What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-04 compared with 2025-03-07 · 370 added, 209 removed, 483 unchanged (55% 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 months ended January 31, 2025 to the comparable prior-year period and where appropriate, as of January 31, 2025, unless otherwise noted.

The financial discussion and analysis in the following MD&A compares the three and six months ended April 30, 2025 to the comparable prior-year period and where appropriate, as of April 30, 2025, unless otherwise noted.

This MD&A is organized as follows:

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TRENDS AND UNCERTAINTIES

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:

During the first six 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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Macroeconomic Uncertainty:

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.

The evolving macroeconomic environment has impacted industry-wide demand, as customers take longer to work through prior orders and have been adopting a more strategic 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.

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.

Additionally, there is growing uncertainty surrounding the tariff environment and import/export regulations, which has resulted in trading partners enacting reciprocally restrictive trade policies and measures.

These have enhanced global trade uncertainty and contributed 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.

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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;

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

trade policy, which have thus far impacted our ability to import and export components and finished products and the costs of doing so.

Additionally, logistics costs may rise with the aforementioned changes in trade policies.

We have 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 have experienced, and expect to continue experiencing, rising input component costs due to the global trade uncertainties referenced above and a competitive pricing environment, all of 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.

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To date, 59 countries have enacted portions, or all, of the OECD proposal and a further 6 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules.

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

Where enacted, the rules are effective for us 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.

The adoption and effective dates of these rules may vary by

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.

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

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Financial Condition and Results of Operations (Continued)

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 2020 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.

In the second quarter of fiscal 2025, the IRS issued a Revenue Agent Report (“RAR”) regarding the audit of our fiscal 2017 through 2019 U.S.

federal income tax returns with which we agreed.

The audit cycle for fiscal 2017 through 2019 is now considered effectively settled, resulting in a reduction of existing unrecognized tax benefits of approximately $340 million, which did not result in a material impact to our Condensed Consolidated Statement of Earnings and our Condensed Consolidated Balance Sheet.

The resolution of the audit resulted in the release of tax reserves that were predominantly related either to adjustments to foreign tax credits that carried a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which affected our effective tax rate.

Other Trends and Uncertainties:

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 have, in the past, 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 term.

We are monitoring and seeking to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks, as well as our 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.

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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.

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

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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.

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

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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.

In connection with the Program, we incurred charges of $146 million for the three and six months ended April 30, 2025.

Three months ended April 30, 2025 compared with three months ended April 30, 2024

Net revenue of $7.6 billion represented an increase of 5.9% (increased 7.1% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment and higher unit volume and AUPs in the Hybrid Cloud segment.

The gross profit margin of 28.4% (or $2.2 billion), represents a decrease of 4.6 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.

The operating profit margin of (14.5)% represents a decrease of 20.4 percentage points from the prior-year period primarily due to the impairment of goodwill.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

Net revenue of $15.5 billion represented an increase of 10.9% (increased 12.0% on a constant currency basis) primarily due to higher AUPs in the Server segment and higher unit volume in the Hybrid Cloud segment.

The gross profit margin of 28.8% (or $4.5 billion), represents a decrease of 5.8 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Intelligent Edge and Hybrid Cloud segments.

The operating profit margin of (4.4)% represents a decrease of 11.2 percentage points from the prior-year period primarily due to the impairment of goodwill.

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The following table summarizes our condensed consolidated GAAP financial results:

For the three months ended January 31,

2025 2024 Change

Dollars in millions,

except per share amounts

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

2025 2024 Change 2025 2024 Change

Dollars in millions, except per share amounts

Net revenue $ 7,627 $ 7,204 5.9% $ 15,481 $ 13,959 10.9%

Gross profit $ 2,169 $ 2,376 (8.7)% $ 4,464 $ 4,833 (7.6)%

Gross profit margin 29.2 % 36.4 % (7.2)pts

Earnings from operations $ 433 $ 525 (17.5)%

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)

Gross profit margin 28.4 % 33.0 % (4.6)pts 28.8 % 34.6 % (5.8)pts

(Loss) earnings from operations $ (1,109) $ 425 (360.9)% $ (676) $ 950 (171.2)%

Operating profit margin (14.5) % 5.9 % (20.4)pts (4.4) % 6.8 % (11.2)pts

Net (loss) earnings attributable to HPE $ (1,050) $ 314 (434.4)% $ (423) $ 701 (160.3)%

Net (loss) earnings attributable to common stockholders $ (1,079) $ 314 (443.6)% $ (481) $ 701 (168.6)%

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

$ (0.82) $ 0.24 $(1.06) $ (0.36) $ 0.53 $(0.89)

