What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-07 compared with 2024-09-05 · 290 added, 354 removed, 402 unchanged (62% 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 nine months ended July 31, 2024 to the comparable prior-year period and where appropriate, as of July 31, 2024, unless otherwise noted.

The financial discussion and analysis in the following MD&A compares the three months ended January 31, 2025 to the comparable prior-year period and where appropriate, as of January 31, 2025, unless otherwise noted.

This MD&A is organized as follows:

• Trends and Uncertainties.

A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment of supply chain constraints (though easing), uneven demand across our portfolio, increased demand for and adoption of new technologies, conservative customer spending environment, persistent inflation, foreign exchange pressures, recent tax developments, and pending merger with Juniper Networks, Inc.

A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment of supply chain constraints (though easing) and heightening global trade restrictions, uneven demand across our portfolio, increased demand for and adoption of new technologies, conservative customer spending environment (though recovering), persistent inflation, foreign exchange pressures, recent tax developments, competitive pricing pressures, and proposed acquisition of Juniper Networks, Inc.

(“Juniper Networks”).

• Executive Overview.

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• GAAP to Non-GAAP Reconciliations .

Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure therein.

Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure.

This section also includes 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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TRENDS AND UNCERTAINTIES

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:

During the first three months of fiscal 2025, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted our operations, as follows:

Technological Advancements:

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With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data.

Increasing demand for AI is also contributing to changes in the competitive landscape.

Our major competitors and emerging competitors are expanding their product and service offerings with integrated products and solutions and exerting increased competitive pressure.

We expect these market dynamics and trends to continue in the longer term.

Macroeconomic Uncertainty:

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.

The effect of the evolving macroeconomic environment has been impacting 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 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.

Additionally, there is growing uncertainty surrounding U.S.

trade policy and import/export regulations, which may, in turn, result in trading partners enacting reciprocally restrictive trade policies and measures.

These may enhance global trade uncertainty and contribute to higher prices of components and end products and services.

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

Supply Chain:

We have seen supply chain constraints for certain components, including graphics processing units, ease (though challenges still remain).

Mild improvements to industry-wide supply constraints have helped to ease certain supply chain challenges we encountered in the recent past, including the increased availability of supply and lower material and logistics costs.

Logistics costs continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network.

We have experienced, and expect to continue experiencing, rising input component costs, principally driven by inflation.

While we have been able to pass on such increased costs to customers, the pricing environment has been, and we believe will continue to remain, competitive, which may impact our financial results.

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 than anticipated customer acceptance timelines on certain AI-related orders;

we expect this trend to continue.

We experienced supply chain constraints for certain components, including graphics processing units, (“GPUs”) and accelerated processing units.

Though, they have since eased, in part due to increased availability of supply and lower material and logistics costs, the future is uncertain due to forthcoming shifts in U.S.

trade policy, which may impact our ability to import and export components and finished products and the costs of doing so.

Logistics costs decreased from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network;

however, these costs may rise with the aforementioned changes in trade policies.

We have, in fact, been experiencing higher-than-normal inventory levels, primarily due to customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related orders;

we expect this trend to continue in the medium term.

We have experienced, and expect to continue experiencing, rising input component costs, which may exacerbate due to the global trade uncertainties referenced above, and a competitive pricing environment, which may impact our financial results.

We plan to mitigate the impact of these dynamics through continued disciplined cost and pricing management and supply chain diversification.

Recurring Revenue and Consumption Models:

We continue to strengthen our core server and storage-oriented offerings and expand our offerings on the HPE GreenLake edge-to-cloud platform, to deliver our entire portfolio as-a-service (“aaS”) and become the edge-to-cloud company for our customers and partners.

We continue to strengthen our core server and storage-oriented offerings and expand our offerings on the HPE GreenLake cloud, to deliver our entire portfolio as-a-service (“aaS”) and become the edge-to-cloud company for our customers and partners.

We expect that such flexible consumption model will continue to strengthen our customer relationships and contribute to growth in recurring revenue.

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We utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts.

Public Sector :

We have a number of engagements with various public sector entities, including the U.S.

federal government and its agencies, as direct or indirect customers of our IT services and hardware.

Significant staffing and resource reductions at certain public sector entities create an uncertain environment and as a result, our financial results may be impacted in the near term.

Recent Tax Developments:

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To date, 59 countries have enacted portions, or all, of the OECD proposal and a further 7 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules.

Where enacted, the rules begin to be effective for us in fiscal 2025.

Where enacted, the rules are effective for us beginning in fiscal 2025.

Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax.

As a result, no impact to our fiscal 2024 results is expected.

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.

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

The adoption and effective dates of these rules may vary by

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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.

country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes.

We do not expect a material impact to our fiscal 2025 results.

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

federal income tax returns.

Subsequent to the close of the first quarter of fiscal 2025, the IRS issued a Revenue Agent Report (“RAR”) with which we agreed.

The final determination will not result in a material impact to our financial statements.

The audit cycle for fiscal 2017 through 2019 will be considered effectively settled during the second quarter of fiscal 2025 resulting in a reduction of existing unrecognized tax benefits of approximately $358 million.

A significant majority of these unrecognized tax benefits relates either to adjustments to foreign tax credits that carry a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which will affect our effective tax rate.

The IRS audit for fiscal 2020 through 2022 remains open.

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.

Pending Merger with Juniper Networks, Inc:

On January 9, 2024 , we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) under which we will acquire Juniper Networks, Inc.

(“Juniper Networks”) in an all-cash transaction for $40.00 per share (the “Merger”), representing an equity value of approximately $14 billion.

