through the SPE were $ 1.2 billion for the nine months ended July 31, 2022 and $ 1.1 billion for the fiscal year ended October 31, 2021.

Leased equipment transferred via securitization through the SPE was $ 761 million for the nine months ended July 31, 2022 and $ 720 million for the fiscal year ended October 31, 2021.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

For the three months ended January 31, 2023, no financing receivables and leased equipment were transferred via securitization through the SPE.

For the fiscal year ended October 31, 2022, financing receivables and leased equipment transferred via securitization through the SPE were $ 1.6 billion and $ 1.2 billion, respectively.

Goodwill is tested for impairment at the reporting unit level.

As of July 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:

As of January 31, 2023, 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:

A & PS, CMS, and Software.

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

The following table represents the carrying value of goodwill, by reportable segment as of January 31, 2023 and October 31, 2022.

There has been no change to the accumulated impairment loss from the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

2 unchanged sentences

$ 7,692 $ 2,889 $ 4,000 $ 2,555 $ 144 $ 123 $ 17,403

Goodwill adjustments — 2 — — — — 2

Balance at July 31, 2022

Goodwill acquired during the period — 18 — — — — 18

Balance at January 31, 2023

$ 7,692 $ 2,907 $ 4,000 $ 2,555 $ 144 $ 123 $ 17,421

As of the annual test date in fiscal 2021, the HPC & AI reporting unit had a goodwill of $ 3.7 billion and an excess of fair value over carrying value of net assets of 8 %.

(1) As a result of the organizational realignments which were effective as of November 1, 2022, (described in Note 1, "Overview and Summary of Significant Accounting Policies"), $ 160 million of goodwill was reallocated from the Storage segment to the Compute segment as of the beginning of the period using a relative fair value approach.

The Company evaluates 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.

As of the annual test date in fiscal 2022, the HPC & AI reporting unit had goodwill of $ 2.9 billion and an excess of fair value over carrying value of net assets of 0 %.

The HPC & AI reporting unit relies significantly on the income approach which estimates the fair value based on the present value of future cash flows.

The HPC & AI business is facing challenges reflected in the results for the nine months ended July 31, 2022.

The challenges are primarily related to supply chain constraints and other operational challenges impacting the Company’s ability to achieve certain customer acceptance milestones required for revenue recognition and resulting cost increases associated with fulfilling contracts over longer than originally anticipated timelines.

The Company currently believes these challenges will be successfully addressed when supply chain constraints ease.

Our annual goodwill impairment test is performed during the fourth quarter in conjunction with completion of our annual long-term business plan.

If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if the Company has significant or sustained decline in its stock price, it is possible its estimates about the HPC & AI reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the HPC & AI reporting unit exceeding its estimated fair value and a potentially material impairment charge.

The HPC & AI business is facing challenges primarily related to supply chain constraints and other operational challenges impacting the Company’s ability to achieve certain customer acceptance milestones required for revenue recognition and resulting cost increases associated with fulfilling contracts over longer than originally anticipated timelines.

The Company currently believes these challenges will be successfully addressed as the supply chain constraints are improving.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

successfully address the current challenges may change, which could result in the carrying value of the HPC & AI reporting unit exceeding its estimated fair value and potential impairment charges.

As of the annual test date in fiscal 2022, the Software reporting unit had goodwill of $ 123 million and an excess of fair value over carrying value of net assets of 0 %.

The Software reporting unit relies significantly on the market approach, which is impacted by market volatility.

Since our last annual test, the equity market valuations impacting this test have decreased.

If global macroeconomic or geopolitical conditions worsen and cause a further significant equity market downturn, it is possible we may determine the carrying value of the Software reporting unit exceeds its estimated fair value.

Such a determination could result in a potentially material impairment charge.

If global macroeconomic or geopolitical conditions worsen and cause a further decline in the equity market or if revenue expectations are not met, this could result in the carrying value of the Software reporting unit exceeding its estimated fair value and potential impairment charges.

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.

