What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-09-05 compared with 2024-06-05 · 217 added, 193 removed, 539 unchanged (43% of the section changed)

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This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this document.

The financial discussion and analysis in the following MD&A compares the three and six months ended April 30, 2024 to the comparable prior-year period and where appropriate, as of April 30, 2024, unless otherwise noted.

The financial discussion and analysis in the following MD&A compares the three and nine months ended July 31, 2024 to the comparable prior-year period and where appropriate, as of July 31, 2024, unless otherwise noted.

This MD&A is organized as follows:

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TRENDS AND UNCERTAINTIES

During the first six months of fiscal 2024, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted the environment in which we operate.

During the first nine months of fiscal 2024, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted the environment in which we operate.

Such developments, and their impact on our operations, were as follows:

Technological Advancements:

We have observed market trends and demand (of customers of various segments and sizes) gravitating towards AI, hybrid cloud, edge computing, data security capabilities, and related offerings.

We have observed market trends and demand (of customers of various segments and sizes) gravitating towards Artificial Intelligence ("AI"), hybrid cloud, edge computing, data security capabilities, and related offerings.

The volume of data at the edge continues to grow, driven by the proliferation of more devices.

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The effect of the evolving macroeconomic environment continued to impact industry-wide demand, as customers take longer to work through prior orders and have been adopting a more conservative approach to discretionary IT spending.

This has resulted in demand softening unevenly across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own.

We expect such mixed macroeconomic environment to continue to limit our revenue growth in the near term.

This has resulted in uneven demand across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own.

We expect such mixed macroeconomic environment to continue and possibly limit revenue growth in the near term.

Supply Chain:

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We plan to mitigate the impact of these dynamics through continued disciplined cost management.

Furthermore, during fiscal 2024, we have been experiencing higher-than-normal inventory levels, primarily due to longer cycle times for us to deliver (and/or for customers to accept) certain AI-related orders;

Furthermore, during fiscal 2024, we have been experiencing higher-than-normal inventory levels, primarily due to longer than anticipated customer acceptance timelines on certain AI-related orders;

we expect this trend to continue.

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The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes.

Other Trends and Uncertainties:

The impacts of trade protection measures, including increases in tariffs and trade barriers, changes in government policies and international trade arrangements, geopolitical volatility (including the ongoing conflict in the Middle East), and global macroeconomic challenges (including the relationship between China and the U.S.), may impact our operations, financial performance, and ability to conduct business in some non-U.S.

We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks.

The Internal Revenue Service (“IRS”) is conducting audits of our fiscal 2017 through 2022 U.S.

federal income tax returns.

During the fourth quarter of fiscal 2023, the IRS issued notices of proposed adjustments (“NOPAs”) for 2017, 2018, and 2019 relating to our intercompany transfer pricing.

During the first quarter of fiscal 2024, the IRS issued a Revenue Agent Report (“RAR”) finalizing their position on the NOPAs for the same issues and same fiscal years.

However, we disagreed with the IRS’ adjustments and believe the positions taken on our tax returns are more likely than not to prevail on technical merits and have continued with settlement discussions with the IRS.

During the fiscal quarter, we submitted a formal settlement offer

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Financial Condition and Results of Operations (Continued)

to the IRS to facilitate the closing of the audit and recorded increased reserves for unrecognized tax benefits of $122 million.

The impact of the increase in reserves is almost entirely offset with a valuation allowance release, and the net impact to income tax expense for the three and nine months ended July 31, 2024 was not material.

It is reasonably possible that the IRS audit for fiscal 2017 through 2019 may be concluded in the next 12 months, and it is reasonably possible that existing unrecognized tax benefits related to these years may be reduced by an amount up to $358 million within the next 12 months, the majority of which relates to adjustments to foreign tax credits that carry a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which affects the Company’s effective tax rate.

Other Trends and Uncertainties:

We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks.

Pending Merger with Juniper Networks, Inc:

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Server, Hybrid Cloud, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Financial Results

The following table summarizes our condensed consolidated GAAP financial results:

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 Change 2024 2023 Change

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Cash flow provided by operations $ 1,154 $ 1,525 $(371) $ 2,311 $ 1,585 $726

Three months ended April 30, 2024 compared with three months ended April 30, 2023

Three months ended July 31, 2024 compared with three months ended July 31, 2023

Net revenue of $7.7 billion represented an increase of 10.1% (increased 10.4% on a constant currency basis) primarily due to higher average unit prices ("AUPs") in the Server segment, moderated by lower volume and product mix effect in the Intelligent Edge segment.

The gross profit margin of 33.0% (or $2.4 billion), represents a decrease of 3.0 percentage points from the prior-year period primarily due to higher mix of lower margin products and services revenue in the Intelligent Edge and Server segments, partially offset by cost recoveries in connection with our exit from Russia and Belarus.

The operating profit margin of 5.9% represents a decrease of 1.6 percentage points from the prior-year period primarily due to the aforementioned gross margin decline moderated by lower operating expenses.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Net revenue of $14.0 billion represented a decrease of 5.6% (decreased 5.7% on a constant currency basis) primarily due to lower unit volume in the Server segment, lower AUPs in the Hybrid Cloud segment, and lower volume and product mix effect in the Intelligent Edge segment.

This decrease was moderated by increase in AUPs in the Server segment.

The gross profit margin of 34.6% (or $4.8 billion) represents a decrease of 0.4 percentage points from the prior-year period which was relatively flat.

The operating profit margin of 6.8% represents a decrease of 0.7 percentage points from the prior-year period primarily due to lower gross profit moderated by lower operating expenses.

The gross profit margin of 31.6% (or $2.4 billion), represents a decrease of 4.2 percentage points from the prior-year period primarily due to a decline in revenue in the Intelligent Edge and Hybrid Cloud segments.

The operating profit margin of 7.1% was relatively flat as compared to the prior-year period.

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

Net revenue of $21.7 billion represented a decrease of 0.5% in actual dollars and constant currency primarily due to lower volume and product mix effect in the Intelligent Edge segment, lower AUPs in the Hybrid Cloud segment, and lower unit volume in the Server segment.