The transaction is expected to be funded based on financing commitments for $14 billion in term loans.

Such financing will ultimately be replaced, in part, with a combination of new debt, mandatory convertible preferred securities, and cash on the balance sheet.

On April 2, 2024, Juniper Networks shareholders approved the transaction.

The impacts of geopolitical volatility (including the ongoing conflict in the Middle East and in Ukraine and 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 have also entered into contracts for the sale of certain products and services that reflect heavier-than-normal discounting due to competitive pressures, which have resulted in lower margins than expected, and we expect will continue to negatively impact our margins in the near to medium term.

We are monitoring and seeking to mitigate these risks with adjustments to our manufacturing, supply chain, distribution networks, pricing and discounting practices.

We remain focused on executing our key strategic priorities, building long-term value creation for our stakeholders, and addressing our customers’ needs while continuing to make prudent decisions in response to the environment.

Proposed Acquisition of Juniper Networks, Inc:

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

On April 2, 2024, Juniper Networks stockholders approved the transaction.

The transaction is expected to be funded based on senior unsecured delayed draw term loans from a syndicate of banks, the post-tax proceeds from our sale to Unisplendour International Technology Limited (“UNIS”) of 30% of the total issued share capital of H3C Technologies Co., Limited (“H3C”), the net proceeds (including after repayments of maturing debt) of our September 2024 issuances of senior unsecured notes and the 7.625% Series C Mandatory Convertible Preferred Stock (the “Preferred Stock”), and cash on the balance sheet.

The closing of the transaction remains subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.

For further information about the Merger, refer to Note 8, “ Acquisitions ” in Item 1 of Part I of this Quarterly Report, and for further discussion about the risks related to the Merger, see the section titled “Risk Factors” in Item 1A of Part II of the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2024.

On January 30 2025, the Antitrust Division of the United States Department of Justice (the “DOJ”) filed a complaint in the United States District Court for the Northern District of California, seeking to enjoin the closing of the Merger, alleging that the Merger is likely to substantially lessen competition in violation of Section 7 of the Clayton Act.

On February 10, 2025, HPE and Juniper Networks filed answers to the DOJ’s complaint, disputing these claims.

Trial is scheduled to begin on July 9, 2025.

While we intend to vigorously defend the litigation, an unfavorable ruling could ultimately prevent the closing of the Merger, thereby adversely impacting our ability to achieve the intended benefits of the Merger, which could, in turn, have an adverse impact on our business, financial condition, and results of operations.

For further information about the Merger, refer to Note 8, “ Acquisitions and Dispositions” to the Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report, and for further discussion about the risks related to the Merger, see the section titled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report.

The foregoing summary of the Merger, the adoption of the Merger Agreement, and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is filed as Exhibit 2.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2024.

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Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Our operations are organized into five reportable segments for financial reporting purposes:

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

Effective at the beginning of the first quarter of fiscal 2025, in order to align its segment financial reporting more closely with its current business structure, HPE implemented an organizational change with the transfer of certain managed services, previously reported within the Server reportable segment, to the Hybrid Cloud reportable segment.

Cost Reduction Program

On March 6, 2025, the Board of Directors approved a cost reduction program (the "Program") intended to reduce structural operating costs and continue advancing our ongoing commitment to profitable growth.

The Program is expected to be implemented through fiscal year 2026 and deliver gross savings of approximately $350 million by fiscal year 2027 through reductions in our workforce.

In order to achieve this level of cost savings, we estimate cash charges of approximately $350 million over the next two years in connection with the Program, with approximately $250 million to be incurred in fiscal year 2025, and the remaining $100 million to be incurred in the fiscal year 2026.

The estimates of the duration of the Program, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual amounts may differ materially from estimates.

In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Program.

Three months ended January 31, 2025 compared with three months ended January 31, 2024

Net revenue of $7.9 billion represented an increase of 16.3% (increased 17.2% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment and higher unit volume in the Hybrid Cloud segment.

The gross profit margin of 29.2% (or $2.3 billion), represents a decrease of 7.2 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments.

The operating profit margin of 5.5% represents a decrease of 2.3 percentage points from the prior-year period primarily due to the aforementioned gross margin decline moderated by lower operating expenses.

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The following table summarizes our condensed consolidated GAAP financial results:

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

2024 2023 Change 2024 2023 Change

Dollars in millions, except per share amounts

For the three months ended January 31,

2025 2024 Change

Dollars in millions,

except per share amounts

Net revenue $ 7,854 $ 6,755 16.3%

Gross profit $ 2,295 $ 2,457 (6.6)%

Gross profit margin 31.6 % 35.8 % (4.2)pts 33.6 % 35.3 % (1.7)pts

Gross profit margin 29.2 % 36.4 % (7.2)pts

Earnings from operations $ 433 $ 525 (17.5)%

Operating profit margin 7.1 % 6.7 % 0.4pts 6.9 % 7.3 % (0.4)pts

Net earnings $ 512 $ 464 10.3% $ 1,213 $ 1,383 (12.3)%

Diluted net earnings per share $ 0.38 $ 0.35 $0.03 $ 0.92 $ 1.05 $(0.13)

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

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 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.