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

For the three months ended January 31,

2025 2024 Change

Dollars in millions,

except per share amounts

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

2025 2024 Change 2025 2024 Change

Dollars in millions, except per share amounts

Net revenue in constant currency $ 7,719 $ 7,204 7.1% $ 15,633 $ 13,959 12.0%

Non-GAAP gross profit $ 2,244 $ 2,383 (5.8)% $ 4,554 $ 4,831 (5.7)%

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

Non-GAAP gross profit margin 29.4 % 33.1 % (3.7)pts 29.4 % 34.6 % (5.2)pts

Non-GAAP earnings from operations $ 613 $ 684 (10.4)% $ 1,393 $ 1,459 (4.5)%

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

Non-GAAP operating profit margin 8.0 % 9.5 % (1.5)pts 9.0 % 10.5 % (1.5)pts

Non-GAAP net earnings attributable to HPE $ 545 $ 561 (2.9)% $ 1,229 $ 1,199 2.5%

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Free cash flow $ (847) $ 610 ($1,457) $ (1,724) $ 128 $(1,852)

(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.

(1) For purposes of calculating diluted net (loss) earnings per share (“EPS”), the preferred stock dividends are added back to the net (loss) 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.

For GAAP diluted net EPS, the effect of employee stock plans and preferred stock is excluded when calculating diluted net loss per share as it would be anti-dilutive.

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

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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

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

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Financial Condition and Results of Operations (Continued)

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 January 31, 2025 and 2024:

As of January 31,

The following presents our ARR calculated as of April 30, 2025 and 2024:

As of April 30,

Dollars in millions

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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.

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

On June 3, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about July 17, 2025, to our holders of record as of the close of business on June 18, 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 June 1, 2025, to holders of record as of the close of business on May 15, 2025.

As of April 30, 2025, we had a remaining authorization of approximately $0.7 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 January 31,

Dollars % of Revenue Dollars % of Revenue

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

2025 2024 2025 2024

Dollars % of Revenue Dollars % of Revenue Dollars % of

Revenue Dollars % of

Dollars in millions

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Amortization of intangible assets 37 0.5 67 0.9 75 0.5 138 1.0

Transformation costs 15 0.2 20 0.3

Impairment of goodwill 1,361 17.8 — — 1,361 8.8 — —

Transformation (credit) costs (13) (0.2) 33 0.5 2 — 53 0.4

Acquisition, disposition and other charges 55 0.7 46 0.6 121 0.8 89 0.6

Earnings from operations 433 5.5 525 7.8

(Loss) earnings from operations (1,109) (14.5) 425 5.9 (676) (4.4) 950 6.8

Gain on sale of a business — — — — 244 1.6 — —

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Earnings from equity interests 25 0.3 42 0.6 42 0.3 88 0.6

Earnings before provision for taxes 733 9.3 483 7.2

(Loss) earnings before provision for taxes (1,045) (13.7) 445 6.2 (312) (2.0) 928 6.6

Provision for taxes (5) (0.1) (131) (1.8) (111) (0.7) (227) (1.6)

Net earnings attributable to HPE 627 8.0 387 5.7

Net (loss) earnings attributable to HPE (1,050) (13.8) 314 4.4 (423) (2.7) 701 5.0

Preferred stock dividends (29) (0.4) — — (58) (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 (loss) earnings attributable to common stockholders $ (1,079) (14.2) % $ 314 4.4 % $ (481) (3.1) % $ 701 5.0 %

Three and six months ended April 30, 2025 compared with the three and six months ended April 30, 2024

For the three months ended April 30, 2025, total net revenue of $7.6 billion represented an increase of $0.4 billion, or 5.9% (increased 7.1% on a constant currency basis).

net revenue increased by $155 million, or 6.0%, to $2.7 billion, and net revenue from outside of the U.S.

increased by $268 million, or 5.8%, to $4.9 billion.

For the six months ended April 30, 2025 , total net revenue of $15.5 billion represented an increase of $1.5 billion, or 10.9% (increased 12.0% on a constant currency basis).

net revenue increased by $379 million, or 7.8%, to $5.3 billion, and net revenue from outside of the U.S.

increased by $1.1 billion, or 12.6%, to $10.2 billion.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

For the three months ended January 31, 2025

For the three months ended April 30, 2025 For the six months ended April 30, 2025

Percentage Points

Server 3.0 8.5

Hybrid Cloud 2.4 2.1

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Total HPE 5.9 10.9

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

Three months ended April 30, 2025 compared with three months ended April 30, 2024

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

• Server net revenue increased $217 million, or 5.6%, primarily due to higher AUPs

• Hybrid Cloud net revenue increased $171 million, or 13.3%, primarily due to increase in unit volume and AUPs

• Intelligent Edge net revenue increased $76 million, or 7.0%, primarily due to higher volume and product mix