This decrease was moderated by an increase in AUPs in the Server segment.

The gross profit margin of 33.6% (or $7.3 billion) represents a decrease of 1.7 percentage points from the prior-year period primarily due to higher mix of lower margin products in the Server segment and decline in revenue in the Intelligent Edge segment.

The operating profit margin of 6.9% was relatively flat as compared to the prior-year period.

The following table summarizes our condensed consolidated non-GAAP financial results:

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 Change 2024 2023 Change

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Please refer to the section "GAAP to non-GAAP Reconciliations" included in this MD&A for these reconciliations, a discussion of the use, usefulness and economic substance of the non-GAAP financial measures, along with a discussion of material limitations, and compensation for those limitations, associated with the use of non-GAAP financial measures.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Annualized Revenue Run-rate ("ARR")

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ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

The following presents our ARR calculated as of April 30, 2024 and 2023:

As of April 30,

The following presents our ARR calculated as of July 31, 2024 and 2023:

As of July 31,

Dollars in millions

Year-over-year growth rate 35% 48%

The 37% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, and Intelligent Edge aaS activity.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

The 35% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud, Server and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, Server aaS and Intelligent Edge aaS activity.

Returning capital to our shareholders remains an important part of our capital allocation framework, which also consists of strategic investments.

During the second quarter of fiscal 2024, we paid a quarterly dividend of $0.13 per share to our shareholders.

On June 4, 2024, we declared a regular cash dividend of $0.13 per share on our common stock, payable on or about July 18, 2024, to our shareholders of record as of the close of business on June 19, 2024.

As of April 30, 2024, we had a remaining authorization of approximately $0.9 billion for future share repurchases.

During the third quarter of fiscal 2024, we paid a quarterly dividend of $0.13 per share to our shareholders.

On September 4, 2024, we declared a regular cash dividend of $0.13 per share on our common stock, payable on or about October 18, 2024, to our shareholders of record as of the close of business on September 19, 2024.

As of July 31, 2024, we had a remaining authorization of approximately $0.9 billion for future share repurchases.

RESULTS OF OPERATIONS

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Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Results of operations in dollars and as a percentage of net revenue were as follows:

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

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Net earnings $ 512 6.6 % $ 464 6.6 % $ 1,213 5.6 % $ 1,383 6.3 %

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Three and six months ended April 30, 2024 compared with the three and six months ended April 30, 2023

For the three months ended April 30, 2024, total net revenue of $7.2 billion represented an increase of $231 million, or 3.3% (increased 3.5% on a constant currency basis).

Three and nine months ended July 31, 2024 compared with the three and nine months ended July 31, 2023

For the three months ended July 31, 2024, total net revenue of $7.7 billion represented an increase of $708 million, or 10.1% (increased 10.4% on a constant currency basis).

net revenue increased by $449 million, or 18.5%, to $2.9 billion, and net revenue from outside of the U.S.

increased by $259 million, or 5.7%, to $4.8 billion.

For the six months ended April 30, 2024, total net revenue of $14.0 billion represented a decrease of $823 million, or 5.6% (decreased 5.7% on a constant currency basis).

net revenue decreased by $402 million, or 7.6%, to $4.9 billion, and net revenue from outside of the U.S.

For the nine months ended July 31, 2024, total net revenue of $21.7 billion represented a decrease of $115 million, or 0.5% in actual dollars and constant currency.

net revenue increased by $47 million, or 0.6%, to $7.8 billion, and net revenue from outside of the U.S.

decreased by $162 million, or 1.2%, to $13.9 billion.

The components of the weighted net revenue change by segment were as follows:

For the three months ended April 30, 2024 For the six months ended April 30, 2024

For the three months ended July 31, 2024 For the nine months ended July 31, 2024

Percentage Points

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Total HPE 10.1 (0.5)

Three months ended April 30, 2024 compared with three months ended April 30, 2023

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Three months ended July 31, 2024 compared with three months ended July 31, 2023

From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows:

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• Corporate Investments and Other net revenue increased $16 million, or 6.5%, primarily due to revenue growth from Advisory and Professional Services (“A&PS”)

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows:

• Server net revenue decreased $400 million, or 5.3%, primarily due to lower unit volume

• Server net revenue increased $712 million, or 6.6%, primarily due to higher AUPs

• Hybrid Cloud net revenue decreased $348 million, or 8.4%, primarily due to lower AUPs

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• Corporate Investments and Other net revenue increased $30 million, or 4.2%, primarily due to revenue growth from A&PS

Please refer to the section "Segment Information" further below for a discussion of our results of operations for each reportable segment.

For the three and nine months ended July 31, 2024, the total gross profit margin of 31.6% and 33.6%, respectively, represents a decrease of 4.2 and 1.7 percentage points, respectively, as compared to the respective prior year periods.

The decrease for the three months ended July 31, 2024, was primarily due to a decline in revenue in the Intelligent Edge and Hybrid Cloud segments.

The decrease for the nine months ended July 31, 2024, was primarily due to higher mix of lower margin products in the Server segment and decline in revenue in the Intelligent Edge segment.

Operating expenses

Research and development ("R&D")

For the three months ended July 31, 2024, R&D expense decreased by $31 million, or 5.4%, primarily due to capitalization of software development costs and lower employee costs, which contributed 3.6 and 2.3 percentage points, respectively, to the change.

For the nine months ended July 31, 2024, R&D expense decreased by $52 million, or 2.9%, primarily due to lower employee costs and capitalization of software development costs, which contributed 1.3 and 1.1 percentage points, respectively, to the change.

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Financial Condition and Results of Operations (Continued)

Please refer to the section "Segment Information" further below for a discussion of our results of operations for each reportable segment.

For the three and six months ended April 30, 2024, the total gross profit margin of 33.0% and 34.6%, respectively, represents a decrease of 3.0 and 0.4 percentage points, respectively, as compared to the respective prior year periods.

The decrease for the three months ended April 30, 2024, was due to higher mix of lower margin products and services revenue in the Intelligent Edge and Server segments, partially offset by cost recoveries in connection with our exit from Russia and Belarus.

For the six months ended April 30, 2024, the change in gross profit margin was relatively flat.