1 unchanged sentence

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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

As of July 31, 2022 As of October 31, 2021

As of January 31, 2023 As of October 31, 2022

Measured Using Fair Value

13 unchanged sentences

Derivative Instruments:

Interest rate contracts — — — — — 95 — 95

Foreign exchange contracts — 276 — 276 — 840 — 840

4 unchanged sentences

Foreign exchange contracts — 329 — 329 — 128 — 128

Other derivatives — — — — — 1 — 1

Total liabilities $ — $ 466 $ — $ 466 $ — $ 307 $ — $ 307

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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, 2022 and October 31, 2021, the estimated fair value of the Company's short-term and long-term debt was $ 14.0 billion and $ 14.6 billion, respectively.

As of July 31, 2022 and October 31, 2021, the carrying value of the Company's short-term and long-term debt was $ 13.9 billion and $ 13.4 billion, respectively.

As of January 31, 2023 and October 31, 2022, the estimated fair value of the Company's short-term and long-term debt was $ 13.0 billion and $ 12.2 billion, respectively.

As of January 31, 2023 and October 31, 2022, the carrying value of the Company's short-term and long-term debt was $ 12.9 billion and $ 12.5 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.

1 unchanged sentence

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.

The Company recognized a gain of $ 25 million in Interest and other, net in the Condensed Consolidated Statements of Earnings, for the nine months ended July 31, 2021.

For the three months ended January 31, 2023, the Company recognized an impairment of $ 10 million on these investments.

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

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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The Company's non-financial assets, such as intangible assets, goodwill, and property, plant and equipment, are recorded at cost.

The Company records right-of-use ("ROU") assets based on the lease liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs.

The Company records right-of-use assets based on the lease liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs.

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

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Notes to Condensed Consolidated Financial Statements (Continued)

During the three months ended July 31, 2022, the Company recorded a ROU asset impairment charge of $ 8 million.

During the nine months ended July 31, 2022, the Company recorded a net gain of $ 4 million primarily due to a lease termination.

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.

These charges were recorded as the carrying value of certain ROU assets exceeded their fair value and are reflected in Transformation costs in the Condensed Consolidated Statements of Earnings.

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

Financial Instruments

1 unchanged sentence

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

As of July 31, 2022 As of October 31, 2021

Cost Gross Unrealized Gain Fair

Value Cost Gross Unrealized Gain Fair

As of January 31, 2023 As of October 31, 2022

Cost Gross Unrealized Gains Fair

Value Cost Gross Unrealized Gains (Losses) Fair

Cash Equivalents:

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Total cash equivalents and available-for-sale debt investments $ 1,265 $ 4 $ 1,269 $ 2,385 $ ( 1 ) $ 2,384

As of July 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, 2022 and October 31, 2021.

As of January 31, 2023 and October 31, 2022, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity.

Time deposits were primarily issued by institu tions outside o f the U.S.

as of January 31, 2023 and October 31, 2022.

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

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

As of July 31, 2022

As of January 31, 2023

Amortized Cost Fair Value

Due in one to five years 29 29

Due in one year $ 19 $ 19

Due in more than five years 114 118

Total $ 133 $ 137

Non-marketable equity investments in privately held companies are included in Long-term financing receivables and other assets in the Condensed Consolidated Balance Sheets.

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 was $ 187 million and $ 253 million as of July 31, 2022 and October 31, 2021, 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 was $ 137 million and $ 129 million as of July 31, 2022 and October 31, 2021, respectively.

During the three and nine months ended July 31, 2022, the Company recorded an unrealized loss of $ 7 million and unrealized gain of $ 97 million, respectively, on these investments.

During the three and nine months ended July 31, 2022, the Company completed the sale of an equity investment

The carrying amount of those non-marketable equity investments accounted for under the measurement alternative was $ 160 million and $ 175 million as of January 31, 2023 and October 31, 2022, respectively.

For the three months ended January 31, 2023, the Company recognized an impairment of $ 10 million on these investments.

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

The carrying amount of those non-marketable equity investments accounted for under the fair value option was $ 126 million as of January 31, 2023 and October 31, 2022.