Operating profit margin 5.5 % 7.8 % (2.3)pts

Net earnings attributable to HPE $ 627 $ 387 62.0%

Net earnings attributable to common stockholders $ 598 $ 387 54.5%

Diluted net earnings per share attributable to common stockholders (1)

$ 0.44 $ 0.29 $0.15

Cash flow (used in) provided by operations $ (390) $ 64 $(454)

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

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

2024 2023 Change 2024 2023 Change

Dollars in millions, except per share amounts

For the three months ended January 31,

2025 2024 Change

Dollars in millions,

except per share amounts

Net revenue in constant currency $ 7,914 $ 6,755 17.2%

Non-GAAP gross profit $ 2,310 $ 2,448 (5.6)%

Non-GAAP gross profit margin 31.8 % 35.9 % (4.1)pts 33.6 % 35.4 % (1.8)pts

Non-GAAP gross profit margin 29.4 % 36.2 % (6.8)pts

Non-GAAP earnings from operations $ 780 $ 775 0.6%

Non-GAAP operating profit margin 10.0 % 10.3 % (0.3)pts 10.3 % 11.2 % (0.9)pts

Non-GAAP net earnings $ 661 $ 639 3.4% $ 1,860 $ 2,152 (13.6)%

Non-GAAP diluted net earnings per share $ 0.50 $ 0.49 $0.01 $ 1.40 $ 1.63 $(0.23)

Non-GAAP operating profit margin 9.9 % 11.5 % (1.6)pts

Non-GAAP net earnings attributable to HPE $ 684 $ 638 7.2%

Non-GAAP net earnings attributable to common stockholders $ 655 $ 638 2.7%

Non-GAAP diluted net earnings per share attributable to common stockholders (1)

$ 0.49 $ 0.48 $0.01

Free cash flow $ (877) $ (482) ($395)

(1) For purposes of calculating diluted net EPS, the preferred stock dividends are added back to the net earnings attributable to common stockholders and the diluted weighted average share calculation assumes the preferred stock was converted at issuance or as of the beginning of the reporting period.

Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure herein.

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.

Annualized Revenue Run-rate (“ARR”)

ARR represents the annualized revenue of all net HPE GreenLake cloud services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four.

We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our aaS business.

We also believe ARR provides investors with greater transparency to our financial information and of the performance metric used in our financial and operational decision making and allows investors to see our results “through the

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Financial Condition and Results of Operations (Continued)

Annualized Revenue Run-rate ("ARR")

ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four.

We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our aaS business.

eyes of management.” We use ARR as a performance metric.

ARR should be viewed independently of net revenue and is not intended to be combined with it.

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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 July 31, 2024 and 2023:

As of July 31,

The following presents our ARR calculated as of January 31, 2025 and 2024:

As of January 31,

Dollars in millions

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The 45% 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 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.

Dividends and Share Repurchase Program

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

The holders of HPE common stock are entitled to receive dividends when and as declared by the Board of Directors.

Our ability to pay dividends will depend on many factors, such as its financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in its debt, industry practice, legal requirements, regulatory constraints, and other factors that the Board of Directors deems relevant.

Furthermore, so long as any share of our Preferred Stock remains outstanding, no dividend on shares of common stock (or any other class of stock junior to the Preferred Stock) shall be declared or paid unless all accumulated and unpaid dividends for all preceding dividend periods for the Preferred Stock have been declared and paid in full in cash, shares of the Company’s common stock or a combination thereof, or a sufficient sum of cash or number of shares of its common stock has been set apart for the payment of such dividends, on all outstanding shares of the Preferred Stock.

During the first quarter of fiscal 2025, we paid a quarterly dividend of $0.13 per share of common stock.

On March 6, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about April 18, 2025, to our holders of record as of the close of business on March 21, 2025.

We also declared a cash dividend of $0.953125 per share of our 7.625% Series C Mandatory Convertible Preferred Stock, which was paid on March 1, 2025, to holders of record as of the close of business on February 15, 2025.

As of January 31, 2025, we had a remaining authorization of approximately $0.8 billion for future share repurchases.

RESULTS OF OPERATIONS

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

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

2024 2023 2024 2023

Dollars % of Revenue Dollars % of Revenue Dollars % of

Revenue Dollars % of

For the three months ended January 31,

Dollars % of Revenue Dollars % of Revenue

Dollars in millions

Net revenue $ 7,854 100.0 % $ 6,755 100.0 %

Cost of sales 5,271 68.4 4,492 64.2 14,397 66.4 14,104 64.7

Cost of sales (exclusive of amortization shown separately below) 5,559 70.8 4,298 63.6

Gross profit 2,295 29.2 2,457 36.4

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Transformation costs 15 0.2 20 0.3

Disaster charges 5 0.1 1 — 5 — 5 —

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

Acquisition, disposition and other charges 66 0.8 43 0.6

Earnings from operations 433 5.5 525 7.8

Gain on sale of a business 244 3.1 — —

Interest and other, net 39 0.5 (88) (1.3)

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Provision for taxes (106) (1.3) (96) (1.5)

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

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 earnings attributable to HPE 627 8.0 387 5.7

Preferred stock dividends (29) (0.4) — —

Net earnings attributable to common stockholders $ 598 7.6 % $ 387 5.7 %

Three months ended January 31, 2025 compared with the three months ended January 31, 2024

For the three months ended January 31, 2025, total net revenue of $7.9 billion represented an increase of $1.1 billion, or 16.3% (increased 17.2% on a constant currency basis).

net revenue increased by $224 million, or 9.8%, to $2.5 billion, and net revenue from outside of the U.S.

increased by $875 million, or 19.6%, to $5.3 billion.