Operating expenses

Research and development ("R&D")

For the three months ended April 30, 2024, R&D expense increased by $20 million, or 3.5%.

The increase was primarily due to higher employee costs driven by higher planned investments in R&D, which contributed 3.8 percentage points to the change.

For the six months ended April 30, 2024, R&D expense decreased by $21 million, or 1.8%.

The decrease was primarily due to lower costs as a result of higher grants for R&D received in the current period by 1.1 percentage points and lower employee costs, partially offset by higher planned investments in R&D, which contributed 0.8 percentage points to the change.

Selling, general and administrative ("SG&A")

For the three months ended April 30, 2024, SG&A expense decreased by $54 million, or 4.3%, primarily due to lower employee costs, and lower travel and marketing expenses, which contributed 2.1 and 1.3 percentage points, respectively, to the change.

For the six months ended April 30, 2024, SG&A expense decreased by $95 million, or 3.8%, primarily due to lower employee costs by 2.3 percentage points, lower consulting costs and lower marketing expenses, both of which contributed 0.7 percentage points to the change.

For the three months ended July 31, 2024, SG&A expense decreased by $73 million, or 5.6%, primarily due to lower employee costs, which contributed 4.7 percentage points, lower travel and marketing expenses and consulting costs, both of which contributed 1.6 percentage points to the change.

For the nine months ended July 31, 2024, SG&A expense decreased by $168 million, or 4.4%, primarily due to lower employee costs, which contributed 2.9 percentage points, lower consulting costs and travel and marketing expenses, both of which contributed 1.1 percentage points to the change.

Transformation programs and costs

Our transformation programs consist of the Cost Optimization and Prioritization Plan (launched in 2020) and the HPE Next Plan (launched in 2017).

For the three and six months ended April 30, 2024, transformation costs decreased by $27 million, or 45.0%, and $109 million, or 67.3%, respectively, due to lower charges incurred in the current period as the primary elements of these plans have been substantially completed by the end of fiscal 2023.

For the three and nine months ended July 31, 2024, transformation costs decreased by $51 million, or 78.5%, and $160 million, or 70.5%, respectively, due to lower charges incurred in the current period as the primary elements of these plans have been substantially completed by the end of fiscal 2023.

For a further discussion, refer to Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Acquisition, disposition and other related charges

For the three and six months ended April 30, 2024, acquisition, disposition and other related charges increased by $27 million or 142.1%, and $59 million, or 196.7%, respectively, primarily due to costs incurred in relation to the pending acquisition of Juniper Networks.

For the three and nine months ended July 31, 2024, acquisition, disposition and other related charges increased by $16 million or 76.2%, and $75 million, or 147.1%, respectively, primarily due to costs incurred in connection with the pending acquisition of Juniper Networks.

Interest and other, net

For the three months ended April 30, 2024, interest and other, net expense decreased by $25 million, primarily due to a gain from the sale of certain investments.

For the six months ended April 30, 2024, interest and other, net expense increased by $37 million, primarily due to increase in loss on equity investments and unfavorable currency fluctuations.

The increase was partially offset by a decrease in net interest expense and gain from the sale of certain investments.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

For the three months ended July 31, 2024, interest and other, net expense was relatively flat as compared to the prior-year period.

For the nine months ended July 31, 2024, interest and other, net expense increased by $41 million, or 50.6%, primarily due to an increase in loss on equity investments and unfavorable currency fluctuations in the current period and the previous year containing tax indemnification income due to an audit settlement.

The increase was partially offset by a decrease in net interest expense and higher gains from sale of certain investments in the current period.

Earnings from equity interests

Earnings from equity interests primarily represents our 49% interest in H3C Technologies Co., Limited ("H3C") and the amortization of our basis difference.

For the three and six months ended April 30, 2024, earnings from equity interests decreased by $7 million and $19 million primarily due to lower net income earned by H3C partially offset by lower amortization expense from basis difference in the current period.

For the three months ended July 31, 2024, earnings from equity interests remained flat as compared to the prior-year period.

For the nine months ended July 31, 2024, earnings from equity interests decreased $19 million, or 10.6%, primarily due to lower net income earned by H3C partially offset by lower amortization expense from basis difference in the current period.

Provision for taxes

For the three months ended April 30, 2024 and 2023, we recorded income tax expense of $131 million and $104 million, respectively, which reflects an effective tax rate of 29.4% and 19.9%, respectively.

For the six months ended April 30, 2024 and 2023, we recorded income tax expense of $227 million and $226 million, respectively, which reflect an effective tax rate of 24.5% and 19.7%, respectively.

For the three and six months ended April 30, 2024, our effective tax rate differed from the U.S.

federal statutory rate of 21% due to our geographic mix of forecasted earnings and net unfavorable permanent differences from U.S.

income tax on non-U.S.

For the three and six months ended April 30, 2023, our effective tax rate differed from the U.S.

For the three months ended July 31, 2024 and 2023, we recorded income tax expense of $96 million and $72 million, respectively, which reflects an effective tax rate of 15.8% and 13.4%, respectively.

For the nine months ended July 31, 2024 and 2023, we recorded income tax expense of $323 million and $298 million, respectively, which reflects an effective tax rate of 21.0% and 17.7%, respectively.

For the three months ended July 31, 2024 and the three and nine months ended July 31, 2023, our effective tax rate differed from the U.S.

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

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Segment Information

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 ("CEO"), uses to evaluate, view, and run our 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 our business operations, which include, but are not

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

limited to, customer base and homogeneity of products and technology.

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

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Segment Results

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended April 30, 2024, as compared to the prior-year period:

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended July 31, 2024, as compared to the prior-year period:

HPE Consolidated Server

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Year-over-year change percentage points 0.4 pts 0.7 pts (0.3) pts (5.2) pts 0.8 pts 6.6 pts

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the six months ended April 30, 2024, as compared to the prior-year period:

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the nine months ended July 31, 2024, as compared to the prior-year period:

HPE Consolidated Server Hybrid Cloud

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(2) Segment earnings (loss) from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, transformation costs, disaster recovery/charges, and acquisition, disposition and other related charges.