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

The carrying amount of these investments was $ 2.2 billion as of January 31, 2023 and October 31, 2022.

For the three months ended January 31, 2023 and 2022, the Company recorded earnings from equity interests of $ 58 million and $ 31 million, respectively, on these investments.

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Notes to Condensed Consolidated Financial Statements (Continued)

accounted for under the fair value option for $ 165 million.

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

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

There were no equity investments with readily determinable fair values as of July 31, 2022 as the Company completed the sale of these investments.

The carrying amount of these investments was $ 57 million as of October 31, 2021.

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.

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

During the three and nine months ended July 31, 2022, the Company recorded earnings from equity interests of $ 68 million and $ 132 million, respectively, on these investments.

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

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, 2022 As of October 31, 2021

As of January 31, 2023 As of October 31, 2022

Fair Value Fair Value

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

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

As of July 31, 2022

As of January 31, 2023

In the Condensed Consolidated Balance Sheets

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Derivative liabilities $ 466 $ — $ 466 $ 128 $ 319 (2)

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

As of October 31, 2022

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(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, 2022 and October 31, 2021, the entire amount of the collateral posted of $ 22 million and $ 5 million, respectively, was through the re-use of counterparty collateral.

As of January 31, 2023, of the $ 319 million of collateral posted, $ 313 million was in cash and $ 6 million was through the re-use of counterparty collateral.

As of October 31, 2022, the entire amount of the collateral posted of $ 113 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, 2022 October 31, 2021 July 31, 2022 October 31, 2021

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

January 31, 2023 October 31, 2022 January 31, 2023 October 31, 2022

In millions In millions

Notes payable and short-term borrowings $ ( 1,347 ) $ ( 1,365 ) $ 3 $ ( 15 )

Long-term debt $ ( 2,358 ) $ ( 2,317 ) $ 137 $ 178

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Gains (Losses) Recognized in OCI on Derivatives

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

Derivatives in Cash Flow Hedging relationship

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Total $ ( 625 ) $ 226

As of January 31, 2023, the Company expects to reclassify an estimated net accumulated other comprehensive loss of approximately $ 104 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.

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Notes to Condensed Consolidated Financial Statements (Continued)

As of July 31, 2022, the Company expects to reclassify an estimated net accumulated other comprehensive gain of approximately $ 124 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

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Gains (Losses) Recognized in Income

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

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 $ 7,809 $ ( 25 ) $ 6,961 $ ( 5 )

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Amount of gains (losses) reclassified from accumulated other comprehensive income into income 50 ( 297 ) 65 136

Interest rate contracts

Amount of gains (losses) reclassified from accumulated other comprehensive income into income — — — — — — — ( 2 )

Gains (losses) on derivatives not designated as hedging instruments

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Total gains (losses) $ 50 $ ( 491 ) $ 65 $ 87

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Notes Payable, Short-Term Borrowings and Long-Term Debt

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

July 31, 2022 October 31, 2021

January 31, 2023 October 31, 2022

Current portion of long-term debt (1)

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Long-term debt 7,577 7,853

Total Debt $ 13,880 $ 13,448

(1) As of July 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 May 2022, the Company issued $ 747 million of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 3.68 %, payable monthly from July 2022 with a stated final maturity date of March 2030.

Total $ 12,926 $ 12,465

(1) As of January 31, 2023, the Current portion of long-term debt, net of discount and issuance costs, includes $ 1.3 billion associated with the asset-backed debt securities issued by the Company.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

Commercial Paper

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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, 2022 and October 31, 2021, no borrowings were outstanding under the Parent Programs, and $ 635 million and $ 705 million, respectively, were outstanding under the subsidiary’s program.

As of January 31, 2023, $ 759 million was outstanding under the Parent Programs.

As of October 31, 2022, no borrowings were outstanding under the Parent Programs.

As of January 31, 2023 and October 31, 2022, $ 680 million and $ 542 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 July 31, 2022 and October 31, 2021, no borrowings were outstanding under this credit facility.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

The Company maintains a senior unsecured revolving credit facility that was entered into in December 2021 with an aggregate lending commitment of $ 4.75 billion for a period of five years .