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

For the three months ended January 31, 2025

Percentage Points

Server 15.9 3.3

Hybrid Cloud 2.0

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Total HPE 16.3

Three months ended January 31, 2025 compared with three months ended January 31, 2024

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

• Server net revenue increased $963 million, or 28.9%, primarily due to higher AUPs

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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:

• Server net revenue increased $1,112 million, or 35.1%, primarily due to higher AUPs

• Hybrid Cloud net revenue decreased $97 million, or 6.9%, primarily due to lower AUPs

• Intelligent Edge net revenue decreased $335 million, or 23.0%, primarily due to lower volume and product mix effect

• Financial Services net revenue increased $6 million, or 0.7%, primarily due to higher finance income

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

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 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

• Intelligent Edge net revenue decreased $561 million, or 14.1%, primarily due to lower volume and product mix effect

• Financial Services net revenue increased $15 million, or 0.6%, primarily due to higher finance income

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

• Hybrid Cloud net revenue increased $132 million, or 10.4%, primarily due to an increase in unit volume

• Intelligent Edge net revenue decreased $55 million, or 4.6%, primarily due to lower AUPs

• Financial Services net revenue remained flat

• Corporate Investments and Other net revenue decreased $41 million, or 17.2%, primarily due to the divestiture of the Communications Technology Group (“ CTG”) business

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.

For the three months ended January 31, 2025, the total gross profit margin of 29.2% represents a decrease of 7.2 percentage points as compared to the respective prior year period.

The decrease for the three months ended January 31, 2025, was primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments.

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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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

For the three months ended January 31, 2025, R&D expense decreased by $107 million, or 18.4%, primarily due to higher mix of capital versus expense investment and lower employee costs, which contributed 10.8 and 7.4 percentage points, respectively, to the change.

Selling, general and administrative (“SG&A”)

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 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 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.

For the three months ended January 31, 2025, SG&A expense increased by $52 million, or 4.3%, primarily due to H3C divestiture related severance costs, which contributed 5.3 percentage points, partially offset by lower marketing expenses, which contributed 0.9 percentage points to the change.

Acquisition, disposition and other charges

For the three months ended January 31, 2025, acquisition, disposition and other charges increased by $23 million or 53.5%, primarily due to costs incurred in connection with the divestiture of CTG and the proposed acquisition of Juniper Networks.

Gain on sale of a business

On December 1, 2024, we completed the disposition of CTG.

We received net proceeds of $210 million and recognized a gain of $244 million.

Interest and other, net

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.

For the three months ended January 31, 2025, interest and other, net income increased by $127 million, or 144.3%, primarily due to a gain on equity investments recognized in the current period compared to a loss on equity investments in the prior-year period, an increase in net interest income, and an increase in the non-service net periodic benefit credit.

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 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.

For the three months ended January 31, 2025, earnings from equity interests decreased $29 million, or 63.0%, primarily due to lower net income earned by H3C as a result of the disposition of 30% of the total issued share capital of H3C.

Provision for taxes

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.

For the three months ended January 31, 2025 and 2024, we recorded income tax expense of $106 million and $96 million, respectively, which reflects an effective tax rate of 14.5% and 19.9%, respectively.

Our effective tax rate generally differs 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.

For further discussion, refer to Note 5, “Taxes on Earnings” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

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, uses to evaluate, view, and run our business operations, which include, but are not

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Financial Condition and Results of Operations (Continued)

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

Segment Information

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

As described in Note 1, "Overview and Summary of Significant Accounting Policies," effective as of the beginning of the first quarter of fiscal 2024, in order to align the Company’s segment financial reporting more closely with its current business structure, the Company realigned its six reportable segments to five reportable segments.

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

A description of the products and services for each segment, along with other pertinent information related to our segments can be found in Note 2, "Segment Information" to the Condensed Consolidated Financial Statements in Item 1 of Part I.

A description of the products and services for each segment, along with other pertinent information related to segments can be found in Note 2, “Segment Information” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Segment Results

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:

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended January 31, 2025, as compared to the prior-year period:

HPE Consolidated Server

8 unchanged sentences

Year-over-year change percentage points (2.3) pts (3.3) pts 3.0 pts (2.0) pts 0.9 pts 3.2 pts

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

Intelligent Edge Financial Services Corporate Investments and Other

Dollars in millions

Net revenue (1)

$ 21,669 $ 11,499 $ 3,804 $ 3,408 $ 2,619 $ 752

Year-over-year change % (0.5) % 6.6 % (8.4) % (14.1) % 0.6 % 4.2 %

Earnings (loss) from operations (2)

$ 1,497 $ 1,273 $ 123 $ 841 $ 234 $ (23)

Earnings (loss) from operations as a % of net revenue 6.9 % 11.1 % 3.2 % 24.7 % 8.9 % (3.1) %

Year-over-year change percentage points (0.4) pts (2.5) pts (1.2) pts 0.5 pts 0.8 pts 5.3 pts

(1) HPE consolidated net revenue excludes intersegment net revenue.

Segment net revenues include intersegment net revenue.

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

2024 2023 % Change 2024 2023 % Change

For the three months ended January 31,

2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 8.1 % 11.4 %

Three months ended January 31, 2025 compared with three months ended January 31, 2024

Server net revenue increased by $963 million, or 28.9% (increased 29.9% on a constant currency basis), primarily due to a $945 million, or 37.8%, increase in product revenue.

The increase in product revenue was primarily due to higher net AUPs of $1,006 million, or 40.2%, partially offset by unfavorable currency fluctuations of $32 million, or 1.3%, and a decrease in net unit volume of $29 million, or 1.2%.

Server earnings from operations as a percentage of net revenue decreased 3.3 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 competitive pricing pressure and input cost increases.

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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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 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.

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.

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

2024 2023 % Change 2024 2023 % Change

For the three months ended January 31,

2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 7.0 % 4.0 %

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 $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 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.

