HPE misses revenue targets as AI server sales slide on customer delays and supply chain snags

HPE Reports Mixed Q4 Results as AI Server Sales Face Headwinds

Hewlett Packard Enterprise delivered fourth-quarter earnings of 62 cents per share, surpassing analyst expectations of 58 cents, but revenue came to just $9.68 billion—up 14% year-over-year yet falling short of Wall Street's $9.93 billion target1

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. The shortfall stems primarily from HPE's server business, which saw revenue decline 5% to $4.46 billion during the quarter, missing the consensus estimate of $4.66 billion1

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. The segment's operating margin also contracted to 9.8%, down from 11.6% a year earlier, signaling pressure on profitability despite the company booking another $2 billion in AI server orders1

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Customer Delays and Volatile Demand for AI Servers Drive Revenue Miss

During a conference call with analysts, HPE Chief Executive Antonio Neri explained that the AI server sales slide resulted from larger customers experiencing delays in their AI projects, leaving them unprepared to receive ordered shipments1

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. Chief Financial Officer Marie Myers warned that such issues may become more frequent as HPE shifts toward government and big-business customers, noting that "demand for AI servers remained volatile, with some large customers delaying orders to the second half of the year"2

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. These customers are building large-scale AI infrastructure, but supply chain snags, export controls on chips, and bureaucratic processes frequently cause them to postpone orders1

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HPE Cuts Its Guidance Amid Delays in Delivery of AI-Dedicated Servers

The ongoing customer delays prompted HPE to issue disappointing revenue guidance for the first quarter of fiscal 2026. The company now expects revenue between $9 billion and $9.4 billion, with the midpoint falling significantly below the Street's target of $9.88 billion according to LSEG2

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. However, HPE projects earnings of between 57 cents and 61 cents per share, above analysts' 53 cent-per-share forecast1

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. Marie Myers emphasized that while the first half of fiscal 2026 faces headwinds, she expects improvement in the second half as benefits from the Juniper Networks acquisition materialize and component costs potentially decline1

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Juniper Acquisition Boosts Networking Revenue Amid Broader Challenges

HPE's $14 billion acquisition of Juniper Networks earlier this year is already delivering results, with networking revenue jumping 150% to $2.8 billion during the quarter, slightly ahead of expectations1

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. Antonio Neri declared that "we are now at the core a networking-centric company," highlighting the strategic importance of this segment for AI infrastructure1

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. However, other business segments struggled: hybrid cloud revenue declined 12% to $1.4 billion, while financial services revenue remained essentially flat at $889 million1

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. The drop in hybrid cloud activity and reduced US federal spending further compounded the challenges facing HPE's financial performance2

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Wall Street Reacts as Stock Decline Reflects Investor Concerns

Despite HPE reaffirming its full-year fiscal 2026 guidance and raising its annual adjusted earnings forecast from a range of $2.20 to $2.40 per share to $2.25 to $2.45 per share, Wall Street investors responded negatively to the near-term outlook1

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. The HPE stock declined more than 9% in late trading, erasing a 2% gain from the regular session1

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. The stock is now up just over 7% for the year, significantly trailing the broader S&P 500 index, which has gained more than 14% in the same period1

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. Marie Myers' acknowledgment that supply chain issues and export controls will continue affecting delivery schedules suggests that the volatility in AI server demand may persist in coming quarters, requiring investors to watch for signs of stabilization in large customer deployments and improvements in component availability.