Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

For purposes of this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section, we use the terms “Hewlett Packard Enterprise”, “HPE”, the “Company”, “we”, “us” and “our” to refer to Hewlett Packard Enterprise Company.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist the reader in understanding our Condensed Consolidated Financial Statements, changes in certain key items in these financial statements from period-to-period and the primary factors that accounted for these changes, as well as how certain accounting principles, policies, and estimates affect our Condensed Consolidated Financial Statements. 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.

This MD&A is organized as follows:

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

• Executive Overview. A discussion of our business and a summary of our financial performance and other highlights, including non-GAAP financial measures, affecting the Company in order to provide context to the remainder of the MD&A.

• Results of Operations. A discussion of the results of operations at the consolidated level is followed by a discussion of the results of operations at the segment level.

• Critical Accounting Policies and Estimates. A discussion of accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

• Liquidity and Capital Resources. An analysis of changes in our cash flows, financial condition, liquidity, and cash requirements and commitments.

*•*GAAP to Non-GAAP Reconciliations. Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure. This section also includes a discussion of the use, usefulness and economic substance of the non-GAAP financial measures, along with a discussion of material limitations, and compensation for those limitations, associated with the use of non-GAAP financial measures.

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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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:

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards artificial intelligence (“AI”), hybrid cloud, edge computing, data security capabilities, and related offerings. The volume of data at the edge continues to grow, driven by the proliferation of more devices. The need for a unified cloud experience everywhere has grown, as well, in order to manage the growth of data at the edge. With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data. Increasing demand for AI is also contributing to changes in the competitive landscape. Our major competitors and emerging competitors are expanding their product and service offerings with integrated products and solutions and exerting increased competitive pressure. We expect these market dynamics and trends to continue in the longer term.

Macroeconomic Uncertainty: The effect of the evolving macroeconomic environment has been impacting industry-wide demand, as customers take longer to work through prior orders and have been adopting a more conservative approach to discretionary IT spending. This has resulted in uneven demand across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own. Additionally, there is growing uncertainty surrounding U.S. trade policy and import/export regulations, which may, in turn, result in trading partners enacting reciprocally restrictive trade policies and measures. These may enhance global trade uncertainty and contribute to higher prices of components and end products and services. We expect such mixed macroeconomic environment to largely continue and possibly limit revenue and margin growth in the near term.

Supply Chain: We experienced supply chain constraints for certain components, including graphics processing units, (“GPUs”) and accelerated processing units. Though, they have since eased, in part due to increased availability of supply and lower material and logistics costs, the future is uncertain due to forthcoming shifts in U.S. trade policy, which may impact our ability to import and export components and finished products and the costs of doing so. Logistics costs decreased from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network; however, these costs may rise with the aforementioned changes in trade policies. We have, in fact, been experiencing higher-than-normal inventory levels, primarily due to customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related orders; we expect this trend to continue in the medium term. We have experienced, and expect to continue experiencing, rising input component costs, which may exacerbate due to the global trade uncertainties referenced above, and a competitive pricing environment, which may impact our financial results. We plan to mitigate the impact of these dynamics through continued disciplined cost and pricing management and supply chain diversification.

Recurring Revenue and Consumption Models: We continue to strengthen our core server and storage-oriented offerings and expand our offerings on the HPE GreenLake cloud, to deliver our entire portfolio as-a-service (“aaS”) and become the edge-to-cloud company for our customers and partners. We expect that such flexible consumption model will continue to strengthen our customer relationships and contribute to growth in recurring revenue.

Foreign Currency Exposure: We have a large global presence, with more than half of our revenue generated outside of the U.S. As a result, our financial results can be, and particularly in recent periods have been, impacted by fluctuations in foreign currency exchange rates. We utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts.

Public Sector: We have a number of engagements with various public sector entities, including the U.S. federal government and its agencies, as direct or indirect customers of our IT services and hardware. Significant staffing and resource reductions at certain public sector entities create an uncertain environment and as a result, our financial results may be impacted in the near term.

Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. To date, 59 countries have enacted portions, or all, of the OECD proposal and a further 7 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules. Where enacted, the rules are effective for us beginning in fiscal 2025. Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. The adoption and effective dates of these rules may vary by

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Management's Discussion and Analysis of

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 2017 through 2022 U.S. federal income tax returns. Subsequent to the close of the first quarter of fiscal 2025, the IRS issued a Revenue Agent Report (“RAR”) with which we agreed. The final determination will not result in a material impact to our financial statements. The audit cycle for fiscal 2017 through 2019 will be considered effectively settled during the second quarter of fiscal 2025 resulting in a reduction of existing unrecognized tax benefits of approximately $358 million. A significant majority of these unrecognized tax benefits relates either to adjustments to foreign tax credits that carry a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which will affect our effective tax rate. The IRS audit for fiscal 2020 through 2022 remains open.