Hybrid Cloud services revenue increased by $109 million, or 6.7%, primarily due to a unit volume increase of $176 million, or 10.8%, led by private cloud and infrastructure software-as-a-service ("SaaS").

This increase was partially offset by lower AUPs of $68 million, or 4.2%.

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.

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.

Three months ended January 31, 2025 compared with three months ended January 31, 2024

Hybrid Cloud net revenue increased by $132 million, or 10.4% (increased 11.1% on a constant currency basis), primarily due to an increase in unit volume, partially offset by lower AUPs.

Hybrid Cloud product revenue increased by $53 million, or 7.7%, primarily due to a unit volume increase of $36 million, or 5.3%, led by storage products and higher AUPs of $13 million or 1.9%.

Hybrid Cloud services revenue increased by $79 million, or 13.6%, primarily due to a unit volume increase of $141 million, or 24.2%, led by private cloud and storage services.

This increase was partially offset by lower AUPs of $63 million, or 10.8%, led by storage services.

Hybrid Cloud earnings from operations as a percentage of net revenue increased 3.0 percentage points.

The increase was driven by a decrease in operating expenses as a percentage of net revenue, primarily due to lower operating expenses resulting from our cost containment measures.

The decrease was moderated by an increase in cost of products and services as a percentage of net revenue, primarily due to lower storage services revenue and competitive pricing pressure.

Intelligent Edge

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

2024 2023 % Change 2024 2023 % Change

For the three months ended January 31,

2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 27.4 % 29.4 %

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

Three months ended January 31, 2025 compared with three months ended January 31, 2024

Intelligent Edge net revenue decreased by $55 million, or 4.6% (decreased 4.3% 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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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Product revenue decreased by $95 million, or 10.3%, led by lower AUPs of $168 million, or 18.2%, partially offset by higher volume and product mix effect of $76 million, or 8.2%.

The product revenue decrease was primarily led by switching products due to higher backlog reduction in prior-year period, partially offset by an increase in wireless local area network products.

Services net revenue increased $40 million, or 14.2%, primarily led by our aaS offerings and attached support service.

Intelligent Edge earnings from operations as a percentage of net revenue decreased 2.0 percentage points primarily due to an increase in cost of products and services as a percentage of net revenue, partially offset by a decrease in operating expenses as a percentage of net revenue.

The increase in cost of product and services as a percentage of net revenue was primarily due to competitive pricing pressure.

The decrease in operating expenses as a percentage of net revenue primarily due to our cost containment measures.

Financial Services

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

2024 2023 % Change 2024 2023 % Change

For the three months ended January 31,

2025 2024 % Change

Dollars in millions

2 unchanged sentences

Earnings from operations as a % of net revenue 9.4 % 8.5 %

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 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, 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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Financial Condition and Results of Operations (Continued)

Three months ended January 31, 2025 compared with three months ended January 31, 2024

FS net revenue remained flat (increased 1.6% on a constant currency basis).

FS earnings from operations as a percentage of net revenue increased 0.9 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 bad debt expense.

Financing Volume

For the three months ended January 31,

Financing volume $ 1,156 $ 1,363

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 15.2% for the three months ended January 31, 2025, as compared to the prior-year period.

The decrease was primarily driven by lower financing of third-party product sales and services, partially offset by higher financing of HPE product sales and services.

Portfolio Assets and Ratios

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

July 31, 2024 October 31, 2023

January 31, 2025 October 31, 2024

Dollars in millions

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Gross portfolio assets 13,199 13,794

Allowance for credit losses (2)

Allowance for doubtful accounts (2)

Operating lease equipment reserve 33 30

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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 $11.4 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.

Debt benefiting FS totaled $11.8 billion as of both January 31, 2025 and October 31, 2024, 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 both January 31, 2025 and October 31, 2024 was $1.7 billion.

As of January 31, 2025 and October 31, 2024, FS net cash and cash equivalents balances were approximately $779 million and $533 million, respectively.

Net portfolio assets as of January 31, 2025 decreased 4.5% from October 31, 2024.

The decrease generally resulted from portfolio runoff exceeding new financing volume during the period, along with unfavorable 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 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.

For the three months ended January 31, 2025 and 2024, FS recorded net bad debt expense of $25 million and $12 million, respectively.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Corporate Investments and Other

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

2024 2023 % Change 2024 2023 % Change

For the three months ended January 31,

2025 2024 % Change

Dollars in millions

2 unchanged sentences

Loss from operations as a % of net revenue (1.0) % (4.2) %

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.

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 6.6 percentage points primarily due to the scale of net revenue growth.

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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

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 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.

Three months ended January 31, 2025 compared with three months ended January 31, 2024

Corporate Investments and Other net revenue decreased by $41 million, or 17.2% (decreased 15.6% on a constant currency basis), primarily due to the divestiture of the CTG business effective December 1, 2024.

Corporate Investments and Other loss from operations as a percentage of net revenue decreased by 3.2 percentage points primarily due to decreases in cost of services and operating expenses as a percentage of net revenue due to the divestiture of the CTG business effective December 1, 2024.

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 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.

As of January 31, 2025, 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, 2024.

LIQUIDITY AND CAPITAL RESOURCES

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We use cash generated by operations as our primary source of liquidity.

We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and shareholder dividend payments.

We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and stockholder dividend payments.

We expect to supplement this short-term liquidity, if necessary, by accessing the capital markets, issuing commercial paper, and borrowing under credit facilities made available by various domestic and foreign financial institutions.

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 (including for the payment of consideration to consummate the Juniper Networks transaction) 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 July 31, 2024.