• Financial Services net revenue decreased $11 million, or 1.3%, primarily due to lower rental revenue on lower average operating leases and unfavorable currency fluctuations

• Corporate Investments and Other net revenue decreased $58 million, or 23.0%, primarily due to the divestiture of the Communications Technology Group (“CTG”) business

Six months ended April 30, 2025 compared with six months ended April 30, 2024

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

• Server net revenue increased $1,180 million, or 16.5%, primarily due to higher AUPs

• Hybrid Cloud net revenue increased $303 million, or 11.9%, primarily due to an increase in unit volume

• Intelligent Edge net revenue increased $21 million, or 0.9%, primarily due to an increase in our aaS offerings

• Financial Services net revenue decreased $11 million, or 0.6%, primarily due to lower rental revenue on lower average operating leases and unfavorable currency fluctuations

• Corporate Investments and Other net revenue decreased $99 million, or 20.2%, primarily due to the divestiture of CTG

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

For the three and six months ended April 30, 2025, the total gross profit margin of 28.4% and 28.8%, respectively, represents a decrease of 4.6 and 5.8 percentage points, respectively, as compared to the respective prior year periods.

The decrease for the three and six months ended April 30, 2025, was primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments.

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Financial Condition and Results of Operations (Continued)

• 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 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 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.

For the three months ended April 30, 2025, R&D expense decreased by $50 million, or 8.5%, primarily due to higher mix of capital versus expense investment, which contributed 12.9 percentage points to the change.

The decrease was partially offset by the cost reduction program, which contributed 4.1 percentage points to the change.

For the six months ended April 30, 2025, R&D expense decreased by $157 million, or 13.4%, primarily due to higher mix of capital versus expense investment, which contributed 11.9 percentage points to the change.

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

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.

For the three and six months ended April 30, 2025, SG&A expense increased by $83 million, or 6.8%, and $135 million, or 5.6%, respectively, primarily due to the cost reduction program, which contributed 7.0 and 6.1 percentage points, respectively.

Impairment of goodwill

Impairment of goodwill f or the three and six months ended April 30, 2025 represents a partial goodwill impairment charge of $1.4 billion, as it was determined that the fair value of the Hybrid Cloud reporting unit was below the carrying value of its net assets.

The decline in the fair value was primarily driven by an increase in the discount rate used in the discounted cash flows analysis, driven by heightened macroeconomic uncertainty.

Refer to Note 9, “Goodwill” to the Condensed Consolidated Financial Statements in Item 1 of Part I for more information.

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.

For the three months ended April 30, 2025, acquisition, disposition and other charges increased by $9 million or 19.6%, primarily due to costs incurred in connection with the proposed acquisition of Juniper Networks.

For the six months ended April 30, 2025, acquisition, disposition and other charges increased by $32 million, or 36.0%, 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

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Interest and other, net

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.

For the three months ended April 30, 2025, interest and other, net income increased by $61 million, or 277.3%, primarily due to an increase in net interest income and an increase in the non-service net periodic benefit credit.

For the six months ended April 30, 2025, interest and other, net income increased by $188 million, or 170.9%, primarily due to an increase in net interest income, a gain on equity investments recognized in the current period compared to a loss on equity investments in the prior-year period, and an increase in the non-service net periodic benefit credit.

Earnings from equity interests

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 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.

For the three and six months ended April 30, 2025, earnings from equity interests decreased $17 million, or 40.5%, and $46 million, or 52.3%, respectively, primarily due to lower earnings from our equity interest in H3C as a result of the disposition of 30% of the total issued share capital of H3C.

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Financial Condition and Results of Operations (Continued)

Provision for taxes

For the three months ended April 30, 2025 and 2024, we recorded income tax expense of $5 million and $131 million, respectively, which reflects an effective tax rate of (0.5)% and 29.4%, respectively.

For the six months ended April 30, 2025 and 2024, we recorded income tax expense of $111 million and $227 million, respectively, which reflects an effective tax rate of (35.6)% and 24.5%, respectively.

For the three and six months ended April 30, 2025, 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 and the effects of the non-deductible goodwill impairment.

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

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

income tax on non-U.S.