As of January 31, 2023 and October 31, 2022, no borrowings were outstanding under this credit facility.

Stockholders' Equity

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

The components of accumulated other comprehensive loss, net of taxes as of January 31, 2023, and changes during the three months ended January 31, 2023 were as follows:

Net unrealized

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Balance at beginning of period $ ( 1 ) $ 109 $ ( 2,596 ) $ ( 610 ) $ ( 3,098 )

Other comprehensive (loss) income before reclassifications ( 11 ) 723 6 ( 81 ) 637

Reclassifications of (gains) losses into earnings — ( 680 ) 122 — ( 558 )

Tax provision — ( 11 ) ( 13 ) ( 2 ) ( 26 )

Other comprehensive income (loss) before reclassifications 5 ( 518 ) — 20 ( 493 )

Reclassifications of losses into earnings — 247 35 — 282

Tax benefit (provision) — 55 ( 3 ) 1 53

Balance at end of period $ 4 $ ( 107 ) $ ( 2,564 ) $ ( 589 ) $ ( 3,256 )

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

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Other comprehensive (loss) income before reclassifications ( 1 ) 215 6 ( 11 ) 209

Reclassifications of losses into earnings — 262 214 — 476

Reclassifications of (gains) losses into earnings — ( 201 ) 42 — ( 159 )

Tax provision — ( 2 ) ( 11 ) — ( 13 )

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Share Repurchase Program

For the nine months ended July 31, 2022, the Company repurchased and settled a total of 25.9 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 July 31, 2022, the Company had unsettled open market repurchases of 0.3 million shares.

Shares repurchased during the nine months ended July 31, 2022 were recorded as a $ 377 million reduction to stockholders' equity.

As of July 31, 2022, the Company had a remaining authorization of $ 1.5 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.

For the three months ended January 31, 2023, the Company repurchased and settled a total of 4.7 million shares under its share repurchase program through open market repurchases, which included 0.3 million shares that were unsettled open market repurchases as of October 31, 2022.

Additionally, as of January 31, 2023, the Company had unsettled open market repurchases

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Notes to Condensed Consolidated Financial Statements (Continued)

of 0.1 million shares.

Shares repurchased during the three months ended January 31, 2023 were recorded as a $ 70 million reduction to stockholders' equity.

As of January 31, 2023, the Company had a remaining authorization of $ 1.3 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.

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

For the three months ended July 31, For the nine months ended July 31,

2022 2021 2022 2021

For the three months ended January 31,

In millions, except per share amounts

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(1) The Company excludes shares potentially issuable under employee stock plans that could dilute basic net EPS in the future from the calculation of diluted net earnings per share, as their effect, if included, would have been anti-dilutive for the periods presented.

Litigation and Contingencies

Litigation, Contingencies, and Commitments

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.

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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, 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.

Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of January 31, 2023, 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.

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Notes to Condensed Consolidated Financial Statements (Continued)

Litigation, Proceedings and Investigations

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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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Notes to Condensed Consolidated Financial Statements (Continued)

The parties have reached an agreement to resolve this litigation.

The terms of the class settlement are reflected in Plaintiff’s Motion for Preliminary Approval of Class Action Settlement and Certification of Settlement Class, which was filed with the Court on September 26, 2022.

On November 3, 2022, the Court granted Plaintiff’s motion and preliminarily approved the terms of the class settlement, which defines the settlement class as all “[w]omen actively employed in California by Defendant at any point from November 1, 2015 through the date of Preliminary Approval” who were employed in a covered job code.

The settlement class excludes certain individuals, including those who previously executed an arbitration agreement with HPE or an agreement that resulted in a release or waiver of claims.

The hearing on final approval of the class settlement is scheduled for April 27, 2023.

India Directorate of Revenue Intelligence Proceedings .

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In April 2013, ECT rejected HP Brazil's appeal, and the administrative proceedings were closed with the penalties against HP Brazil remaining in place.