Other Trends and Uncertainties: The impacts of 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. markets. We have also entered into contracts for the sale of certain products and services that reflect heavier-than-normal discounting due to competitive pressures, which have resulted in lower margins than expected, and we expect will continue to negatively impact our margins in the near to medium term. We are monitoring and seeking to mitigate these risks with adjustments to our manufacturing, supply chain, distribution networks, pricing and discounting practices. We remain focused on executing our key strategic priorities, building long-term value creation for our stakeholders, and addressing our customers’ needs while continuing to make prudent decisions in response to the environment.

Proposed Acquisition of Juniper Networks, Inc: On January 9, 2024, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) under which we will acquire Juniper Networks in an all-cash transaction for $40.00 per share (the “Merger”), representing an equity value of approximately $14 billion. On April 2, 2024, Juniper Networks stockholders approved the transaction. The transaction is expected to be funded based on senior unsecured delayed draw term loans from a syndicate of banks, the post-tax proceeds from our sale to Unisplendour International Technology Limited (“UNIS”) of 30% of the total issued share capital of H3C Technologies Co., Limited (“H3C”), the net proceeds (including after repayments of maturing debt) of our September 2024 issuances of senior unsecured notes and the 7.625% Series C Mandatory Convertible Preferred Stock (the “Preferred Stock”), and cash on the balance sheet. The closing of the transaction remains subject to receipt of regulatory approvals and satisfaction of other customary closing conditions. On January 30 2025, the Antitrust Division of the United States Department of Justice (the “DOJ”) filed a complaint in the United States District Court for the Northern District of California, seeking to enjoin the closing of the Merger, alleging that the Merger is likely to substantially lessen competition in violation of Section 7 of the Clayton Act. On February 10, 2025, HPE and Juniper Networks filed answers to the DOJ’s complaint, disputing these claims. Trial is scheduled to begin on July 9, 2025. While we intend to vigorously defend the litigation, an unfavorable ruling could ultimately prevent the closing of the Merger, thereby adversely impacting our ability to achieve the intended benefits of the Merger, which could, in turn, have an adverse impact on our business, financial condition, and results of operations.

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

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

EXECUTIVE OVERVIEW

We are a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze, and act upon data seamlessly from edge-to-cloud. We enable customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future. Our customers range from small-and-medium size businesses to large global enterprises and governmental entities. Our legacy dates to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.

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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Our operations are organized into five reportable segments for financial reporting purposes: Server, Hybrid Cloud, Intelligent Edge, Financial Services (“FS”), and Corporate Investments and Other. Effective at the beginning of the first quarter of fiscal 2025, in order to align its segment financial reporting more closely with its current business structure, HPE implemented an organizational change with the transfer of certain managed services, previously reported within the Server reportable segment, to the Hybrid Cloud reportable segment.

Cost Reduction Program

On March 6, 2025, the Board of Directors approved a cost reduction program (the "Program") intended to reduce structural operating costs and continue advancing our ongoing commitment to profitable growth. The Program is expected to be implemented through fiscal year 2026 and deliver gross savings of approximately $350 million by fiscal year 2027 through reductions in our workforce.

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

The estimates of the duration of the Program, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual amounts may differ materially from estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Program.

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

Net revenue of $7.9 billion represented an increase of 16.3% (increased 17.2% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment and higher unit volume in the Hybrid Cloud segment. The gross profit margin of 29.2% (or $2.3 billion), represents a decrease of 7.2 percentage points from the prior-year period primarily due to an increase in cost of sales in the Server, Hybrid Cloud and Intelligent Edge segments. The operating profit margin of 5.5% represents a decrease of 2.3 percentage points from the prior-year period primarily due to the aforementioned gross margin decline moderated by lower operating expenses.