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

Segment Information

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Segment Results

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended January 31, 2025, 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 April 30, 2025, as compared to the prior-year period:

HPE Consolidated Server

4 unchanged sentences

Year-over-year change % 5.9 % 5.6 % 13.3 % 7.0 % (1.3) % (23.0) %

Earnings (loss) from operations (2)

(Loss) earnings from operations (2)

$ (1,109) $ 241 $ 78 $ 274 $ 89 $ (10)

Earnings (loss) from operations as a % of net revenue 5.5 % 8.1 % 7.0 % 27.4 % 9.4 % (1.0) %

(Loss) earnings from operations as a % of net revenue (14.5) % 5.9 % 5.4 % 23.6 % 10.4 % (5.2) %

Year-over-year change percentage points (20.4) pts (5.1) pts 4.4 pts 1.8 pts 1.1 pts (1.6) pts

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the six months ended April 30, 2025, 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)

$ 15,481 $ 8,348 $ 2,858 $ 2,308 $ 1,729 $ 391

Year-over-year change % 10.9 % 16.5 % 11.9 % 0.9 % (0.6) % (20.2) %

(Loss) earnings from operations (2)

$ (676) $ 589 $ 177 $ 588 $ 171 $ (12)

(Loss) earnings from operations as a % of net revenue (4.4) % 7.1 % 6.2 % 25.5 % 9.9 % (3.1) %

Year-over-year change percentage points (11.2) pts (4.1) pts 3.7 pts (0.3) pts 1.0 pts 0.8 pts

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

Segment net revenues include intersegment net revenue.

For the three months ended January 31,

2025 2024 % Change

(2) Segment earnings (loss) from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, transformation (credit) costs, H3C divestiture related severance costs, severance costs related to the cost reduction program, acquisition, disposition and other charges and impairment of goodwill.

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

2025 2024 % Change 2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 5.9 % 11.0 % 7.1 % 11.2 %

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

Three months ended April 30, 2025 compared with three months ended April 30, 2024

Server net revenue increased by $217 million, or 5.6% (increased 6.8% on a constant currency basis), primarily due to a $235 million, or 7.9%, 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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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 2024 % Change

The increase in product revenue was primarily due to higher net AUPs of $601 million, or 20.1%, partially offset by a decrease in net unit volume of $348 million, or 11.6%.

Server earnings from operations as a percentage of net revenue decreased 5.1 percentage points due to an increase in cost of products as a percentage of net revenue resulting from input cost increases and competitive pricing pressure.

Operating expenses as a percentage of net revenue remained relatively flat as compared to the prior-year period.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

Server net revenue increased by $1,180 million, or 16.5% (increased 17.5% on a constant currency basis), primarily due to a $1,180 million, or 21.5%, increase in product revenue.

The increase in product revenue was primarily due to higher net AUPs of $1,607 million, or 29.3%, partially offset by a decrease in net unit volume of $377 million, or 6.9%, and unfavorable currency fluctuations of $50 million, or 0.9%.

Server earnings from operations as a percentage of net revenue decreased 4.1 percentage points due to an increase in costs of products as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue.

The increase in cost of products as a percentage of net revenue was primarily due to competitive pricing pressure, input cost increases, and higher mix of lower margin products.

The decrease in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue increase while total operating expenses remained relatively flat.

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

2025 2024 % Change 2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 5.4 % 1.0 % 6.2 % 2.5 %

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.

Three months ended April 30, 2025 compared with three months ended April 30, 2024

Hybrid Cloud net revenue increased by $171 million, or 13.3% (increased 14.6% on a constant currency basis), primarily due to increases in unit volume and AUPs.

Hybrid Cloud product revenue increased by $106 million, or 15.9%, primarily due to a unit volume increase of $96 million, or 14.4%, led by private cloud products.

Hybrid Cloud services revenue increased by $65 million, or 10.6%, primarily driven by higher services contribution from private cloud products and storage subscription services.

Hybrid Cloud earnings from operations as a percentage of net revenue increased 4.4 percentage points, due to a decrease in operating expenses as a percentage of net revenue.

Operating expenses decreased due to capitalization of software costs and cost containment measures.

Cost of products and services as a percentage of net revenue increased due to a higher contribution

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

from our products portfolio, as we transition to a more software-defined platform with HPE Alletra.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

Hybrid Cloud net revenue increased by $303 million, or 11.9%, (increased 12.8% on a constant currency basis) primarily due to an increase in unit volume.

Hybrid Cloud product revenue increased by $159 million, or 11.7%, primarily due to a unit volume increase of $132 million, or 9.7%, led by private cloud products.

Hybrid Cloud services revenue increased by $144 million, or 12.0%, primarily driven by higher services contribution from private cloud products and storage subscription services.

Hybrid Cloud earnings from operations as a percentage of net revenue increased 3.7 percentage points, due to a decrease in operating expenses as a percentage of net revenue, primarily driven by capitalization of software costs and cost containment measures.

Cost of products and services as a percentage of net revenue increased due to a higher contribution from our products portfolio, as we transition to a more software-defined platform with HPE Alletra.

Intelligent Edge

For the three months ended January 31,

2025 2024 % Change

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

2025 2024 % Change 2025 2024 % Change

Dollars in millions

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Earnings from operations as a % of net revenue 23.6 % 21.8 % 25.5 % 25.8 %

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 $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.