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 % Change 2024 2023 % Change

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Earnings from operations as a % of net revenue 10.8 % 10.1 % 11.1 % 13.6 %

Three months ended April 30, 2024 compared with three months ended April 30, 2023

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Three months ended July 31, 2024 compared with three months ended July 31, 2023

Server net revenue increased by $1,112 million, or 35.1% (increased 35.2% on a constant currency basis), primarily due to a $1,105 million, or 48.0%, increase in product revenue.

The increase in product revenue was primarily due to higher net AUPs of $821 million, or 35.7%, and an increase in net unit volume of $282 million, or 12.3%.

Server earnings from operations as a percentage of net revenue decreased 3.4 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue.

The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products and services revenue, partially offset by lower supply chain costs.

Server earnings from operations as a percentage of net revenue increased 0.7 percentage points due to a decrease in operating expenses as a percentage of net revenue, moderated by an increase in costs of products and services as a percentage of net revenue.

The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Server net revenue decreased by $400 million, or 5.3% (decreased 5.2% on a constant currency basis), primarily due to a $375 million, or 6.4%, decrease in product revenue.

The decrease in product revenue was primarily due to lower net unit volume of $595 million, or 10.1%, as customers absorbed prior orders.

This decrease was partially offset by higher net AUPs of $216 million, or 3.7%.

The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products.

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

Server net revenue increased by $712 million, or 6.6% (increased 6.7% on a constant currency basis), primarily due to a $730 million, or 8.9%, increase in product revenue.

The increase in product revenue was primarily due to higher net AUPs of $1,038 million, or 12.7%.

This increase was partially offset by lower net unit volume of $313 million, or 3.8%.

Server earnings from operations as a percentage of net revenue decreased 2.5 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue.

The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products and competitive pricing pressure.

The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 % Change 2024 2023 % Change

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Earnings from operations as a % of net revenue 5.1 % 5.4 % 3.2 % 4.4 %

Three months ended April 30, 2024 compared with three months ended April 30, 2023

Three months ended July 31, 2024 compared with three months ended July 31, 2023

Hybrid Cloud net revenue decreased by $97 million, or 6.9% (decreased 6.7% on a constant currency basis), primarily due to a decrease in AUPs, partially offset by an increase in unit volume.

Hybrid Cloud product revenue decreased by $171 million, or 20.5%, primarily due to a decrease in AUPs of $267 million, or 32.0%, partially offset by a unit volume increase of $86 million or 10.4%, both of which were led by private cloud and storage products.

Hybrid Cloud services revenue increased by $56 million, or 10.4%, primarily due to a unit volume increase of $72 million, or 13.5%, led by private cloud and infrastructure software-as-a-service (“SaaS”).

Hybrid Cloud product revenue decreased by $113 million, or 13.5%, primarily due to a decrease in AUPs of $267 million, or 31.8%, led by private cloud and storage products.

This decrease was partially offset by a unit volume increase of $148 million or 17.6%, led by storage and private cloud products.

Hybrid Cloud services revenue increased by $16 million, or 2.9%, primarily due to a unit volume increase of $44 million, or 8.0%, led by private cloud.

This increase was partially offset by lower AUPs of $25 million, or 4.5%.

Hybrid Cloud earnings from operations as a percentage of net revenue decreased 1.1 percentage points primarily due to an increase in operating expenses as a percentage of net revenue moderated by a decrease in cost of products and services as a percentage of net revenue.

The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline and the related impact of fixed overhead costs.

The decrease in cost of products and services as a percentage of net revenue was primarily due to higher margin GreenLake Flex Solutions deals and increase in storage subscription and infrastructure SaaS revenues.

This was moderated by a decrease in AUPs for storage products.

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Hybrid Cloud net revenue decreased by $251 million, or 9.1%, (decreased 9.3% on a constant currency basis), primarily due to a decrease in AUPs, partially offset by an increase in unit volume.

Hybrid Cloud earnings from operations as a percentage of net revenue remained relatively flat as compared to the prior-year period.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

Hybrid Cloud net revenue decreased by $348 million, or 8.4%, in actual dollars and constant currency primarily due to a decrease in AUPs, partially offset by an increase in unit volume.

Hybrid Cloud product revenue decreased by $457 million, or 18.0%, primarily due to a decrease in AUPs of $688 million, or 27.2%, led by storage and private cloud products, partially offset by a unit volume increase of $214 million or 8.5%, led by storage products.

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Hybrid Cloud earnings from operations as a percentage of net revenue decreased 1.2 percentage points due to an increase in operating expenses as a percentage of net revenue, moderated by a decrease in cost of products and services as a percentage of net revenue.

The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline and the related impact of fixed overhead costs.

The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline.

The decrease in cost of products and services as a percentage of net revenue was primarily due to higher margin GreenLake Flex Solutions deals, increase in storage subscription and infrastructure SaaS revenues.

This was moderated by a decrease in AUPs for storage products.

Intelligent Edge

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 % Change 2024 2023 % Change

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Earnings from operations as a % of net revenue 22.4 % 27.6 % 24.7 % 24.2 %

Three months ended April 30, 2024 compared with three months ended April 30, 2023

Intelligent Edge net revenue decreased by $258 million, or 19.2% (decreased 19.1% on a constant currency basis).

Three months ended July 31, 2024 compared with three months ended July 31, 2023

Intelligent Edge net revenue decreased by $335 million, or 23.0% in actual dollars and constant currency.

Product revenue decreased by $378 million, or 31.5%, led by lower volume and product mix effect of $324 million, or 27.0%, and lower AUPs of $54 million, or 4.5%.

The product revenue decrease was primarily led by switching products and wireless local area network products due to softened demand.

Services net revenue increased $43 million, or 16.8%, primarily led by our aaS offerings and attached support service.

Intelligent Edge earnings from operations as a percentage of net revenue decreased 5.2 percentage points primarily due to an increase in operating expenses as a percentage of net revenue, partially offset by a decrease in cost of products and services as a percentage of net revenue.

Operating expenses as a percentage of net revenue increased primarily due to scale of net revenue decline, higher employee costs related to acquisitions and investment to enhance Aruba offerings in GreenLake.

The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and cost containment measures.