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Financial Condition and Results of Operations (Continued)

Financial Results

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
Net revenue			$	7,854					$	6,755					16.3%
Gross profit			$	2,295					$	2,457					(6.6)%
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)			$	0.44					$	0.29					$0.15
Cash flow (used in) provided by operations			$	(390)					$	64					$(454)

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

			For the three months ended January 31,
			2025						2024						Change
			Dollars in millions, except per share amounts
Net revenue in constant currency			$	7,914					$	6,755					17.2%
Non-GAAP gross profit			$	2,310					$	2,448					(5.6)%
Non-GAAP gross profit margin			29.4		%				36.2		%				(6.8)pts
Non-GAAP earnings from operations			$	780					$	775					0.6%
Non-GAAP operating profit margin			9.9		%				11.5		%				(1.6)pts
Non-GAAP net earnings attributable to HPE			$	684					$	638					7.2%
Non-GAAP net earnings attributable to common stockholders			$	655					$	638					2.7%
Non-GAAP diluted net earnings per share attributable to common stockholders(1)			$	0.49					$	0.48					$0.01
Free cash flow			$	(877)					$	(482)					($395)

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

Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure herein. Please refer to the section “GAAP to non-GAAP Reconciliations” included in this MD&A for these reconciliations, a discussion of the use, usefulness and economic substance of the non-GAAP financial measures, along with a discussion of material limitations, and compensation for those limitations, associated with the use of non-GAAP financial measures.

Annualized Revenue Run-rate (“ARR”)

ARR represents the annualized revenue of all net HPE GreenLake cloud services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four. We believe that ARR is a metric that allows management to better understand and highlight the potential future performance of our aaS business. We also believe ARR provides investors with greater transparency to our financial information and of the performance metric used in our financial and operational decision making and allows investors to see our results “through the

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Financial Condition and Results of Operations (Continued)

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.

ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. 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,
			2025												2024
			Dollars in millions
ARR			$			2,068									$			1,426
Year-over-year growth rate			45%												42%

The 45% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud, Server and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, Server aaS and Intelligent Edge aaS activity.

Dividends and Share Repurchase Program

Returning capital to our stockholders remains an important part of our capital allocation framework, which also consists of strategic investments. The holders of HPE common stock are entitled to receive dividends when and as declared by the Board of Directors. Our ability to pay dividends will depend on many factors, such as its financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in its debt, industry practice, legal requirements, regulatory constraints, and other factors that the Board of Directors deems relevant. Furthermore, so long as any share of our Preferred Stock remains outstanding, no dividend on shares of common stock (or any other class of stock junior to the Preferred Stock) shall be declared or paid unless all accumulated and unpaid dividends for all preceding dividend periods for the Preferred Stock have been declared and paid in full in cash, shares of the Company’s common stock or a combination thereof, or a sufficient sum of cash or number of shares of its common stock has been set apart for the payment of such dividends, on all outstanding shares of the Preferred Stock. During the first quarter of fiscal 2025, we paid a quarterly dividend of $0.13 per share of common stock. On March 6, 2025, we declared a regular cash dividend of $0.13 per share of our common stock, payable on or about April 18, 2025, to our holders of record as of the close of business on March 21, 2025. We also declared a cash dividend of $0.953125 per share of our 7.625% Series C Mandatory Convertible Preferred Stock, which was paid on March 1, 2025, to holders of record as of the close of business on February 15, 2025.

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

RESULTS OF OPERATIONS

Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our revenue growth has been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. In order to provide a framework for assessing performance excluding the impact of foreign currency fluctuations, we present the year-over-year percentage change in revenue on a constant currency basis, which assumes no change in foreign currency exchange rates from the prior-year period and does not adjust for any repricing or demand impacts from changes in foreign currency exchange rates. This change in revenue on a constant currency basis is calculated as the quotient of (a) current year revenue converted to U.S. dollars using the prior-year period's foreign currency exchange rates divided by (b) the prior-year period revenue. This information is provided so that revenue can be viewed without the effect of fluctuations in foreign currency exchange rates, which is consistent with how management evaluates our revenue results and trends. This constant currency disclosure is provided in addition to, and not as a substitute for, the year-over-year percentage change in revenue on a GAAP basis. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.

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Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

			For the three months ended January 31,
			2025												2024
			Dollars						% of Revenue						Dollars						% of Revenue
			Dollars in millions
Net revenue			$	7,854					100.0		%				$	6,755					100.0		%
Cost of sales (exclusive of amortization shown separately below)			5,559						70.8						4,298						63.6
Gross profit			2,295						29.2						2,457						36.4
Research and development			475						6.0						582						8.6
Selling, general and administrative			1,268						16.1						1,216						18.0
Amortization of intangible assets			38						0.5						71						1.1
Transformation costs			15						0.2						20						0.3
Acquisition, disposition and other charges			66						0.8						43						0.6
Earnings from operations			433						5.5						525						7.8
Gain on sale of a business			244						3.1						—						—
Interest and other, net			39						0.5						(88)						(1.3)
Earnings from equity interests			17						0.2						46						0.7
Earnings before provision for taxes			733						9.3						483						7.2
Provision for taxes			(106)						(1.3)						(96)						(1.5)
Net earnings attributable to HPE			627						8.0						387						5.7
Preferred stock dividends			(29)						(0.4)						—						—
Net earnings attributable to common stockholders			$	598					7.6		%				$	387					5.7		%

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

Net revenue

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). U.S. net revenue increased by $224 million, or 9.8%, to $2.5 billion, and net revenue from outside of the U.S. increased by $875 million, or 19.6%, to $5.3 billion.