Three months ended April 30, 2025 compared with three months ended April 30, 2024

Intelligent Edge net revenue increased by $76 million, or 7.0% (increased 8.0% on a constant currency basis).

Product revenue increased by $43 million, or 5.4%, primarily led by higher volume and product mix effect of $52 million, or 6.5%.

The product revenue increase was primarily led by switching products due to increased demand.

Services net revenue increased $33 million, or 11.3%, primarily led by our aaS offerings.

Intelligent Edge earnings from operations as a percentage of net revenue increased 1.8 percentage points primarily due to a decrease in operating expenses as a percentage of net revenue, partially offset by an increase in cost of products and services 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.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

Intelligent Edge net revenue increased by $21 million, or 0.9% (increased 1.5% on a constant currency basis).

Services net revenue increased $73 million, or 12.8%, primarily led by our aaS offerings.

Product revenue decreased by $52 million, or 3.0%, led by lower AUPs of $172 million, or 10.0%, partially offset by higher volume and product mix effect of $128 million, or 7.5%.

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.

Intelligent Edge earnings from operations as a percentage of net revenue remained relatively flat.

Financial Services

For the three months ended January 31,

2025 2024 % Change

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

2025 2024 % Change 2025 2024 % Change

Dollars in millions

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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).

Three months ended April 30, 2025 compared with three months ended April 30, 2024

FS net revenue decreased by $11 million, or 1.3% (increased 0.8% on a constant currency basis) primarily due to lower rental revenue on lower average operating leases and unfavorable currency fluctuations, partially offset by higher finance income from higher average finance leases, along with higher asset management remarketing revenue and asset recovery services revenue.

FS earnings from operations as a percentage of net revenue increased 1.1 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.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

FS net revenue decreased by $11 million, or 0.6% (increased 1.2% on a constant currency basis) primarily due to lower rental revenue on lower average operating leases and unfavorable currency fluctuations, partially offset by higher finance income from higher average finance leases, along with higher asset management remarketing revenue and asset recovery services revenue.

FS earnings from operations as a percentage of net revenue increased 1.0 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 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 and higher borrowing costs.

Financing Volume

For the three months ended January 31,

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

2025 2024 2025 2024

Financing volume $ 1,305 $ 1,672 $ 2,461 $ 3,035

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.

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 21.9% and 18.9% for the three and six months ended April 30, 2025, as compared to the prior-year period.

The decrease for the three and six months ended April 30, 2025, was primarily driven by lower financing of both HPE and third-party product sales and services.

Portfolio Assets and Ratios

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

January 31, 2025 October 31, 2024

April 30, 2025 October 31, 2024

Dollars in millions

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(1) Intercompany activity is eliminated in consolidation.

(2) Allowance for credit losses for financing receivables includes both the short- and long-term portions.

(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 $11.8 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 months ended January 31, 2025 and 2024, FS recorded net bad debt expense of $25 million and $12 million, respectively.

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Financial Condition and Results of Operations (Continued)

(2) Allowance for credit losses for financing receivables includes both the short- and long-term portions.

Debt benefiting FS totaled $11.6 billion and $11.8 billion as of April 30, 2025 and October 31, 2024, 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 both April 30, 2025 and October 31, 2024 was $1.7 billion.

As of April 30, 2025 and October 31, 2024, FS net cash and cash equivalents balances were approximately $670 million and $533 million, respectively.

Net portfolio assets as of April 30, 2025 decreased 2.2% from October 31, 2024.

The decrease generally resulted from portfolio runoff exceeding new financing volume during the period, partially offset by favorable currency fluctuations.

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

For the three and six months ended April 30, 2025, FS recorded net bad debt expense of $25 million and $50 million, respectively.

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

Corporate Investments and Other

For the three months ended January 31,

2025 2024 % Change

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

2025 2024 % Change 2025 2024 % Change

Dollars in millions

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Loss from operations as a % of net revenue (5.2) % (3.6) % (3.1) % (3.9) %

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

Three months ended April 30, 2025 compared with three months ended April 30, 2024

Corporate Investments and Other net revenue decreased by $58 million, or 23.0% (decreased 21.4% 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.

Corporate Investments and Other loss from operations remained relatively flat.

Six months ended April 30, 2025 compared with six months ended April 30, 2024

Corporate Investments and Other net revenue decreased by $99 million, or 20.2% (decreased 18.6% 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 0.8 percentage points primarily due 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 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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

As of April 30, 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, except for estimates used in our goodwill impairment analysis.

We review goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter, or whenever events or circumstances indicate the carrying amount of goodwill may not be recoverable.

We are permitted to conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test.

We performed interim goodwill impairment tests as of November 1, 2024 and April 30, 2025.

As of April 30, 2025, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, “Segment Information” to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report, with the exception of Corporate Investments and Other which contains one reporting unit:

Advisory and Professional Services.