In parallel, in September 2011, HP Brazil filed a civil action against ECT seeking to have ECT's decision revoked.

In parallel, in September 2011,

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Notes to Condensed Consolidated Financial Statements (Continued)

HP Brazil filed a civil action against ECT seeking to have ECT's decision revoked.

HP Brazil also requested an injunction suspending the application of the penalties until a final ruling on the merits of the case.

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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

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Notes to Condensed Consolidated Financial Statements (Continued)

December 30, 2020.

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.

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The Court-approved notice was issued to potential class members and the opt-in period is now closed.

Hewlett-Packard Company v.

Oracle (Itanium).

On June 15, 2011, HP Inc.

filed suit against Oracle in the Superior Court of California, County of Santa Clara in connection with Oracle's March 2011 announcement that it was discontinuing software support for HP Inc.’s Itanium-based line of mission critical servers.

asserted, among other things, that Oracle’s actions breached the contract that was signed by the parties as part of the settlement of the litigation relating to Oracle’s hiring of Mark Hurd.

Trial was bifurcated into two phases.

prevailed in the first phase of the trial, in which the court ruled that the contract at issue required Oracle to continue to offer its software products on HP Inc.'s Itanium-based servers for as long as HP Inc.

decided to sell such servers.

Phase 2 of the trial was then postponed by Oracle’s appeal of the trial court’s denial of Oracle’s “anti-SLAPP” motion, in which Oracle argued that HP Inc.’s damages claim infringed on Oracle’s First Amendment rights.

On August 27, 2015, the California Court of Appeal rejected Oracle’s appeal.

The matter was remanded to the trial court for Phase 2 of the trial, which began on May 23, 2016, and was submitted to the jury on June 29, 2016.

On June 30, 2016, the jury returned a verdict in favor of HP Inc., awarding HP Inc.

approximately $ 3 billion in damages:

$ 1.7 billion for past lost profits and $ 1.3 billion for future lost profits.

On October 20, 2016, the court entered judgment for this amount with interest accruing until the judgment is paid.

Oracle’s motion for a new trial was denied on December 19, 2016, and Oracle filed its notice of appeal from the trial court’s judgment on January 17, 2017.

On February 2, 2017, HP Inc.

filed a notice of cross-appeal challenging the trial court’s denial of prejudgment interest.

On May 16, 2019, HP Inc.

filed its application to renew the judgment.

As of May 16, 2019, the renewed judgment is approximately $ 3.8 billion.

Daily interest on the renewed judgment is now accruing at $ 1 million and will be recorded upon receipt.

On June 14, 2021, the California Court of Appeal affirmed the judgment of the trial court.

Oracle filed a Petition for Rehearing with the California Court of Appeal, which was denied on July 8, 2021.

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

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.

On May 16, 2022, the United States Supreme Court denied Oracle's Petition.

The matter is now closed.

Oracle America, Inc., et al.

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Judgment has not yet been entered by the Court as the parties are engaged in post-verdict motion practice on multiple issues, including HPE’s Motion for Judgment as a Matter of Law and Oracle’s request for an award of prejudgment interest and attorneys’ fees.

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Notes to Condensed Consolidated Financial Statements (Continued)

The parties have since reached an agreement to resolve this dispute.

Pursuant to the terms of the settlement, the case has been dismissed, and the matter is closed.

Q3 Networking Litigation.

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

On May 3, 2022, the ITC issued its Notice of Final Determination, affirming the initial determination and terminating the investigation.

On May 3, 2022, the ITC issued its Notice of Final Determination, affirming the initial determination and

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Notes to Condensed Consolidated Financial Statements (Continued)

terminating the investigation.

On June 18, 2022, Q3 Networking filed a petition for review of the ITC ruling with the United States Court of Appeals for the Federal Circuit.

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Environmental

The Company's operations and products are or may in the future become subject to various federal, state, local and foreign laws and regulations concerning environmental protection, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the clean-up of contaminated sites, the substances and materials used in the Company's products, the energy consumption of products, services and operations and the operational or financial responsibility for recycling, treatment and disposal of those products.