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

			For the three months ended January 31, 2025
			Percentage Points
Server			14.2
Hybrid Cloud			2.0
Intelligent Edge			(0.8)
Financial Services			—
Corporate Investments and Other			(0.6)
Total segment			14.8
Elimination of intersegment net revenue and other			1.5
Total HPE			16.3

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

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

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

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Management's Discussion and Analysis of

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.

Gross profit

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.

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.

Acquisition, disposition and other charges

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

Gain on sale of a business

On December 1, 2024, we completed the disposition of CTG. We received net proceeds of $210 million and recognized a gain of $244 million.

Interest and other, net

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

Earnings from equity interests

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.

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Segment Information

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

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

Segment Results

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the three months ended January 31, 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)			$	7,854					$	4,290					$	1,405					$	1,146					$	873					$	197
Year-over-year change %			16.3		%				28.9		%				10.4		%				(4.6)		%				—		%				(17.2)		%
Earnings (loss) from operations(2)			$	433					$	348					$	99					$	314					$	82					$	(2)
Earnings (loss) from operations as a % of net revenue			5.5		%				8.1		%				7.0		%				27.4		%				9.4		%				(1.0)		%
Year-over-year change percentage points			(2.3)		pts				(3.3)		pts				3.0		pts				(2.0)		pts				0.9		pts				3.2		pts

(1)HPE consolidated net revenue excludes intersegment net revenue. Segment net revenues include intersegment net revenue.

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

Server

			For the three months ended January 31,
			2025						2024						% Change
			Dollars in millions
Net revenue			$	4,290					$	3,327					28.9		%
Earnings from operations			$	348					$	379					(8.2)		%
Earnings from operations as a % of net revenue			8.1		%				11.4		%

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

Server net revenue increased by $963 million, or 28.9% (increased 29.9% on a constant currency basis), primarily due to a $945 million, or 37.8%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $1,006 million, or 40.2%, partially offset by unfavorable currency fluctuations of $32 million, or 1.3%, and a decrease in net unit volume of $29 million, or 1.2%.

Server earnings from operations as a percentage of net revenue decreased 3.3 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in costs of products and services as a percentage of net revenue was primarily due to competitive pricing pressure and input cost increases. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

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Financial Condition and Results of Operations (Continued)

Hybrid Cloud

			For the three months ended January 31,
			2025						2024						% Change
			Dollars in millions
Net revenue			$	1,405					$	1,273					10.4		%
Earnings from operations			$	99					$	51					94.1		%
Earnings from operations as a % of net revenue			7.0		%				4.0		%

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

Hybrid Cloud net revenue increased by $132 million, or 10.4% (increased 11.1% on a constant currency basis), primarily due to an increase in unit volume, partially offset by lower AUPs. Hybrid Cloud product revenue increased by $53 million, or 7.7%, primarily due to a unit volume increase of $36 million, or 5.3%, led by storage products and higher AUPs of $13 million or 1.9%. Hybrid Cloud services revenue increased by $79 million, or 13.6%, primarily due to a unit volume increase of $141 million, or 24.2%, led by private cloud and storage services. This increase was partially offset by lower AUPs of $63 million, or 10.8%, led by storage services.

Hybrid Cloud earnings from operations as a percentage of net revenue increased 3.0 percentage points. The increase was driven by a decrease in operating expenses as a percentage of net revenue, primarily due to lower operating expenses resulting from our cost containment measures. The decrease was moderated by an increase in cost of products and services as a percentage of net revenue, primarily due to lower storage services revenue and competitive pricing pressure.

Intelligent Edge

			For the three months ended January 31,
			2025						2024						% Change
			Dollars in millions
Net revenue			$	1,146					$	1,201					(4.6)		%
Earnings from operations			$	314					$	353					(11.0)		%
Earnings from operations as a % of net revenue			27.4		%				29.4		%

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. The increase in cost of product and services as a percentage of net revenue was primarily due to competitive pricing pressure. The decrease in operating expenses as a percentage of net revenue primarily due to our cost containment measures.