When performing the goodwill impairment test, we compare the fair value of each reporting unit to its carrying amount.

An impairment exists if the fair value of the reporting unit is less than its carrying amount.

Estimating the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.

We estimate the fair value of our reporting units using a weighting of fair values derived mostly from the income approach and, to a lesser extent, the market approach.

Under the income approach, the fair value of a reporting unit is based on discounted cash flow analysis of management's short-term and long-term forecast of operating performance.

This analysis includes significant assumptions regarding revenue growth rates, expected operating margins, and timing of expected future cash flows based on market conditions and customer acceptances.

The discount rate used is based on the weighted-average cost of capital of comparable public companies adjusted for the relevant risk associated with business specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows.

Under the market approach, the fair value is based on market multiples of revenue and earnings derived from comparable publicly traded companies with operating and investment characteristics similar to the reporting unit.

We weight the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit.

When market comparables are not meaningful or not available, we estimate the fair value of a reporting unit using the income approach.

In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to individual reporting units to determine the carrying amount of each reporting unit.

November 1, 2024 Interim Impairment Test

An interim impairment test was performed as of November 1, 2024 based on organizational changes impacting the Hybrid Cloud and Server reporting units.

The interim impairment test did not result in an impairment of goodwill.

April 30, 2025 Interim Impairment Test

During the second quarter of fiscal 2025, the macroeconomic environment experienced a rapid deterioration, primarily driven by the announcement and subsequent modifications of international tariffs, an escalation in global trade tensions, and increasing geopolitical uncertainty.

These events have contributed to significant movement in inputs used to determine the weighted-average cost of capital.

As of April 30, 2025, we determined that an indicator of potential impairment existed to require an interim quantitative goodwill impairment test for its reporting units.

Based on the results of the interim quantitative impairment test performed as of April 30, 2025, the fair value of the Hybrid Cloud reporting unit was below the carrying value assigned to Hybrid Cloud.

The decline in the fair value of the Hybrid Cloud reporting unit was primarily driven by an increase in the discount rate used in the discounted cash flows analysis, which reflected heightened macroeconomic uncertainty and changes in market conditions.

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

Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows which we consider to be a level 3 unobservable input in the fair value hierarchy.

Prior to the quantitative goodwill impairment test, we tested the recoverability of long-lived assets and other assets of the Hybrid Cloud reporting unit and concluded that such assets were not impaired.

The quantitative goodwill impairment test indicated that the carrying value of the Hybrid Cloud reporting unit exceeded its fair value by $1.4 billion.

As a result, we recorded a goodwill impairment charge of $1.4 billion in the second quarter of fiscal 2025.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Subsequent to the impairment of Hybrid Cloud reporting unit, the indicated fair values of the reporting units exceeded their respective carrying amounts by a range of 0% to 112%.

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

Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying amount, except Server and Hybrid Cloud.

The Hybrid Cloud reporting unit has remaining goodwill of $3.5 billion as of April 30, 2025 and an excess of fair value over carrying value of net assets of 0% as of the interim test date.

Hybrid Cloud business is transitioning to a more cloud-native, software-defined platform with HPE Alletra.

Translating this growth to revenue and operating income will take time because a greater mix of high margin business, such as ratable software and services, are deferred and recognized in future periods.

The excess of fair value over carrying amount for the Server reporting unit was 3%.

The fair value of the Server reporting unit was also impacted by an increase in the discount rate used in the discounted cash flow analysis, driven by heightened macroeconomic uncertainty.

The Server reporting unit has a goodwill balance of $10.2 billion as of April 30, 2025.

In the current macroeconomic and inflationary environment, customers have invested selectively, resulting in moderate unit growth and competitive pricing in the traditional servers business.

While the AI servers business is growing at a faster pace, because graphics processing units represent a large portion of the solutions, the pricing is very competitive and margins are limited.

The Server business continues to focus on capturing market share in both traditional and AI servers, while maintaining operating margin and leveraging its strong portfolio of products.

If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if we have a significant or sustained decline in our stock price, it is possible the estimates about our Hybrid Cloud and Server reporting units’ ability to successfully address the current challenges may change, which could result in the carrying value of the Hybrid Cloud and Server reporting units exceeding their estimated fair value and potential impairment charges.

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, 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 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 (credit) 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.

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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.

as of April 30, 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.

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.

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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 $102 million, during the first six months of fiscal 2025.

As of April 30, 2025, we had a remaining authorization of approximately $0.7 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.