We anticipate that the funds made available, including the debt funding related to the proposed acquisition of Juniper Networks, proceeds from issuance of the Preferred Stock and proceeds from the sale of 30% of the total issued share capital of H3C, and cash generated from our operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months (including for the payment of consideration to consummate the Juniper Networks transaction) 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 I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report, and market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this Quarterly Report.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

as of January 31, 2025.

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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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.

In connection with the share repurchase program previously authorized by our Board of Directors, we repurchased and settled an aggregate amount of $52 million, during the first three months of fiscal 2025.

As of January 31, 2025, we had a remaining authorization of approximately $0.8 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.

On May 23, 2024, we announced plans to divest our CTG business to HCLTech.

CTG was included in our Communications and Media Solutions business, which was 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.

The transaction was unanimously approved by the boards of directors of both companies.

The transaction is expected to be funded based on financing commitments for $14 billion in term loans.

Such financing will ultimately be replaced, in part, with a combination of new debt, mandatory convertible preferred securities, and cash on the balance sheet.

On April 2, 2024, Juniper Networks shareholders approved the transaction.

The closing of the transaction remains subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.

Pursuant to the Shareholders' Agreement among our relevant subsidiaries, Unisplendour International Technology Limited ("UNIS"), and H3C dated as of May 1, 2016, as amended from time to time, and most recently on October 28, 2022, we delivered a notice to UNIS on December 30, 2022, to exercise our right to put to UNIS, for cash consideration, all of the H3C shares held by us, which represent 49% of the total issued share capital of H3C.

On May 26, 2023, our relevant subsidiaries entered into a Put Share Purchase Agreement with UNIS, whereby UNIS has agreed to purchase all of the H3C shares held by us, through our subsidiaries.

On May 24, 2024, our relevant subsidiaries entered into (i) an Amended and Restated Put Share Purchase Agreement with UNIS, whereby our relevant subsidiaries shall sell to UNIS 30% of the total issued share capital of H3C for pre-tax cash consideration of approximately $2.1 billion by August 31, 2024 (the “Sale Transaction”), and (ii) an Agreement on Subsequent Arrangements with UNIS, whereby upon closing of the Sale Transaction, our relevant subsidiary shall have a put option to sell to UNIS and UNIS shall have a call option to purchase from our relevant subsidiary 19% of the total issued share capital of H3C for pre-tax cash consideration of approximately $1.4 billion between the 16 th month and until the 36 th month after the Sale Transaction.

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.

On December 1, 2024, we completed the disposition of CTG.

We received net proceeds of $210 million and recognized a gain of $244 million included in Gain on sale of a business in the Condensed Consolidated Statements of Earnings.

In September 2024, we issued $9.0 billion of senior unsecured notes and $1.5 billion of Preferred Stock, the net proceeds of which we intend to use to fund a portion of the consideration for the acquisition of Juniper Networks and for other general corporate purposes.

If the transaction is terminated, the senior unsecured notes and Preferred Stock will be treated as follows:

• If (i) the proposed acquisition of Juniper Networks does not close on or before the later of (a) the date that is five business days after October 9, 2025 and (b) the date that is five business days after any later date to which Juniper Networks and HPE may agree to extend the “End Date” (as defined in the Merger Agreement) or (ii) HPE notifies the trustee of such notes that HPE will not pursue the consummation of the proposed acquisition of Juniper Networks, we shall be required to redeem $6.5 billion of these senior unsecured notes.

• If (i) the proposed acquisition of Juniper Networks does not close on or before the later of (a) the date that is five business days after October 9, 2025 and (b) the date that is five business days after any later date to which Juniper Networks and HPE may agree to extend the “End Date” (as defined in the Merger Agreement) or (ii) HPE notifies the holders of the Preferred Stock in writing that HPE will not pursue the consummation of the proposed acquisition of Juniper Networks, we may, at our option, redeem the Preferred Stock, in whole but not in part.

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

July 31, 2024 October 31, 2023

January 31, 2025 October 31, 2024

Cash, cash equivalents and restricted cash $ 13,852 $ 15,105

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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 July 31, 2024.

The maximum aggregate commitment under this facility is $4.0 billion, however, no balances were outstanding under this facility as of January 31, 2025.

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

(3) The maximum aggregate capacity under the uncommitted lines of credit is $1.4 billion of which $0.4 billion was primarily utilized towards issuances of bank guarantees.

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Financial Condition and Results of Operations (Continued)

(3) The maximum aggregate capacity under the uncommitted lines of credit is $1.3 billion, of which $0.4 billion was primarily utilized towards issuances of bank guarantees.

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

For the nine months ended July 31,

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

For the three months ended January 31,

Net cash (used in) provided by operating activities $ (390) $ 64

Net cash used in investing activities (23) (740)

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

Net cash (used in) provided by financing activities (797) 53

Effect of exchange rate changes on cash, cash equivalents, and restricted cash (43) 14

Net decrease in cash, cash equivalents and restricted cash $ (676) $ (1,631)

Change in cash, cash equivalents and restricted cash $ (1,253) $ (609)

Free cash flow $ (877) $ (482)

Operating Activities

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 net hedge positions, as compared to the prior-year period.

For the three months ended January 31, 2025, net cash used in operating activities increased by $0.5 billion, as compared to the corresponding period in fiscal 2024.

The increase was primarily due to unfavorable changes from other assets and liabilities, and unfavorable working capital changes driven by the timing of payments.

The increase was moderated by increase in collection from financing receivables, as compared to the prior-year period.