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

Intelligent Edge net revenue decreased by $561 million, or 14.1% (decreased 14.3% on a constant currency basis).

Product revenue decreased by $711 million, or 21.9%, led by lower volume and product mix effect of $715 million, or 22.0%, and lower AUPs of $4 million, or 0.1%, moderated by favorable currency fluctuations of $8 million.

The product revenue decrease was primarily led by switching products and wireless local area network products due to softened demand.

Services net revenue increased $150 million, or 20.8%, primarily led by attached support service and our aaS offerings.

Intelligent Edge earnings from operations as a percentage of net revenue increased 0.5 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue, partially offset by an increase in operating expenses as a percentage of net revenue.

The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and cost containment measures.

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Financial Condition and Results of Operations (Continued)

Intelligent Edge earnings from operations as a percentage of net revenue decreased 2.9 percentage points primarily due to an increase in operating expenses as a percentage of net revenue, partially offset by a decrease in cost of products and services as a percentage of net revenue.

The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and lower supply chain costs.

Operating expenses as a percentage of net revenue increased primarily due to higher employee costs related to acquisitions.

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Intelligent Edge net revenue decreased by $226 million, or 9.0% (decreased 9.2% on a constant currency basis).

Product revenue decreased by $333 million, or 16.3%, led by lower volume and product mix effect of $391 million, or 19.1%, moderated by higher AUPs of $50 million, or 2.4%, and favorable currency fluctuations of $8 million.

The product revenue decrease was primarily led by wireless local area network products and switching products due to softened demand.

Services net revenue increased $107 million, or 23.0%, primarily led by attached support service and our aaS offerings.

Intelligent Edge earnings from operations as a percentage of net revenue increased 3.6 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue, partially offset by an increase in operating expenses as a percentage of net revenue.

The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and lower supply chain costs.

Operating expenses as a percentage of net revenue increased primarily due to higher employee costs related to acquisitions.

Financial Services

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 % Change 2024 2023 % Change

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Earnings from operations as a % of net revenue 9.0 % 8.2 % 8.9 % 8.1 %

Three months ended April 30, 2024 compared with three months ended April 30, 2023

FS net revenue increased by $9 million, or 1.0% (increased 1.1% on a constant currency basis) due primarily to higher finance income on higher average finance leases in an increasing interest rate environment.

FS earnings from operations as a percentage of net revenue increased 0.4 percentage points due to operating expenses as a percentage of net revenue and cost of services as a percentage of net revenue were relatively flat.

Six months ended April 30, 2024 compared with six months ended April 30, 2023

FS net revenue was increased by $9 million, or 0.5% (decreased 0.4% on a constant currency basis) due primarily to higher finance income on higher average finance leases in an increasing interest rate environment.

FS earnings from operations as a percentage of net revenue increased 0.9% percentage points largely due to operating expenses as a percentage of net revenue and cost of services as a percentage of net revenue were relatively flat.

Three months ended July 31, 2024 compared with three months ended July 31, 2023

FS net revenue increased by $6 million, or 0.7% (increased 1.4% on a constant currency basis) due primarily to higher finance income on higher average finance leases in a higher interest rate environment, partially offset by lower rental revenue on lower average operating leases, along with unfavorable currency impact.

FS earnings from operations as a percentage of net revenue increased 0.8 percentage points due to a decrease in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat.

The decrease in cost of services as a percentage of net revenue resulted primarily from lower depreciation expense, partially offset by higher borrowing costs.

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

FS net revenue increased by $15 million, or 0.6% (increased 0.2% on a constant currency basis) due primarily to higher finance income on higher average finance leases in a higher interest rate environment.

FS earnings from operations as a percentage of net revenue increased 0.8 percentage points although the cost of services as a percentage of net revenue and operating expenses as a percentage of net revenue were relatively flat.

Financing Volume

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

Financing volume $ 1,483 $ 1,655 $ 4,518 $ 4,923

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, was relatively flat and decreased 7.1% for the three and six months ended April 30, 2024, as compared to the prior-year period.

The decrease for the six months ended April 30, 2024, was primarily due to lower financing of third-party product and services, partially offset by higher financing of HPE product sales and services.

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 10.4% and 8.2% for the three and nine months ended July 31, 2024, as compared to the prior-year period.

The decrease for the three and nine months ended July 31, 2024, was primarily due to lower financing of third-party product and services, partially offset by higher financing of HPE product sales and services.

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The portfolio assets and ratios derived from the segment balance sheets for FS were as follows:

April 30, 2024 October 31, 2023

July 31, 2024 October 31, 2023

Dollars in millions

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(3) Debt benefiting FS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity associated with FS and its subsidiaries.

Debt benefiting FS totaled $11.5 billion and $11.6 billion as of April 30, 2024 and October 31, 2023, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies.

FS equity at April 30, 2024 and October 31, 2023 was $1.6 billion and$1.7 billion, respectively.

As of April 30, 2024 and October 31, 2023, FS net cash and cash equivalents balances were approximately $552 million and $700 million, respectively.

Net portfolio assets as of April 30, 2024 increased 0.7% from October 31, 2023.

Debt benefiting FS totaled $11.4 billion and $11.6 billion as of July 31, 2024 and October 31, 2023, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies.

FS equity at July 31, 2024 and October 31, 2023 was $1.6 billion and $1.7 billion, respectively.

As of July 31, 2024 and October 31, 2023, FS net cash and cash equivalents balances were approximately $534 million and $700 million, respectively.

Net portfolio assets as of July 31, 2024 increased 0.6% from October 31, 2023.

The increase generally resulted from favorable currency fluctuations.

FS bad debt expense includes charges to general reserves, specific reserves, and write-offs for sales-type, direct-financing, and operating leases.

For the three and six months ended April 30, 2024, FS recorded net bad debt expense of $10 million and $22 million, respectively.

For the three and six months ended April 30, 2023, FS recorded net bad debt expense of $11 million and $30 million, respectively.

For the three and nine months ended July 31, 2024, FS recorded net bad debt expense of $14 million and $36 million, respectively.

For the three and nine months ended July 31, 2023, FS recorded net bad debt expense of $16 million and $46 million, respectively.