Financial Services

			For the three months ended January 31,
			2025						2024						% Change
			Dollars in millions
Net revenue			$	873					$	873					—		%
Earnings from operations			$	82					$	74					10.8		%
Earnings from operations as a % of net revenue			9.4		%				8.5		%

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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

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

FS earnings from operations as a percentage of net revenue increased 0.9 percentage points due to a decrease in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat. The decrease in cost of services as a percentage of net revenue resulted primarily from lower depreciation expense, partially offset by higher bad debt expense.

Financing Volume

			For the three months ended January 31,
			2025						2024
			In millions
Financing volume			$	1,156					$	1,363

Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased 15.2% for the three months ended January 31, 2025, as compared to the prior-year period. The decrease was primarily driven by lower financing of third-party product sales and services, partially offset by higher financing of HPE product sales and services.

Portfolio Assets and Ratios

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

			As of
			January 31, 2025						October 31, 2024
			Dollars in millions
Financing receivables, gross			$	9,315					$	9,647
Net equipment under operating leases			3,374						3,632
Capitalized profit on intercompany equipment transactions(1)			384						396
Intercompany leases(1)			126						119
Gross portfolio assets			13,199						13,794
Allowance for doubtful accounts(2)			189						177
Operating lease equipment reserve			33						30
Total reserves			222						207
Net portfolio assets			$	12,977					$	13,587
Reserve coverage			1.7		%				1.5		%
Debt-to-equity ratio(3)			7.0x						7.0x

(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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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Corporate Investments and Other

						For the three months ended January 31,
						2025						2024						% Change
						Dollars in millions
Net revenue						$	197					$	238					(17.2)		%
Loss from operations						$	(2)					$	(10)					80.0		%
Loss from operations as a % of net revenue						(1.0)		%				(4.2)		%

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

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

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Condensed Consolidated Financial Statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue, and expenses, and the disclosure of contingent liabilities. An accounting policy is deemed to be critical if the nature of the estimate or assumption it incorporates is subject to a material level of judgment related to matters that are highly uncertain, and changes in those estimates and assumptions are reasonably likely to materially impact our Condensed Consolidated Financial Statements.

Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. 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.

LIQUIDITY AND CAPITAL RESOURCES

Current Overview

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 expect to supplement this short-term liquidity, if necessary, by accessing the capital markets, issuing commercial paper, and borrowing under credit facilities made available by various domestic and foreign financial institutions. However, our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions. We anticipate that the funds made available, including the debt funding related to the proposed acquisition of Juniper Networks, proceeds from issuance of the Preferred Stock and proceeds from the sale of 30% of the total issued share capital of H3C, and cash generated from our operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months (including for the payment of consideration to consummate the Juniper Networks transaction) and for the foreseeable future thereafter. Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended October 31, 2024, as modified by the risk statements in the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report, and market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this Quarterly Report.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Our cash balances are held in numerous locations throughout the world, with a substantial amount held in the U.S. as of January 31, 2025. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.

Amounts held outside of the U.S. are generally utilized to support our non-U.S. liquidity needs. Repatriations of amounts held outside the U.S. generally will not be taxable from a U.S. federal tax perspective, but may be subject to state income or foreign withholding tax. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is to keep cash balances outside of the U.S. and to meet liquidity needs through ongoing cash flows, external borrowings, or both. We do not expect restrictions or potential taxes incurred on repatriation of amounts held outside of the U.S. 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. For more information on our share repurchase program, refer to the section entitled “Unregistered Sales of Equity Securities and Use of Proceeds” in Item 2 of Part II.

On May 23, 2024, we announced plans to divest our CTG business to HCLTech. CTG was included in our Communications and Media Solutions business, which was reported in the Corporate Investments and Other segment. This divestiture includes the platform-based software solutions portions of the CTG portfolio, including systems integration, network applications, data intelligence, and the business support systems groups. On December 1, 2024, we completed the disposition of CTG. We received net proceeds of $210 million and recognized a gain of $244 million included in Gain on sale of a business in the Condensed Consolidated Statements of Earnings.

In September 2024, we issued $9.0 billion of senior unsecured notes and $1.5 billion of Preferred Stock, the net proceeds of which we intend to use to fund a portion of the consideration for the acquisition of Juniper Networks and for other general corporate purposes. If the transaction is terminated, the senior unsecured notes and Preferred Stock will be treated as follows:

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

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

Liquidity

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

			As of
			January 31, 2025						October 31, 2024
			In millions
Cash, cash equivalents and restricted cash			$	13,852					$	15,105
Total debt			17,877						18,246
Available borrowing resources(1)			5,937						6,009
Commercial paper programs(2)			5,085						5,101
Uncommitted lines of credit(3)			$	852					$	908

(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.