The Company's operations and products are or may in the future become subject to various federal, state, local, and foreign laws and regulations concerning the environment, including laws addressing the discharge of pollutants into the air and water;

the management, movement, and disposal of hazardous substances and wastes;

the clean-up of contaminated sites;

product safety and compliance;

the energy consumption of products, services, and operations;

and the operational or financial responsibility for recycling, treatment, and disposal of those products.

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 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 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.

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The Company is also contractually obligated to make financial contributions to address actions related to certain environmental liabilities, both ongoing and arising in the future, pursuant to its Separation and Distribution Agreement with HP Inc.

In the ordinary course of business, the Company may issue performance guarantees to certain of its clients, customers, and other parties pursuant to which the Company has guaranteed the performance obligations of third parties.

Some of those guarantees may be backed by standby letters of credit or surety bonds.

In general, the Company would be obligated to perform over the term of the guarantee in the event a specified triggering event occurs as defined by the guarantee.

The Company believes the likelihood of having to perform under a material guarantee is remote.

The Company has entered into service contracts with certain of its clients that are supported by financing arrangements.

If a service contract is terminated as a result of the Company's non-performance under the contract or failure to comply with the terms of the financing arrangement, the Company could, under certain circumstances, be required to acquire certain assets related to the service contract.

The Company believes the likelihood of having to acquire a material amount of assets under these arrangements is remote.

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Notes to Condensed Consolidated Financial Statements (Continued)

Unconditional Purchase Obligations

As of July 31, 2022, the Company had unconditional purchase obligations of approximately $ 1.7 billion.

These unconditional purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction, as well as settlements that the Company has reached with third parties, requiring it to pay determined amounts over a specified period of time.

These unconditional purchase obligations are related principally to inventory purchases, software maintenance and support services and other items.

Unconditional purchase obligations exclude agreements that are cancellable without penalty.

The Company expects the commitments to total $ 208 million, $ 377 million, $ 167 million, $ 261 million, $ 301 million, and $ 342 million for the remainder of fiscal year 2022, fiscal years 2023, 2024, 2025, 2026, and thereafter, respectively.

Indemnifications

In the ordinary course of business, the Company enters into contractual arrangements under which the Company may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of the Company or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance.

The Company also provides indemnifications to certain vendors and customers against claims of IP infringement made by third parties arising from the use by such vendors and customers of the Company's software products and support services and certain other matters.

Some indemnifications may not be subject to maximum loss clauses.

Historically, payments made related to these indemnifications have been immaterial.

Equity Method Investments

Pursuant to the Shareholders' Agreement among the Company, Unisplendor International Technology Limited ("UNIS"), and H3C Technologies Co Limited ("H3C") dated as of May 1, 2016, as amended from time to time, and most recently on October 28, 2022, the Company delivered a notice to UNIS on December 30, 2022, to exercise its right to put to UNIS, for cash consideration, all of the H3C shares held by the Company, which represent 49 % of the total issued share capital of H3C, at a price per share of 15.0 times the last twelve months’ post-tax profit of H3C (measured as of the period ending April 30, 2022) divided by the total number of H3C shares outstanding as of December 30, 2022.

The determination of the purchase price remains subject to agreement among the parties, taking into account certain adjustments to the post-tax profit of H3C pursuant to the terms of the Shareholders’ Agreement and the availability of the necessary information to make such determination.

The disposition is also subject to obtaining required regulatory approvals.

Subsequent Events

Subsequent to January 31, 2023, the Company announced and entered into definitive agreements to acquire Athonet and Axis Security.

Athonet is a private cellular network technology provider that delivers mobile core networks to enterprises and communication service providers.

Axis Security is a cloud security provider, which will allow the Company to expand its edge-to-cloud security capabilities by offering a Security Access Services Edge solution.

The total expected cash purchase price of the acquisitions is approximately $ 490 million, subject to normal working capital and other closing adjustments.

The Company expects both transactions to close during fiscal 2023.

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