Corporate Investments and Other

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 % Change 2024 2023 % Change

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Loss from operations as a % of net revenue (1.5) % (8.1) % (3.1) % (8.4) %

Three months ended April 30, 2024 compared with three months ended April 30, 2023

Three months ended July 31, 2024 compared with three months ended July 31, 2023

Corporate Investments and Other net revenue increased by $16 million, or 6.5% (increased 9.8% on a constant currency basis), primarily due to revenue growth from A&PS, partially offset by unfavorable currency fluctuations.

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Financial Condition and Results of Operations (Continued)

Six months ended April 30, 2024 compared with six months ended April 30, 2023

Nine months ended July 31, 2024 compared with nine months ended July 31, 2023

Corporate Investments and Other net revenue increased by $30 million, or 4.2% (increased 6.4% on a constant currency basis), primarily due to revenue growth from A&PS, partially offset by unfavorable currency fluctuations.

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 4.7 percentage points primarily due to decreases in cost of services as a percentage of net revenue resulting from our cost containment measures, while operating expenses as a percentage of net revenue increased due to higher total operating expenses.

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 5.3 percentage points primarily due to decreases in cost of services as a percentage of net revenue resulting from our cost containment measures, and decreases in operating expenses as a percentage of net revenue due to the scale of net revenue growth while operating expenses remained relatively flat.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Accounting policies that are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments include revenue recognition, taxes on earnings, impairment assessment of goodwill and intangible assets, and contingencies.

As of April 30, 2024, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

As of July 31, 2024, there have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

LIQUIDITY AND CAPITAL RESOURCES

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However, our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market, and economic conditions.

We anticipate that the funds made available, including committed debt funding related to the pending merger with Juniper Networks and anticipated proceeds from the sale of H3C shares held by us, and cash generated from operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months and for the foreseeable future thereafter.

Our liquidity is subject to various risks including the risks identified in the section entitled "Risk Factors" in Item 1A of Part II and market risks identified in the section entitled "Quantitative and Qualitative Disclosures about Market Risk" in Item 3 of Part I.

Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S.

as of April 30, 2024.

as of July 31, 2024.

We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.

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to have a material effect on our overall liquidity, financial condition, or results of operations.

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $48 million, during the first six months of fiscal 2024.

As of April 30, 2024, we had a remaining

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Financial Condition and Results of Operations (Continued)

authorization of approximately $0.9 billion for future share repurchases.

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $100 million, during the first nine months of fiscal 2024.

As of July 31, 2024, we had a remaining authorization of approximately $0.9 billion for future share repurchases.

For more information on our share repurchase program, refer to the section entitled "Unregistered Sales of Equity Securities and Use of Proceeds" in Item 2 of Part II.

On May 23, 2024, we announced plans to divest our Communications Technology Group ("CTG") business to HCLTech.

CTG is included in our Communications and Media Solutions business, which is reported in the Corporate Investments and Other segment.

This divestiture includes the platform-based software solutions portions of the CTG portfolio, including systems integration, network applications, data intelligence, and the business support systems groups.

The disposition is subject to regulatory approvals and satisfaction of other customary closing conditions.

As of July 31, 2024, assets and liabilities to be sold have been presented in our Condensed Consolidated Balance Sheet as assets and liabilities held for sale.

On January 9, 2024, we entered into a definitive Agreement and Plan of Merger under which HPE will acquire Juniper Networks in an all-cash transaction for $40.00 per share, representing an equity value of approximately $14 billion.

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The transactions referenced in clauses (i) and (ii) above, taken together, revise the arrangements governing the aforementioned sale of all of the H3C shares held by us, through our subsidiaries and are subject to certain grace periods and regulatory approvals.

On September 4, 2024, pursuant to the Amended and Restated Put Share Purchase Agreement with UNIS, we received $2.1 billion of pre-tax consideration ($2.0 billion post-tax), in connection with the sale to UNIS of 30% of the total issued share capital of H3C.

Our cash, cash equivalents, restricted cash, total debt, and available borrowing resources were as follows:

April 30, 2024 October 31, 2023

July 31, 2024 October 31, 2023

Cash, cash equivalents and restricted cash $ 3,905 $ 4,581

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(1) Excludes the financing commitment for the Juniper Networks acquisition.

The maximum aggregate commitment under this facility is $14.0 billion, however, no balances were outstanding under this facility as of April 30, 2024.

The maximum aggregate commitment under this facility is $14.0 billion, however, no balances were outstanding under this facility as of July 31, 2024.

(2) The maximum aggregate borrowing amount of the commercial paper programs and revolving credit facility is $5.75 billion.

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The following tables represent the way in which management reviews cash flows:

For the six months ended April 30,

For the nine months ended July 31,

Net cash provided by operating activities $ 2,311 $ 1,585

Net cash used in investing activities (1,580) (3,186)

Net cash (used in) provided by financing activities (1,676) 163

Net cash used in financing activities (1,372) (168)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash (35) 138

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Operating Activities

For the six months ended April 30, 2024, net cash provided by operating activities increased by $1.1 billion, as compared to the corresponding period in fiscal 2023.

For the nine months ended July 31, 2024, net cash provided by operating activities increased by $0.7 billion, as compared to the corresponding period in fiscal 2023.

The increase was primarily due to favorable working capital and favorable impacts from financing receivables.

The increase was moderated by higher cash payouts for variable compensation and unfavorable impacts from other assets and liabilities, as compared to the prior-year period.

The increase was moderated by higher cash payouts for variable compensation and unfavorable impacts from net hedge positions, as compared to the prior-year period.

Our working capital metrics and cash conversion impacts were as follows:

April 30, 2024 October 31, 2023 Change April 30, 2023 October 31, 2022 Change Y/Y Change

July 31, 2024 October 31, 2023 Change July 31, 2023 October 31, 2022 Change Y/Y Change

Days of sales outstanding in accounts receivable ("DSO") 45 43 2 44 47 (3) 1

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DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue.

Compared to the corresponding three-month period in fiscal 2023, DSO remained flat.

Compared to the corresponding three-month period in fiscal 2023, the DSO remained relatively flat.