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

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

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,
			2025						2024
			In millions
Net cash (used in) provided by operating activities			$	(390)					$	64
Net cash used in investing activities			(23)						(740)
Net cash (used in) provided by financing activities			(797)						53
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(43)						14
Change in cash, cash equivalents and restricted cash			$	(1,253)					$	(609)
Free cash flow			$	(877)					$	(482)

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.

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

			As of																		As of
			January 31, 2025						October 31, 2024						Change						January 31, 2024						October 31, 2023						Change						Y/Y Change
Days of sales outstanding in accounts receivable ("DSO")			40						38						2						50						43						7						(10)
Days of supply in inventory ("DOS")			139						120						19						127						87						40						12
Days of purchases outstanding in accounts payable ("DPO")			(174)						(170)						(4)						(170)						(134)						(36)						(4)
Cash conversion cycle			5						(12)						17						7						(4)						11						(2)

The cash conversion cycle is the sum of DSO and DOS less DPO. Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the extent of receivables factoring, seasonal trends, the timing of the revenue recognition and inventory purchases within the period, the impact of commodity costs, and acquisition activity.

DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue. Compared to the corresponding three-month period in fiscal 2024, the decrease in DSO in the current period was primarily due to higher early collections.

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

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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

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.

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.

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. This was primarily due to higher cash used in operating activities, as compared to the prior-year period. For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A.

For more information on the impact of operating assets and liabilities to our cash flows, see Note 6, “Balance Sheet Details” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Capital Resources

We maintain debt levels that we establish through consideration of several factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure. We maintain a revolving credit facility and two commercial paper programs, “the Parent Programs,” and a wholly-owned subsidiary maintains a third program. There have been no changes to our commercial paper programs and revolving credit facility since October 31, 2024.

As noted above, we are also party to two senior unsecured delayed draw term loan facilities, comprised of a $1.0 billion 364-day tranche and a $3.0 billion three-year tranche, subject to customary conditions. Unless previously terminated, commitments under both the 364-day term loan and the three-year term loan will terminate upon the earliest of (i) five business days after the Juniper Outside Date (as defined in such term loan agreements), (ii) the occurrence of the closing of the acquisition of Juniper Networks without the funding of any borrowings under either of the term loan agreements, and (iii) the termination of the Merger Agreement by HPE in writing in accordance with its terms.

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

Significant funding and liquidity activities for the three months ended January 31, 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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

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.

Retirement Benefit Plan Funding

For the remainder of fiscal 2025, we anticipate making contributions of approximately $143 million to our non-U.S. pension plans. Our policy is to fund our pension plans so that we meet at least the minimum contribution requirements, as established by various authorities including local government and tax authorities.

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

Uncertain Tax Positions

As of January 31, 2025, we had approximately $188 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include $2 million expected to be paid within one year. For the remaining amount, we are unable to make a reasonable estimate as to when cash settlement with the tax authorities might occur due to the uncertainties related to these tax matters. Payments of these obligations would result from settlements with taxing authorities. For more information on our uncertain tax positions, see Note 5, “Taxes on Earnings” to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Off-Balance Sheet Arrangements

As part of our ongoing business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

We have third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers. 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.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

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,
			2025												2024
			Dollars						% of Revenue						Dollars						% of Revenue
			Dollars in millions
GAAP net revenue			$	7,854					100		%				$	6,755					100		%
GAAP cost of sales			5,559						70.8		%				4,298						63.6		%
GAAP gross profit			2,295						29.2		%				2,457						36.4		%
Non-GAAP adjustments
Stock-based compensation expense			17						0.2		%				16						0.2		%
Acquisition, disposition and other charges(1)			(3)						—		%				(25)						(0.4)		%
H3C divestiture related severance costs			1						—		%				—						—		%
Non-GAAP gross profit			$	2,310					29.4		%				$	2,448					36.2		%

(1) Includes divestiture recovery.