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

January 31, 2025 October 31, 2024

April 30, 2025 October 31, 2024

Cash, cash equivalents and restricted cash $ 11,788 $ 15,105

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

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

The maximum aggregate commitment under this facility is $4.0 billion, however, no balances were outstanding under this facility as of April 30, 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 $1.3 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 three months ended January 31,

For the six months ended April 30,

Net cash (used in) provided by operating activities $ (851) $ 1,157

Net cash used in investing activities (1,012) (1,107)

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

Net cash used in financing activities (1,492) (1,676)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 38 (31)

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Operating Activities

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.

For the six months ended April 30, 2025, net cash used in operating activities increased by $2.0 billion, as compared to the corresponding period in fiscal 2024.

The increase was primarily due to unfavorable working capital changes driven by the timing of payments, moderated by an increase in collection from financing receivables, as compared to the prior-year period.

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

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

April 30, 2025 October 31, 2024 Change April 30, 2024 October 31, 2023 Change Y/Y Change

Days of sales outstanding in accounts receivable ("DSO") 46 38 8 48 43 5 (2)

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

Compared to the corresponding three-month period in fiscal 2024, the increase in DOS in the current period was primarily due to higher inventory levels caused by strategic purchases of key components to support growth in AI systems.

Compared to the corresponding three-month period in fiscal 2024, the decrease in DOS in the current period was primarily due to higher shipments.

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

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

Compared to the corresponding three-month period in fiscal 2024, the increase in DPO in the current period was primarily due to higher inventory purchases.

Compared to the corresponding three-month period in fiscal 2024, the decrease in DPO in the current period was primarily due to higher vendor payments for planned AI systems, and lower inventory purchases.

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Investing Activities

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.

For the six months ended April 30, 2025, net cash used in investing activities decreased by $0.1 billion, as compared to the corresponding period in fiscal 2024.

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

Financing Activities

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.

For the six months ended April 30, 2025, net cash used in financing activities decreased by $0.2 billion, as compared to the corresponding period in fiscal 2024.

This decrease was primarily due to lower repayments of debt of $1.2 billion, partially offset by lower proceeds from debt, net of issuance costs of $0.8 billion, and higher cash utilized for share repurchases and stock-based award activities of $0.1 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 three months ended January 31, 2025, FCF decreased by $0.4 billion, as compared to the corresponding period in fiscal 2024.

For the six months ended April 30, 2025, FCF decreased by $1.9 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.

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

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

Significant funding and liquidity activities for the six months ended April 30, 2025 were as follows:

Debt Repayments:

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

• During the six months ended April 30, 2025, we repaid $0.8 billion of the outstanding asset-backed debt securities.

Cash Requirements and Commitments

Contractual Obligations

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

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Financial Condition and Results of Operations (Continued)

Cash Requirements and Commitments

Contractual Obligations

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.

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.

Retirement Benefit Plan Funding

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Restructuring Plans

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.

As of April 30, 2025, we expect to make future cash payments of approximately $140 million in connection with our approved restructuring plans, which includes $28 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.

Cost Reduction Program

The Program is expected to be implemented through fiscal year 2026.

As of April 30, 2025, we expect to make future cash payments of approximately $350 million in connection with the Program, which includes $140 million expected to be paid through the remainder of fiscal 2025 and $210 million expected to be paid thereafter.

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.

As of April 30, 2025, we had approximately $152 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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For more information on our third-party revolving short-term financing arrangements, see Note 6, “Balance Sheet Details”, to the Condensed Consolidated Financial Statements in Item 1 of Part I.

GAAP to non-GAAP Reconciliations

The following tables provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure for the periods presented:

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Financial Condition and Results of Operations (Continued)

GAAP to non-GAAP Reconciliations

The following tables provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure for the periods presented:

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

For the three months ended January 31,

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

2025 2024 2025 2024

Revenue Dollars % of

Dollars in millions

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— — % (7) (0.1) % (3) — % (32) (0.2) %

Cost reduction program 46 0.6 % — — % 46 0.3 % — — %

H3C divestiture related severance costs 16 0.2 % — — % 17 0.1 % — — %

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(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 January 31,

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

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

2025 2024 2025 2024

Revenue Dollars % of

Dollars in millions

GAAP earnings from operations $ 433 5.5 % $ 525 7.8 %

GAAP (loss) earnings from operations $ (1,109) (14.5) % $ 425 5.9 % $ (676) (4.4) % $ 950 6.8 %

Non-GAAP Adjustments:

Amortization of intangible assets 37 0.5 % 67 0.9 % 75 0.5 % 138 1.0 %

Transformation costs 15 0.2 % 20 0.3 %

Impairment of goodwill 1,361 17.8 % — — % 1,361 8.8 % — — %

Transformation (credit) costs (13) (0.2) % 33 0.5 % 2 — % 53 0.4 %

Stock-based compensation expense 116 1.5 % 120 1.7 % 270 1.7 % 261 1.9 %

H3C divestiture related severance costs 20 0.3 % — — % 97 0.6 % — — %

Cost reduction program 146 1.9 % — — % 146 0.9 % — — %

Acquisition, disposition and other charges 55 0.7 % 39 0.5 % 118 0.8 % 57 0.4 %

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Financial Condition and Results of Operations (Continued)

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 January 31,

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

Reconciliation of GAAP net (loss) earnings and diluted net EPS to non-GAAP net earnings and diluted net EPS.