DOS measures the average number of days from procurement to sale of our products.

DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold.

Compared to the corresponding three-month period in fiscal 2023, the increase in DOS in the current period was primarily due to higher inventory levels caused by strategic purchases of key components and higher ending inventory pending customer acceptances.

DPO measures the average number of days our accounts payable balances are outstanding.

DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold.

Compared to the corresponding three-month period in fiscal 2023, the increase in DPO in the current period was primarily due to higher inventory purchases, and lower vendor payments during the current period.

Compared to the corresponding three-month period in fiscal 2023, the increase in DPO in the current period was primarily due to higher inventory purchases.

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Investing Activities

For the six months ended April 30, 2024, net cash used in investing activities decreased by $1.1 billion, as compared to the corresponding period in fiscal 2023.

The decrease was primarily due to lower cash utilized in net financial collateral activities of $0.4 billion and the prior-year period containing higher net payments made in connection with business acquisitions of $0.4 billion.

For the nine months ended July 31, 2024, net cash used in investing activities decreased by $1.6 billion, as compared to the corresponding period in fiscal 2023.

The decrease was primarily due to lower cash utilized in net financial collateral activities of $0.5 billion, lower investments in property, plant and equipment and software assets, net of sales proceeds of $0.3 billion, and the prior-year period containing net payments made in connection with business acquisitions of $0.8 billion.

Financing Activities

For the six months ended April 30, 2024, net cash used in financing activities increased by $1.8 billion, as compared to the corresponding period in fiscal 2023.

This was primarily due to lower proceeds from debt, net of issuance costs and short-term borrowings of $2.2 billion, offset by lower repayments of debt of $0.2 billion and lower share repurchases of $0.1 billion, as compared to the prior-year period.

For the nine months ended July 31, 2024, net cash used in financing activities increased by $1.2 billion, as compared to the corresponding period in fiscal 2023.

This was primarily due to lower proceeds from debt, net of issuance costs of $1.7 billion, partially offset by lower repayments of debt of $0.3 billion and lower share repurchases of $0.3 billion, as compared to the prior-year period.

Free Cash Flow

Free cash flow (“FCF”) represents cash flow from operations less net capital expenditures (investments in property, plant and equipment ("PP&E") less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

For the six months ended April 30, 2024, FCF increased by $1.2 billion, as compared to the corresponding period in fiscal 2023.

Free cash flow ("FCF") represents cash flow from operations less net capital expenditures (investments in property, plant and equipment ("PP&E") and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

For the nine months ended July 31, 2024, FCF increased by $0.9 billion, as compared to the corresponding period in fiscal 2023.

This was primarily due to higher cash provided by operations, as compared to the prior-year period.

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In December 2023, we filed a shelf registration statement with the Securities and Exchange Commission that allows us to sell, at any time and from time to time, in one or more offerings, debt securities, preferred stock, common stock, warrants, depository shares, purchase contracts, guarantees or units consisting of any of these securities.

Significant funding and liquidity activities for the six months ended April 30, 2024 were as follows:

Significant funding and liquidity activities for the nine months ended July 31, 2024 were as follows:

Debt Issuances

• In June 2024, we issued $818 million of asset-backed debt securities in six tranches with a weighted average interest rate of 5.593% and final maturity date of April 2032.

• In January 2024, we issued $796 million of asset-backed debt securities in six tranches with a weighted average interest rate of 5.476% and final maturity date of November 2031.

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• In April 2024, the Company repaid $1.0 billion of 1.45% Senior Notes on their original maturity date.

• During the six months ended April 30, 2024, we repaid $834 million of the outstanding asset-backed debt securities.

• During the nine months ended July 31, 2024, we repaid $1.1 billion of the outstanding asset-backed debt securities.

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Restructuring Plans

As of April 30, 2024, we expect to make future cash payments of approximately $210 million in connection with our approved restructuring plans, which includes $60 million expected to be paid through the remainder of fiscal 2024 and $150 million expected to be paid thereafter.

As of July 31, 2024, we expect to make future cash payments of approximately $195 million in connection with our approved restructuring plans, which includes $25 million expected to be paid through the remainder of fiscal 2024 and $170 million expected to be paid thereafter.

For more information on our restructuring activities, see Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Uncertain Tax Positions

As of April 30, 2024, we had approximately $241 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.

As of July 31, 2024, we had approximately $238 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.

These liabilities and related interest and penalties include $2 million expected to be paid within one year.

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Reconciliation of GAAP gross profit and gross profit margin to non-GAAP gross profit and gross profit margin.

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

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Disaster recovery (7) — % (3) — % (39) (0.2) % (3) — %

Divestiture related exit costs 9 0.1 % — — % 9 — % — — %

Non-GAAP gross profit $ 2,450 31.8 % $ 2,516 35.9 % $ 7,281 33.6 % $ 7,715 35.4 %

Reconciliation of GAAP earnings from operations and operating profit margin to non-GAAP earnings from operations and operating profit margin.

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

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Stock-based compensation expense 80 1.0 % 91 1.3 % 341 1.6 % 357 1.6 %

Divestiture related exit costs 35 0.5 % — — % 35 0.2 % — — %

Acquisition, disposition and other related charges 37 0.5 % 21 0.3 % 126 0.6 % 51 0.2 %

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Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

Dollars Diluted Net Earnings per Share Dollars Diluted Net Earnings per Share Dollars Diluted Net Earnings per Share Dollars Diluted Net Earnings per Share

Dollars in millions

Dollars in millions except per share amounts

GAAP net earnings $ 512 $ 0.38 $ 464 $ 0.35 $ 1,213 $ 0.92 $ 1,383 $ 1.05

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Stock-based compensation expense 80 0.06 91 0.07 341 0.26 357 0.28

Divestiture related exit costs 35 0.03 — — 35 0.03 — —

Acquisition, disposition and other related charges 37 0.03 21 0.02 126 0.10 51 0.04

Earnings from equity interests (44) (0.04) 2 — (132) (0.10) 16 0.01

(42) (0.03) 2 — (88) (0.07) 14 0.01

Loss on equity investments, net

— — — — 61 0.05 — —

(Gain) Loss on equity investments, net (14) (0.01) — — 47 0.03 — —

Other adjustments (1)

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Non-GAAP net earnings $ 661 $ 0.50 $ 639 $ 0.49 $ 1,860 $ 1.40 $ 2,152 $ 1.63

(1) For the three and six months ended April 30, 2024, includes the equity in earnings from H3C equity method investment and all periods include the amortization of the basis difference in our investment.