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

			For the three months ended January 31,
			2025												2024
			Dollars						% of Revenue						Dollars						% of Revenue
			Dollars in millions
GAAP earnings from operations			$	433					5.5		%				$	525					7.8		%
Non-GAAP Adjustments:
Amortization of intangible assets			38						0.5		%				71						1.1		%
Transformation costs			15						0.2		%				20						0.3		%
Stock-based compensation expense			154						2.0		%				141						2.1		%
H3C divestiture related severance costs			77						1.0		%				—						—		%
Acquisition, disposition and other charges			63						0.8		%				18						0.3		%
Non-GAAP earnings from operations			$	780					9.9		%				$	775					11.5		%

Table of Content

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

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,
			2025												2024
			Dollars						Diluted Net Earnings per Share						Dollars						Diluted Net Earnings per Share
			Dollars in millions except per share amounts
GAAP net earnings			$	627					$	0.44					$	387					$	0.29
Non-GAAP Adjustments:
Amortization of intangible assets			38						0.03						71						0.05
Transformation costs			15						0.01						20						0.02
Stock-based compensation expense			154						0.11						141						0.11
Gain on sale of a business			(244)						(0.17)						—						—
H3C divestiture related severance costs			77						0.05						—						—
Acquisition, disposition and other charges			63						0.04						18						0.01
Adjustments for equity interests			—						—						(46)						(0.03)
(Gain) loss on equity investments, net			(2)						—						61						0.05
Other adjustments(1)			(29)						(0.02)						2						—
Adjustments for taxes			(15)						—						(16)						(0.02)
Non-GAAP net earnings attributable to HPE(2)			684						$	0.49					638						$	0.48
Preferred stock dividends			(29)												—
Non-GAAP net earnings attributable to common stockholders			$	655											$	638

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

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

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

			For the three months ended January 31,
			2025						2024
			In millions
Net cash (used in) provided by operating activities			$	(390)					$	64
Investment in property, plant and equipment and software assets			(528)						(656)
Proceeds from sale of property, plant and equipment			84						96
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(43)						14
Free cash flow			$	(877)					$	(482)

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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

The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP tax rate, non-GAAP net earnings attributable to HPE, non-GAAP net earnings attributable to common stockholders, non-GAAP diluted net earnings per share attributable to common stockholders, and FCF. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to net revenue on a constant currency basis is net revenue. The GAAP measure most directly comparable to non-GAAP gross profit is gross profit. The GAAP measure most directly comparable to non-GAAP gross profit margin is gross profit margin. The GAAP measure most directly comparable to non-GAAP earnings from operations is earnings from operations. The GAAP measure most directly comparable to non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) is operating profit margin (earnings from operations as a percentage of net revenue). The GAAP measure most directly comparable to non-GAAP income tax rate is income tax rate. The GAAP measure most directly comparable to non-GAAP net earnings attributable to HPE and non-GAAP net earnings attributable to common stockholders is net earnings. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share attributable to common stockholders is diluted net earnings per share attributable to common stockholders. The GAAP measure most directly comparable to FCF is cash flow from operations.

We believe that providing the non-GAAP measures stated above, in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision making and allows the reader of our Condensed Consolidated Financial Statements to see our financial results “through the eyes” of management. We further believe that providing this information provides investors with a supplemental view to understand our historical and prospective operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. Disclosure of these non-GAAP financial measures also facilitates comparisons of our operating performance with the performance of other companies in the same industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

Economic Substance of non-GAAP Financial Measures

Net revenue on a constant currency basis assumes no change to the foreign exchange rate utilized in the comparable prior-year period. This measure assists investors with evaluating our past and future performance, without the impact of foreign exchange rates, as more than half of our revenue is generated outside of the U.S.

We believe that excluding the items mentioned below from the non-GAAP financial measures provides a supplemental view to management and our investors of our consolidated financial performance and presents the financial results of the business without costs that we do not believe to be reflective of our ongoing operating results. Exclusion of these items can have a material impact on the equivalent GAAP measure and cash flows thus limiting the use of such non-GAAP financial measures as analytic tools. See “Compensation for Limitations With Use of Non-GAAP Financial Measures” section below for further information.

Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the stock-based compensation expense, acquisition, disposition and other charges, and H3C divestiture related severance costs. See below for the reasons management excludes each item:

• Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date. Although stock-based compensation is a key incentive offered to our employees, we exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense.

• We incur costs related to our acquisition, disposition and other charges. Charges include expenses associated with acquisitions, disposal activities, and disaster (recovery) charges. We exclude these costs because we consider these charges to be discrete events and do not believe they are reflective of normal continuing business operations. For the three months ended January 31, 2025, acquisition charges were driven by costs associated with the proposed acquisition of Juniper Networks and miscellaneous disposition related charges. For the three months ended January 31, 2024, acquisition charges were driven by acquisitions of Juniper Networks, in addition to prior acquisitions of Axis and Athonet.