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

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

January 31, 2025 October 31, 2024 Change January 31, 2024 October 31, 2023 Change Y/Y Change

Days of sales outstanding in accounts receivable ("DSO") 40 38 2 50 43 7 (10)

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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, the DSO remained relatively flat.

Compared to the corresponding three-month period in fiscal 2024, the decrease in DSO in the current period was primarily due to higher early collections.

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

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Investing Activities

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.

For the three months ended January 31, 2025, net cash used in investing activities decreased by $0.7 billion, as compared to the corresponding period in fiscal 2024.

The decrease was primarily due to lower cash utilized in net financial collateral activities of $0.4 billion, proceeds from the divestiture of our CTG business received in the current period of $0.2 billion, and lower investments in property, plant and equipment and software assets, net of sales proceeds of $0.1 billion, as compared to the prior-year period.

Financing Activities

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.

For the three months ended January 31, 2025, net cash used in financing activities increased by $0.9 billion, as compared to the corresponding period in fiscal 2024.

This increase was primarily due to lower proceeds from debt, net of issuance costs of $0.8 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”) 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.

For the three months ended January 31, 2025, FCF decreased by $0.4 billion, as compared to the corresponding period in fiscal 2024.

This was primarily due to higher cash used in operating activities, as compared to the prior-year period.

For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A.

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There have been no changes to our commercial paper programs and revolving credit facility since October 31, 2024.

As noted above, we are also party to two senior unsecured delayed draw term loan facilities, comprised of a $1.0 billion 364-day tranche and a $3.0 billion three-year tranche, subject to customary conditions.

Unless previously terminated, commitments under both the 364-day term loan and the three-year term loan will terminate upon the earliest of (i) five business days after the Juniper Outside Date (as defined in such term loan agreements), (ii) the occurrence of the closing of the acquisition of Juniper Networks without the funding of any borrowings under either of the term loan agreements, and (iii) the termination of the Merger Agreement by HPE in writing in accordance with its terms.

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 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.

Significant funding and liquidity activities for the three months ended January 31, 2025 were as follows:

Debt Repayments:

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

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

• During the three months ended January 31, 2025, we repaid $0.4 billion of the outstanding asset-backed debt securities.

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Contractual Obligations

Other than the previously mentioned repayment of unsecured senior notes and issuance and redemption of asset-backed debt securities, our contractual obligations have not changed materially outside of the normal course of business since October 31, 2023.

Other than the previously mentioned repayment of asset-backed debt securities, our contractual obligations have not changed materially outside of the normal course of business since October 31, 2024.

For further information see “Cash Requirements and Commitments” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

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Restructuring Plans

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.

As of January 31, 2025, we expect to make future cash payments of approximately $159 million in connection with our approved restructuring plans, which includes $47 million expected to be paid through the remainder of fiscal 2025 and $112 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 July 31, 2024, we had approximately $238 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.

As of January 31, 2025, we had approximately $188 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 July 31, For the nine months ended July 31,

2024 2023 2024 2023

Revenue Dollars % of

For the three months ended January 31,

Revenue Dollars % of

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Stock-based compensation expense 17 0.2 % 16 0.2 %

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

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

Acquisition, disposition and other charges (1)

(3) — % (25) (0.4) %

H3C divestiture related severance costs 1 — % — — %

Non-GAAP gross profit $ 2,310 29.4 % $ 2,448 36.2 %

(1) Includes divestiture recovery.

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 July 31, For the nine months ended July 31,

2024 2023 2024 2023

Revenue Dollars % of

For the three months ended January 31,

Revenue Dollars % of

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Transformation costs 15 0.2 % 20 0.3 %

Disaster (recovery) charges

(2) — % (2) — % (34) (0.2) % 2 — %

Stock-based compensation expense 154 2.0 % 141 2.1 %

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 %

H3C divestiture related severance costs 77 1.0 % — — %

Acquisition, disposition and other charges 63 0.8 % 18 0.3 %

Non-GAAP earnings from operations $ 780 9.9 % $ 775 11.5 %

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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 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

For the three months ended January 31,

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

Dollars in millions except per share amounts

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Transformation costs 15 0.01 20 0.02

Disaster (recovery) charges

(2) — (2) — (34) (0.03) 2 —

Stock-based compensation expense 154 0.11 141 0.11

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

Gain on sale of a business (244) (0.17) — —

H3C divestiture related severance costs 77 0.05 — —

Acquisition, disposition and other charges 63 0.04 18 0.01

Adjustments for equity interests — — (46) (0.03)

(Gain) loss on equity investments, net (2) — 61 0.05

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Adjustments for taxes (15) — (16) (0.02)

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

Non-GAAP net earnings attributable to HPE (2)

684 $ 0.49 638 $ 0.48

Preferred stock dividends (29) —

Non-GAAP net earnings attributable to common stockholders $ 655 $ 638

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

(2) For purposes of calculating Non-GAAP diluted net EPS, the preferred stock dividends are added back to the Non-GAAP net earnings attributable to common stockholders and the diluted weighted average share calculation assumes the preferred stock was converted at issuance or as of the beginning of the reporting period.

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

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

For the three months ended January 31,

Net cash (used in) provided by operating activities $ (390) $ 64

Investment in property, plant and equipment and software assets (528) (656)

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Use of Non-GAAP Financial Measures

The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP income tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF.

The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP tax rate, non-GAAP net earnings attributable to HPE, non-GAAP net earnings attributable to common stockholders, non-GAAP diluted net earnings per share attributable to common stockholders, and FCF.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States.

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The GAAP measure most directly comparable to non-GAAP income tax rate is income tax rate.