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

2025 2024 2025 2024

Dollars Diluted Net EPS (1)

Dollars Diluted Net EPS Dollars Diluted Net EPS (1)

Dollars Diluted Net EPS

Dollars in millions except per share amounts

GAAP net earnings $ 627 $ 0.44 $ 387 $ 0.29

GAAP net (loss) earnings $ (1,050) $ (0.82) $ 314 $ 0.24 (423) (0.36) $ 701 0.53

Non-GAAP Adjustments:

Amortization of intangible assets 37 0.03 67 0.05 75 0.06 138 0.10

Transformation costs 15 0.01 20 0.02

Impairment of goodwill 1,361 1.03 — — 1,361 1.03 — —

Transformation (credit) costs (13) (0.01) 33 0.03 2 — 53 0.04

Stock-based compensation expense 116 0.09 120 0.09 270 0.20 261 0.20

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H3C divestiture related severance costs 20 0.02 — — 97 0.07 — —

Cost reduction program 146 0.11 — — 146 0.11 — —

Acquisition, disposition and other charges 55 0.04 39 0.03 118 0.08 57 0.05

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Non-GAAP net earnings attributable to common stockholders $ 516 $ 561 $ 1,171 $ 1,199

(1) Non-GAAP diluted net EPS reflects any dilutive effect of outstanding convertible preferred stock and employee stock plans, but that effect is excluded when calculating GAAP diluted net EPS as that would be anti-dilutive.

See Note 14 “Net (Loss) Earnings Per Share”, to the Condensed Consolidated Financial Statements in Item 1 of Part I for further information.

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

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

(3) 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.

See the table below for the shares used to calculate Non-GAAP diluted net EPS.

Shares used to calculate Non-GAAP diluted net EPS.

For the three months ended April 30, For the six months ended April 30, 2025

2025 2024 2025 2024

Weighted-average shares used to compute basic net EPS 1,322 1,311 1,319 1,306

Dilutive effect of employee stock plans 10 14 14 14

Dilutive effect of 7.625% Series C mandatory convertible preferred stock

Weighted-average shares used to compute Non-GAAP diluted net EPS 1,419 1,325 1,409 1,320

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

For the three months ended January 31,

For the three months ended April 30, For the six months ended April 30, 2025

2025 2024 2025 2024

Net cash (used in) provided by operating activities $ (461) $ 1,093 $ (851) $ 1,157

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Free cash flow $ (847) $ 610 $ (1,724) $ 128

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Use of Non-GAAP Financial Measures

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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 non-GAAP diluted net earnings per share

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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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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, acquisition, disposition and other charges, and H3C divestiture related severance costs.

See below for the reasons management excludes each item:

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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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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

For the three and six months ended April 30, 2025, acquisition charges were driven by costs associated with the proposed acquisition of Juniper Networks and miscellaneous disposition related charges.

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

• We incurred severance and other charges pursuant to cost management initiatives.

We exclude these charges because we do not believe they are reflective of normal continuing business operations.

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

• 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.

The divestiture resulted 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.

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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.

Non-GAAP earnings from operations and non-GAAP operating profit margin consist of (loss) earnings from operations or (loss) earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, impairment of goodwill, transformation (credit) costs, gain on sale of a business, and

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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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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.

• Transformation costs represent net costs related to the (i) HPE Next Plan and (ii) Cost Optimization and Prioritization Plan and include restructuring charges, program design and execution costs, costs incurred to transform our IT infrastructure, net gains from the sale of real estate and any impairment charges on real estate identified as part of the initiatives.

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.

• In the second quarter of fiscal 2025, we recorded a non-cash impairment charge for the goodwill associated with our Hybrid Cloud reporting unit.

HPE believes that this non-cash charge does not reflect the Company’s operating results and is not indicative of the underlying performance of the business.

HPE excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HPE’s current operating performance and comparisons to HPE’s operating performance in other periods.

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

• Transformation (credit) costs represent net costs related to the (i) HPE Next Plan and (ii) Cost Optimization and Prioritization Plan.

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, 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.

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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, non-GAAP net earnings attributable to common stockholders, and non-GAAP diluted net earnings per share attributable to common stockholders consist of net (loss) earnings or diluted net (loss) 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.

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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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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

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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, frequency and timing.

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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

vary in size, frequency and timing.

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