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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

• We incurred H3C divestiture related severance costs in connection with the disposition of total issued share capital of H3C. On September 4, 2024, we divested 30% of the total issued share capital of H3C and received proceeds of $2.1 billion of pre-tax consideration ($2.0 billion post-tax). The divestiture will result in decreased future investment earnings and cash dividend inflows resulting in a decision to implement offsetting cost savings measures. These measures include severance for certain of the Company’s employees. The non-GAAP adjustment represents our costs to execute these related exit actions to offset the loss in equity earnings and related cash flows. We expect future annualized cost savings of approximately $120 million following the completion of these actions.

Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, transformation costs, gain on sale of a business, and acquisition, disposition and other charges. In addition to the items previously explained above, management excludes these items for the following reasons:

• We incur charges relating to the amortization of intangible assets and exclude these charges for purposes of calculating these non-GAAP measures. Such charges are significantly impacted by the timing and magnitude of our acquisitions. We exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are noncash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding intangible asset amortization. Although this does not directly affect our cash position, the loss in value of intangible assets over time can have a material impact on the equivalent GAAP earnings measure.

• 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. 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. On December 1, 2024, we completed the disposition of CTG which resulted in a gain of $244 million. We consider this divestiture to be a discrete event and believe eliminating this adjustment for the purposes of calculating non-GAAP measures facilitates the evaluation of our current operating performance.

Non-GAAP net earnings attributable to HPE, non-GAAP net earnings attributable to common stockholders, and non-GAAP diluted net earnings per share attributable to common stockholders consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as adjustments for equity interests, gain or loss on equity investments, other adjustments, and adjustments for taxes. Non-GAAP net earnings attributable to HPE and non-GAAP diluted net earnings per share attributable to common stockholders includes preferred stock dividends added back to non-GAAP net earnings attributable to HPE. The Adjustments for taxes line item includes certain income tax valuation allowances and separation taxes, the impact of tax reform, structural rate adjustment, excess tax benefit from stock-based compensation, and adjustments for additional taxes or tax benefits associated with each non-GAAP item. In addition to the items previously explained, management excludes these items for the following reasons:

• During the six months ended April 30, 2024, we stopped reporting H3C earnings in our non-GAAP results due to the planned divestiture of the H3C investment. Per the terms of the original Put Share Purchase Agreement, we weren’t anticipating receiving dividends from this investment prospectively. However, on May 24, 2024, we entered into an Amended and Restated Put Share Purchase Agreement and an Agreement on Subsequent Arrangements, both with UNIS, 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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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Management's Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

2024. On September 4, 2024, we divested 30% of the total issued share capital of H3C. We continue to possess the option to sell the remaining 19% of the total issued share capital of H3C at a later date. We believe that eliminating these amounts for purposes of calculating non-GAAP financial measures facilitates the evaluation of our current operating performance.

• We exclude gains and losses (including impairments) on our non-marketable equity investments because we do not believe they are reflective of normal continuing business operations. These adjustments are reflected in Interest and other, net in the Condensed Consolidated Statements of Earnings. 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. When projecting this long-term rate, we evaluated a three-year financial projection. The projected rate assumes no incremental acquisitions in the three-year projection period and considers other factors including our expected tax structure, our tax positions in various jurisdictions and current impacts from key legislation implemented in major jurisdictions where we operate. For fiscal 2025, we will use a projected non-GAAP income tax rate of 15%, which reflects currently available information as well as other factors and assumptions. The non-GAAP income tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix including due to acquisition activity, or other changes to our strategy or business operations. We will re-evaluate its long-term rate as appropriate. For fiscal 2024, we had a non-GAAP tax rate of 15%. We believe that making these adjustments for purposes of calculating non-GAAP measures, facilitates a supplemental evaluation of our current operating performance and comparisons to past operating results.

FCF is defined as cash flow from operations, less net capital expenditures (investments in PP&E and software assets less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash. FCF does not represent the total increase or decrease in cash for the period. Our management and investors can use FCF for the purpose of determining the amount of cash available for investment in our businesses, repurchasing stock and other purposes as well as evaluating our historical and prospective liquidity.

Compensation for Limitations With Use of Non-GAAP Financial Measures

These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are that they can have a material impact on the equivalent GAAP earnings measures and cash flows, they may be calculated differently by other companies (limiting the usefulness of those measures for comparative purposes) and may not reflect the full economic effect of the loss in value of certain assets.

We compensate for these limitations on the use of non-GAAP financial measures by relying primarily on our GAAP results and using non-GAAP financial measures only as a supplement. We also provide a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure for this quarter and prior periods, and we encourage investors to review those reconciliations carefully.

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