This article first appeared on GuruFocus.

Hewlett Packard Enterprise (NYSE:HPE) closed out fiscal 2025 with a quarter that could be seen as a strong proof point for a business entering a new strategic phase. Revenue reached $9.7 billion, up 14% from a year earlier, while annualized revenue run-rate surged 63% to $3.2 billion as customers continued shifting workloads into AI and cloud environments. Management framed the Juniper Networks acquisition as a catalyst that could expand HPE's AI and networking footprint, giving the business more commercial leverage heading into fiscal 2026. Profitability also strengthened, with GAAP gross margin at 33.5% and non-GAAP gross margin at 36.4%, both rising from last year and supporting record profit performance and healthy free cash flow.

Cash generation remained a highlight. HPE produced $2.465 billion in cash from operations, $435 million more than last year, and free cash flow rose to $1.92 billion, an increase of $420 million. Networking stood out with $2.8 billion in revenue, up 150% from the prior-year period and posting a 23% operating margin. Financial Services delivered $889 million in revenue, along with an 11.5% operating margin and a return on equity of 20.8%. Server and hybrid cloud revenue softened from the prior-year period, a shift that management suggested reflects changing spending priorities. Capital returns totaled $271 million in dividends and buybacks, and the board approved a $0.1425 per share dividend payable in January.

Looking into fiscal 2026, HPE guided first-quarter revenue between $9 billion and $9.4 billion, with GAAP EPS projected between $0.09 and $0.13 and non-GAAP EPS expected between $0.57 and $0.61. For the full year, the company reaffirmed revenue expansion expectations of 17% to 22% and lifted profit guidance, including non-GAAP operating profit growth between 32% and 40% and GAAP operating profit growth between 455% and 520%. Diluted GAAP EPS is expected to land between $0.62 and $0.82, while non-GAAP EPS could reach $2.25 to $2.45. HPE also raised the midpoint of its free cash flow target to a range of $1.7 billion to $2 billion. Leadership said structural cost programs, portfolio simplification, and accelerating AI and cloud demand could set the tone for a stronger year of execution and capital efficiency in 2026.