The GAAP measure most directly comparable to non-GAAP net earnings is net earnings.

The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share.

The GAAP measure most directly comparable to non-GAAP net earnings attributable to HPE and non-GAAP net earnings attributable to common stockholders is net earnings.

The GAAP measure most directly comparable to non-GAAP diluted net earnings per share attributable to common stockholders is diluted net earnings per share attributable to common stockholders.

The GAAP measure most directly comparable to FCF is cash flow from operations.

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We believe that excluding the items mentioned below from the non-GAAP financial measures provides a supplemental view to management and our investors of our consolidated financial performance and presents the financial results of the business without costs that we do not believe to be reflective of our ongoing operating results.

Exclusion of these items can have a material impact on the equivalent GAAP measure and cash flows thus limiting their use as analytic tools.

Exclusion of these items can have a material impact on the equivalent GAAP measure and cash flows thus limiting the use of such non-GAAP financial measures as analytic tools.

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, disaster (recovery) charges, and divestiture related exit costs.

Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the stock-based compensation expense, acquisition, disposition and other charges, and H3C divestiture related severance costs.

See below for the reasons management excludes each item:

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Although stock-based compensation is a key incentive offered to our employees, we exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense.

• 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.

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.

• 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.

• We incur costs related to our acquisition, disposition and other charges.

Charges include expenses associated with acquisitions, disposal activities, and disaster (recovery) charges.

We exclude these costs because we consider these charges to be discrete events and do not believe they are reflective of normal continuing business operations.

For the three months ended January 31, 2025, acquisition charges were driven by costs associated with the proposed acquisition of Juniper Networks and miscellaneous disposition related charges.

For the three months ended January 31, 2024, acquisition charges were driven by acquisitions of Juniper Networks, in addition to prior acquisitions of Axis and Athonet.

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Financial Condition and Results of Operations (Continued)

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.

• We incurred H3C divestiture related severance costs in connection with the disposition of total issued share capital of H3C.

On September 4, 2024, we divested 30% of the total issued share capital of H3C and received proceeds of $2.1 billion of pre-tax consideration ($2.0 billion post-tax).

The divestiture will result in decreased future investment earnings and cash dividend inflows resulting in a decision to implement offsetting cost savings measures.

These measures include severance for certain of the Company’s employees.

The non-GAAP adjustment represents our costs to execute these related exit actions to offset the loss in equity earnings and related cash flows.

We expect future annualized cost savings of approximately $120 million following the completion of these actions.

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, gain on sale of a business, and acquisition, disposition and other charges.

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

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Such charges are significantly impacted by the timing and magnitude of our acquisitions.

We exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding intangible asset amortization.

We exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are noncash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding intangible asset amortization.

Although this does not directly affect our cash position, the loss in value of intangible assets over time can have a material impact on the equivalent GAAP earnings measure.

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We exclude these costs as they are discrete costs related to two specific transformation programs that were announced in 2017 and 2020, respectively, as multi-year programs necessary to transform the business and IT infrastructure following material divestiture transactions in 2017 and in response to COVID-19 and an evolving product portfolio in fiscal 2020.

The HPE Next Plan and Cost Optimization and Prioritization Plan are substantially complete.

The primary elements of the HPE Next and the Cost Optimization and Prioritization Plan have been substantially completed by October 31, 2024.

The exclusion of the transformation program costs from our non-GAAP financial measures as stated above is to provide a supplemental measure of our operating results that does not include material HPE Next Plan and Cost Optimization and Prioritization Plan costs as we do not believe such costs to be reflective of our ongoing operating cost structure.

Further as our transformation costs for these plans have materially fluctuated since 2017, have been materially declining since 2021 and we do not expect these costs to be material.

We believe non-GAAP measures excluding these costs are useful to management and investors for comparing operating performance across multiple periods.

• We incur costs related to our acquisition, disposition and other related charges.

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 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.

We consider these acquisitions and divestitures to be discrete events.

We exclude these costs as these expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of our acquisitions and divestitures.

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

Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as earnings from equity interests, gain or loss on equity investments, other adjustments, and adjustments for taxes.

Further as our transformation costs for these plans have materially fluctuated since 2017, have been materially declining since 2021, we believe non-GAAP measures excluding these costs are useful to management and investors for comparing operating performance across multiple periods.

• Gain on sale of a business represents the gain associated with certain disposal activities.

On December 1, 2024, we completed the disposition of CTG which resulted in a gain of $244 million.

We consider this divestiture to be a discrete event and believe eliminating this adjustment for the purposes of calculating non-GAAP measures facilitates the evaluation of our current operating performance.

Non-GAAP net earnings attributable to HPE, non-GAAP net earnings attributable to common stockholders, and non-GAAP diluted net earnings per share attributable to common stockholders consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as adjustments for equity interests, gain or loss on equity investments, other adjustments, and adjustments for taxes.

Non-GAAP net earnings attributable to HPE and non-GAAP diluted net earnings per share attributable to common stockholders includes preferred stock dividends added back to non-GAAP net earnings attributable to HPE.

The Adjustments for taxes line item includes certain income tax valuation allowances and separation taxes, the impact of tax reform, structural rate adjustment, excess tax benefit from stock-based compensation, and adjustments for additional taxes or tax benefits associated with each non-GAAP item.

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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.

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, 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 represented our expectation at such time to divest 30% of the total issued share capital of H3C in fiscal

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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.

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.

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

• We utilize a structural long-term projected non-GAAP income tax rate in order to provide consistency across the interim reporting periods and to eliminate the effects of items not directly related to our operating structure that can vary in size and frequency.

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

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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