(1) Other adjustments includes non-service net periodic benefit cost and tax indemnification and other adjustments.

Reconciliation of net cash provided by operating activities to free cash flow.

For the three months ended April 30, For the six months ended April 30,

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

2024 2023 2024 2023

Net cash provided by operating activities $ 1,154 $ 1,525 $ 2,311 $ 1,585

Investment in property, plant and equipment (560) (688) (1,216) (1,482)

Investment in property, plant and equipment and software assets (543) (671) (1,759) (2,153)

Proceeds from sale of property, plant and equipment 62 102 280 347

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See "Compensation for Limitations With Use of Non-GAAP Financial Measures" section below for further information.

Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the stock-based compensation expense, and disaster (recovery) charges.

Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the stock-based compensation expense, disaster (recovery) charges, and divestiture related exit costs.

See below for the reasons management excludes each item:

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• Disaster (recovery) charges are primarily related to the exit of our businesses in Russia and Belarus, and include credit losses of financing and trade receivables, employee severance and abandoned assets.

Disaster charges also include direct costs or recovery of these costs related to COVID-19 as a result of Hewlett Packard Enterprise-hosted, co-hosted, or sponsored event cancellations and subsequent shift to a virtual format.

Disaster charges also include direct costs or recovery of these costs.

We exclude disaster (recovery) charges from these non-GAAP measures as the specific charges are non-recurring charges and not indicative of the operational performance of our business.

Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, transformation costs and acquisition, disposition and other related charges.

In addition to the items previously explained above, management excludes these items for the following reasons:

• Divestiture related exit costs include expenses associated with certain disposal activities.

On May 23, 2024, HPE announced plans to divest the Company’s CTG business.

We consider this divestiture to be a discrete event.

We exclude these costs as these expenses are non-recurring exit costs to eliminate stranded costs of this business.

In addition, our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding these charges.

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Financial Condition and Results of Operations (Continued)

In addition to the items previously explained above, management excludes these items for the following reasons:

• We incur charges relating to the amortization of intangible assets and exclude these charges for purposes of calculating these non-GAAP measures.

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The charges are direct expenses, such as professional fees and retention costs, most of which are treated as non-cash or non-capitalized expenses.

For the three and six months ended April 30, 2024, these charges were driven by costs associated with the pending acquisition of Juniper Networks, in addition to prior acquisitions of Axis and Athonet.

For the three and six months ended April 30, 2023, these charges were driven by acquisitions of Axis, Zerto and Athonet.

For the three and nine months ended July 31, 2024, these charges were driven by costs associated with the pending acquisition of Juniper Networks, in addition to prior acquisitions of Axis, Athonet and OpsRamp.

For the three and nine months ended July 31, 2023, these charges were driven by acquisitions of Axis, Zerto, OpsRamp and Athonet.

Charges may also include expenses associated with disposal activities including legal and arbitration settlements in connection with certain dispositions.

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In addition to the items previously explained, management excludes these items for the following reasons:

• For the three and six months ended April 30, 2024 and prospectively, the adjustment to earnings from equity interests includes the equity in earnings from the H3C investment.

In connection with the planned divestiture of the H3C investment, we stopped reporting H3C earnings in our non-GAAP results as we no longer receive dividends from this investment due to the Put Share Purchase Agreement described in Note 16 “Equity Method Investments” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

• During the six months ended April 30, 2024, we stopped reporting H3C earnings in our non-GAAP results due to the planned divestiture of the H3C investment.

Per the terms of the original Put Share Purchase Agreement, we weren’t anticipating receiving dividends from this investment prospectively.

However, on May 24, 2024, we entered into an Amended and Restated Put Share Purchase Agreement and an Agreement on Subsequent Arrangements, both with UNIS, as described in Note 16 “Equity Method Investments” to the Condensed Consolidated Financial Statements in Item 1 of Part I, which, taken together, revise the arrangements governing the aforementioned sale as previously set forth in the original Put Share Purchase Agreement.

For the three months ended July 31, 2024, the adjustment to earnings from equity interests represents our expectation at such time to divest 30% of the total issued share capital of H3C in fiscal 2024.

On September 4, 2024, we divested 30% of the total issued share capital of H3C.

We continue to possess the option to sell the remaining 19% of the total issued share capital of H3C at a later date.

Prospectively, the adjustment to earnings from equity interests will incorporate the completed divestment of 30% of the total issued share capital of H3C.

All periods presented include the amortization of the basis difference in our investment.

For the six months ended April 30, 2023, this adjustment also included our portion of intangible asset impairment charges from H3C.

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

months ended July 31, 2023, this adjustment also included our portion of intangible asset impairment charges from H3C.

We believe that eliminating these amounts for purposes of calculating non-GAAP financial measures facilitates the evaluation of our current operating performance.

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When projecting this long-term rate, we evaluated a three-year financial projection.

The projected rate assumes no incremental acquisitions in the three-year projection period and considers other factors

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

including our expected tax structure, our tax positions in various jurisdictions and current impacts from key legislation implemented in major jurisdictions where we operate.

The projected rate assumes no incremental acquisitions in the three-year projection period and considers other factors including our expected tax structure, our tax positions in various jurisdictions and current impacts from key legislation implemented in major jurisdictions where we operate.

For fiscal 2024, we will use a projected non-GAAP income tax rate of 15%, which reflects currently available information as well as other factors and assumptions.

3 unchanged sentences

We believe that making these adjustments for purposes of calculating non-GAAP measures, facilitates a supplemental evaluation of our current operating performance and comparisons to past operating results.

FCF is defined as cash flow from operations, less net capital expenditures (investments in PP&E less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

FCF is defined as cash flow from operations, less net capital expenditures (investments in PP&E and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

FCF does not represent the total increase or decrease in cash for the period.

6 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis