filings.toolsItem 1. Financial Statements.
161K characters. Original on sec.gov · Markdown
Item 1. Financial Statements.
Index
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions, except per share amounts | |||||||||||||||||||||||
| Net Revenue: | |||||||||||||||||||||||
| Products | $ | 5,861 | $ | 4,970 | |||||||||||||||||||
| Services | 3,245 | 2,698 | |||||||||||||||||||||
| Financing income | 195 | 186 | |||||||||||||||||||||
| Total net revenue | 9,301 | 7,854 | |||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||
| Cost of products (exclusive of amortization shown separately below) | 4,089 | 3,762 | |||||||||||||||||||||
| Cost of services (exclusive of amortization shown separately below) | 1,750 | 1,669 | |||||||||||||||||||||
| Financing cost | 122 | 128 | |||||||||||||||||||||
| Research and development | 744 | 475 | |||||||||||||||||||||
| Selling, general and administrative | 1,698 | 1,268 | |||||||||||||||||||||
| Amortization of intangible assets | 311 | 38 | |||||||||||||||||||||
| Transformation costs | — | 15 | |||||||||||||||||||||
| Acquisition, disposition and other charges | 117 | 66 | |||||||||||||||||||||
| Total costs and expenses | 8,831 | 7,421 | |||||||||||||||||||||
| Earnings from operations | 470 | 433 | |||||||||||||||||||||
| Interest and other, net | (54) | 39 | |||||||||||||||||||||
| Gain on sale of a business | — | 244 | |||||||||||||||||||||
| Earnings from equity interests | 17 | 17 | |||||||||||||||||||||
| Earnings before provision for taxes | 433 | 733 | |||||||||||||||||||||
| Benefit (provision) for taxes | 19 | (106) | |||||||||||||||||||||
| Net earnings attributable to HPE | 452 | 627 | |||||||||||||||||||||
| Preferred stock dividends | (29) | (29) | |||||||||||||||||||||
| Net earnings attributable to common stockholders | $ | 423 | $ | 598 | |||||||||||||||||||
| Net Earnings Per Share Attributable to Common Stockholders: | |||||||||||||||||||||||
| Basic | $ | 0.32 | $ | 0.45 | |||||||||||||||||||
| Diluted | $ | 0.31 | $ | 0.44 | |||||||||||||||||||
| Weighted-average Shares Used to Compute Net Earnings Per Share: | |||||||||||||||||||||||
| Basic | 1,334 | 1,316 | |||||||||||||||||||||
| Diluted | 1,356 | 1,409 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| For the three months ended January 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||||||||
| Net earnings attributable to HPE | $ | 452 | $ | 627 | |||||||||||||||||||||||||||||||
| Other Comprehensive (Loss) Income, Before Taxes | |||||||||||||||||||||||||||||||||||
| Change in Net Unrealized Gains (Losses) on Available-for-sale Securities: | |||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) arising during the period | 1 | (1) | |||||||||||||||||||||||||||||||||
| 1 | (1) | ||||||||||||||||||||||||||||||||||
| Change in Net Unrealized Components of Cash Flow Hedges: | |||||||||||||||||||||||||||||||||||
| Net unrealized (losses) gains arising during the period | (191) | 270 | |||||||||||||||||||||||||||||||||
| Net losses (gains) reclassified into earnings | 138 | (213) | |||||||||||||||||||||||||||||||||
| (53) | 57 | ||||||||||||||||||||||||||||||||||
| Change in Unrealized Components of Defined Benefit Plans: | |||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss and prior service benefit | 24 | 30 | |||||||||||||||||||||||||||||||||
| 24 | 30 | ||||||||||||||||||||||||||||||||||
| Change in Cumulative Translation Adjustment: | — | (22) | |||||||||||||||||||||||||||||||||
| Other Comprehensive (Loss) Income, Before Taxes | (28) | 64 | |||||||||||||||||||||||||||||||||
| Benefit (Provision) for Taxes | 4 | (14) | |||||||||||||||||||||||||||||||||
| Other Comprehensive (Loss) Income , Net of Taxes | (24) | 50 | |||||||||||||||||||||||||||||||||
| Comprehensive Income | $ | 428 | $ | 677 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| In millions, except par value and shares | |||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 4,841 | $ | 5,773 | |||||||
| Accounts receivable, net of allowances | 4,931 | 5,290 | |||||||||
| Financing receivables, net of allowances | 3,835 | 3,826 | |||||||||
| Inventory | 6,913 | 6,352 | |||||||||
| Other current assets | 4,683 | 3,753 | |||||||||
| Total current assets | 25,203 | 24,994 | |||||||||
| Property, plant and equipment, net | 5,911 | 6,002 | |||||||||
| Long-term financing receivables and other assets | 13,801 | 13,817 | |||||||||
| Investments in equity interests | 924 | 955 | |||||||||
| Goodwill | 23,828 | 23,770 | |||||||||
| Intangible assets, net | 6,101 | 6,368 | |||||||||
| Total assets | $ | 75,768 | $ | 75,906 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Notes payable and short-term borrowings | $ | 3,906 | $ | 4,609 | |||||||
| Accounts payable | 8,379 | 7,731 | |||||||||
| Employee compensation and benefits | 1,375 | 1,871 | |||||||||
| Taxes on earnings | 375 | 319 | |||||||||
| Deferred revenue | 5,483 | 5,358 | |||||||||
| Other accrued liabilities | 4,839 | 4,755 | |||||||||
| Total current liabilities | 24,357 | 24,643 | |||||||||
| Long-term debt | 17,705 | 17,756 | |||||||||
| Other non-current liabilities | 8,872 | 8,753 | |||||||||
| Commitments and Contingencies | |||||||||||
| HPE Stockholders' Equity: | |||||||||||
| 7.625% Series C mandatory convertible preferred stock, $0.01 par value (30,000,000 shares issued and outstanding as of January 31, 2026 and October 31, 2025, respectively) | — | — | |||||||||
| Common stock, $0.01 par value (9,600,000,000 shares authorized; 1,328,922,107 and 1,318,292,428 shares issued and outstanding as of January 31, 2026 and October 31, 2025, respectively) | 13 | 13 | |||||||||
| Additional paid-in capital | 30,126 | 30,234 | |||||||||
| Accumulated deficit | (2,593) | (2,811) | |||||||||
| Accumulated other comprehensive loss | (2,772) | (2,748) | |||||||||
| Total HPE stockholders' equity | 24,774 | 24,688 | |||||||||
| Non-controlling interests | 60 | 66 | |||||||||
| Total stockholders' equity | 24,834 | 24,754 | |||||||||
| Total liabilities and stockholders' equity | $ | 75,768 | $ | 75,906 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| For the three months ended January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| In millions | |||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net earnings attributable to HPE | $ | 452 | $ | 627 | |||||||
| Adjustments to Reconcile Net Earnings Attributable to HPE to Net Cash Provided by (Used in) Operating Activities: | |||||||||||
| Depreciation and amortization | 872 | 599 | |||||||||
| Stock-based compensation expense | 216 | 154 | |||||||||
| Provision for inventory and credit losses | 61 | 67 | |||||||||
| Cost reduction program | 23 | — | |||||||||
| Deferred taxes on earnings | (151) | (2) | |||||||||
| Earnings from equity interests | (17) | (17) | |||||||||
| Gain on sale of a business | — | (244) | |||||||||
| Dividends received from equity investees | 51 | — | |||||||||
| H3C divestiture related severance costs | — | 77 | |||||||||
| Amortization of inventory fair value adjustment | 31 | — | |||||||||
| Other, net | 23 | 60 | |||||||||
| Changes in Operating Assets and Liabilities, Net of Acquisitions: | |||||||||||
| Accounts receivable | 274 | 91 | |||||||||
| Financing receivables | 70 | 317 | |||||||||
| Inventory | (458) | (811) | |||||||||
| Accounts payable | 496 | (264) | |||||||||
| Taxes on earnings | 86 | 49 | |||||||||
| Other assets and liabilities | (851) | (1,093) | |||||||||
| Net cash provided by (used in) operating activities | 1,178 | (390) | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Investment in property, plant and equipment and software assets | (569) | (528) | |||||||||
| Proceeds from sale of property, plant and equipment | 66 | 84 | |||||||||
| Purchases of equity investments | (4) | — | |||||||||
| Proceeds from sale of available-for-sale securities and other investments | 2 | 1 | |||||||||
| Financial collateral posted | (304) | — | |||||||||
| Financial collateral received | 16 | 210 | |||||||||
| Proceeds from sale of a business | — | 210 | |||||||||
| Net cash used in investing activities | (793) | (23) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Short-term borrowings with original maturities less than 90 days, net | (3) | 9 | |||||||||
| Proceeds from debt, net of issuance costs | 126 | 105 | |||||||||
| Payment of debt | (917) | (486) | |||||||||
| Net payments related to stock-based award activities | (173) | (169) | |||||||||
| Repurchases of common stock | (158) | (52) | |||||||||
| Cash dividends paid to preferred stockholders | (29) | (25) | |||||||||
| Cash dividends paid to common stockholders | (190) | (171) | |||||||||
| Other | (8) | (8) | |||||||||
| Net cash used in financing activities | (1,352) | (797) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 33 | (43) | |||||||||
| Change in cash, cash equivalents and restricted cash | (934) | (1,253) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 5,859 | 15,105 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 4,925 | $ | 13,852 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
| Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended January 31, 2026 | Number of Shares | Par Value | Number of 7.625% Series C Mandatory Convertible Shares | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Equity Attributable to the Company | Non- controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| In millions, except number of shares in thousands | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of October 31, 2025 | 1,318,292 | $ | 13 | 30,000 | $ | 30,234 | $ | (2,811) | $ | (2,748) | $ | 24,688 | $ | 66 | $ | 24,754 | ||||||||||||||||||||||||||||||||||||||||
| Net earnings attributable to HPE | 452 | 452 | 2 | 454 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | (24) | (24) | (24) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | 428 | 2 | 430 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 216 | 216 | 216 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax withholding related to vesting of employee stock plans | (196) | (196) | (196) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with employee stock plans and other | 17,690 | 20 | (1) | 19 | 19 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (7,060) | (148) | (14) | (162) | (162) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock accrued/declared ($0.95 per preferred share) | (29) | (29) | (29) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.14 per share) | (190) | (190) | (8) | (198) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 31, 2026 | 1,328,922 | $ | 13 | 30,000 | $ | 30,126 | $ | (2,593) | $ | (2,772) | $ | 24,774 | $ | 60 | $ | 24,834 | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended January 31, 2025 | Number of Shares | Par Value | Number of 7.625% Series C Mandatory Convertible Shares | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Equity Attributable to the Company | Non- controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| In millions, except number of shares in thousands | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of October 31, 2024 | 1,297,258 | $ | 13 | 30,000 | $ | 29,848 | $ | (2,068) | $ | (2,977) | $ | 24,816 | $ | 64 | $ | 24,880 | |||||||||||||||||||||||||||||||||||||||||||
| Net earnings attributable to HPE | 627 | 627 | 2 | 629 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 50 | 50 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | 677 | 2 | 679 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 154 | 154 | 154 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax withholding related to vesting of employee stock plans | (192) | (192) | (192) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with employee stock plans and other | 18,428 | 18 | 1 | 19 | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (2,295) | (48) | (2) | (50) | (50) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend on preferred stock accrued / declared ($0.95 per preferred share) | (29) | (29) | (29) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.13 per share) | (171) | (171) | (8) | (179) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 31, 2025 | 1,313,391 | $ | 13 | 30,000 | $ | 29,780 | $ | (1,642) | $ | (2,927) | $ | 25,224 | $ | 58 | $ | 25,282 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Overview and Summary of Significant Accounting Policies
Background
Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise,” “HPE,” or the “Company”) is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge-to-cloud. Hewlett Packard Enterprise enables 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. Hewlett Packard Enterprise's customers range from small- and medium-sized businesses to large global enterprises and governmental entities.
Basis of Presentation and Consolidation
The Condensed Consolidated Financial Statements of the Company were prepared in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”). The Company’s unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries and affiliates in which the Company has a controlling financial interest or is the primary beneficiary. All intercompany transactions and accounts within the consolidated businesses of the Company have been eliminated. Certain prior period financial statement amounts have been reclassified to conform to current period presentation. This interim information should be read in conjunction with the Consolidated Financial Statements for the fiscal year ended October 31, 2025 in HPE’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on December 18, 2025. The Condensed Consolidated Balance Sheet for October 31, 2025 was derived from audited financial statements.
Segment Realignment
Effective November 1, 2025, HPE implemented an organizational change by (i) merging the Server, Hybrid Cloud, and Financial Services business segments into a new segment named Cloud & Artificial Intelligence (“AI”) and (ii) transferring the Telco and Instant On businesses from the Networking segment to the Corporate Investments and Other segment. As a result, the Company’s organizational structure consists of the following segments: (i) Cloud & AI; (ii) Networking; and (iii) Corporate Investments and Other. The Company has reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue and operating profit for each of the segments as described above. These changes had no impact on HPE’s previously reported consolidated net revenue, net earnings, net earnings per share (“EPS”) or total assets. Refer to Note 2, “Segment Information” for further information.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in HPE’s Condensed Consolidated Financial Statements and accompanying notes. Actual results may differ materially from those estimates.
Significant Accounting Policies
There have been no significant changes to the Company's significant accounting policies described in Part II, Item 8, Note 1, “Overview and Summary of Significant Accounting Policies,” of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2025.
Recently Enacted Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendment is effective for interim periods with annual reporting periods beginning after December 15, 2027, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
In December 2025, the FASB issued guidance to establish the accounting for a government grant received by a business entity. The amendment is effective for annual and interim periods beginning after December 15, 2028, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
In September 2025, the FASB issued guidance to target improvements to the Accounting for Internal-Use Software, which simplifies the capitalization guidance by removing all references to software development project stages and clarifies the criteria to begin capitalizing cost. The amendment is effective for annual and interim periods beginning after December 15, 2027, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
In November 2024, the FASB issued guidance to provide disaggregated expense disclosures in the Consolidated Financial Statements. The Company is required to adopt the guidance for its annual period ending October 31, 2028 and all interim periods thereafter, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
In December 2023, the FASB issued guidance to provide disaggregated income tax disclosures on the effective tax rate reconciliation and income taxes paid. The guidance is applicable to the Company’s annual filings beginning October 31, 2026. Adoption of this new guidance will result in increased disclosures in the “Taxes on Earnings” note in the Company’s Consolidated Financial Statements but will not impact the consolidated financial results.
Note 2: Segment Information
Hewlett Packard Enterprise's operations are organized into three segments for financial reporting purposes: Cloud & AI, Networking, and Corporate Investments and Other. Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker (“CODM”), Antonio F. Neri, who is the President and Chief Executive Officer, uses to evaluate, view and run the Company's business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The three segments are based on this structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results. A summary of the types of products and services within each segment is as follows:
Networking develops and sells high-performance network and security products and services that empower customers of all sizes to build scalable, reliable, secure, agile, and efficient automated networks. HPE’s platforms are purpose-built using AI to deliver secure and sustainable user experiences from the edge to the data center and cloud. Networking’s solutions include hardware products such as Wi-Fi and private cellular access points; QFX, EX, and CX switches; MX and PTX routers; and gateways. Additionally, HPE provides software products, such as Mist and Aruba Central for cloud-based and on-premise management, network access control, software-defined wide area networking, network security, analytics and assurance, and private cellular core software. The Company also offers professional and support services and education and training programs, as well as as-a-service (“aaS”) and flexible consumption models through HPE GreenLake.
Cloud & AI includes server and storage offerings. The Cloud & AI server portfolio includes general-purpose servers for multi-workload computing and workload-optimized servers to deliver the best performance and value for demanding applications, and integrated systems comprised of software and hardware designed to address High-Performance Computing and Supercomputing (including exascale applications), AI, Data Analytics, and Transaction Processing workloads for government and commercial customers globally. The Cloud & AI comprehensive storage portfolio offers a wide variety of cloud-native and hybrid solutions across storage, private cloud and the infrastructure software-as-a-service (“SaaS”) space. The storage product line includes data storage and data management offerings with the HPE Alletra Storage portfolio; unstructured data solutions and analytics for AI; data protection and archiving. Storage offerings also include the Company’s GreenLake Flex and software solutions. Financial services provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software, and services from Hewlett Packard Enterprise and others.
Corporate Investments and Other includes the Advisory and Professional Services (“A & PS”) business, which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities; Telco, Instant On, and Hewlett Packard Labs.
Segment Policy
Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level. These unallocated operating costs include certain corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, transformation costs, H3C divestiture related severance costs, severance costs
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
associated with the cost reduction program, and acquisition, disposition and other charges. Total assets by segment are not presented as that information is not used to allocate resources or assess performance at the segment level and is not reviewed by the CODM.
Segment Operating Results
Segment net revenue and operating results were as follows:
| Networking | Cloud & AI | Corporate Investments and Other | Total | ||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Three months ended January 31, 2026: | |||||||||||||||||||||||
| Total segment net revenue | $ | 2,706 | $ | 6,334 | $ | 261 | $ | 9,301 | |||||||||||||||
| Segment cost of sales | 1,049 | 4,644 | 204 | 5,897 | |||||||||||||||||||
| Segment operating expenses | 1,017 | 1,045 | 69 | 2,131 | |||||||||||||||||||
| Segment earnings (loss) from operations | $ | 640 | $ | 645 | $ | (12) | $ | 1,273 | |||||||||||||||
| Three months ended January 31, 2025(1): | |||||||||||||||||||||||
| Total segment net revenue | $ | 1,076 | $ | 6,511 | $ | 267 | $ | 7,854 | |||||||||||||||
| Segment cost of sales | 395 | 4,944 | 202 | 5,541 | |||||||||||||||||||
| Segment operating expenses | 361 | 1,020 | 73 | 1,454 | |||||||||||||||||||
| Segment earnings (loss) from operations | $ | 320 | $ | 547 | $ | (8) | $ | 859 | |||||||||||||||
(1) Effective at the beginning of the first quarter of fiscal 2026, HPE implemented an organizational change by (i) merging the Server, Hybrid Cloud, and Financial Services business segments into a new segment named Cloud & AI and (ii) transferring the Telco and Instant On businesses to Corporate Investments and Other from Networking. The Company reflected these changes to its segment information retrospectively. These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share or total assets.
The reconciliation of segment operating results to Condensed Consolidated Statements of Earnings was as follows:
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Earnings Before Taxes: | |||||||||||||||||||||||
| Total segment earnings from operations | $ | 1,273 | $ | 859 | |||||||||||||||||||
| Unallocated corporate costs and eliminations | (91) | (79) | |||||||||||||||||||||
| Stock-based compensation expense | (216) | (154) | |||||||||||||||||||||
| Amortization of intangible assets | (311) | (38) | |||||||||||||||||||||
| Transformation costs | — | (15) | |||||||||||||||||||||
| Gain on sale of a business | — | 244 | |||||||||||||||||||||
| H3C divestiture related severance costs | — | (77) | |||||||||||||||||||||
| Cost reduction program | (23) | — | |||||||||||||||||||||
| Acquisition, disposition and other charges | (162) | (63) | |||||||||||||||||||||
| Interest and other, net | (54) | 39 | |||||||||||||||||||||
| Earnings from equity interests | 17 | 17 | |||||||||||||||||||||
| Total earnings before provision for taxes | $ | 433 | $ | 733 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Geographic Information
Net revenue by geographic region was as follows:
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Americas: | |||||||||||||||||||||||
| United States | $ | 3,320 | $ | 2,518 | |||||||||||||||||||
| Americas excluding United States | 503 | 874 | |||||||||||||||||||||
| Total Americas | 3,823 | 3,392 | |||||||||||||||||||||
| Europe, Middle East and Africa | 3,487 | 2,680 | |||||||||||||||||||||
| Asia Pacific and Japan | 1,991 | 1,782 | |||||||||||||||||||||
| Total consolidated net revenue | $ | 9,301 | $ | 7,854 |
Disaggregation of Revenue
Net revenue disaggregated by segment and major product categories was as follows:
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Networking | |||||||||||||||||||||||
| Campus & Branch | $ | 1,227 | $ | 864 | |||||||||||||||||||
| Data Center Networking | 444 | 92 | |||||||||||||||||||||
| Security | 255 | 119 | |||||||||||||||||||||
| Routing | 780 | 1 | |||||||||||||||||||||
| Total | 2,706 | 1,076 | |||||||||||||||||||||
| Cloud & AI | |||||||||||||||||||||||
| Server | 4,232 | 4,348 | |||||||||||||||||||||
| Storage(1) | 1,061 | 1,055 | |||||||||||||||||||||
| Financial Services | 876 | 873 | |||||||||||||||||||||
| Other(2) | 165 | 235 | |||||||||||||||||||||
| Total | 6,334 | 6,511 | |||||||||||||||||||||
| Corporate Investments and Other | 261 | 267 | |||||||||||||||||||||
| Total consolidated net revenue | $ | 9,301 | $ | 7,854 |
(1) Storage includes revenue from GreenLake Flex and Software.
(2) Other category includes intersegment revenue eliminations and third-party storage solutions.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 3: Retirement Benefit Plans
The Company's net pension benefit credit for defined benefit plans recognized in the Condensed Consolidated Statements of Earnings was as follows:
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Service cost | $ | 15 | $ | 12 | |||||||||||||||||||
| Interest cost(1) | 93 | 89 | |||||||||||||||||||||
| Expected return on plan assets(1) | (156) | (149) | |||||||||||||||||||||
| Amortization and Deferrals(1): | |||||||||||||||||||||||
| Actuarial loss | 24 | 31 | |||||||||||||||||||||
| Prior service benefit | — | (1) | |||||||||||||||||||||
| Total net benefit credit | $ | (24) | $ | (18) |
(1)These non-service components were included in Interest and other, net in the Condensed Consolidated Statements of Earnings.
Note 4: Taxes on Earnings
Benefit (Provision) for Taxes
For the three months ended January 31, 2026 and 2025, the Company recorded income tax benefit of $19 million and income tax expense of $106 million, respectively, which reflects an effective tax rate of (4.4)% and 14.5%, respectively. The effective tax rate generally differs from the U.S. federal statutory rate of 21.0% due to favorable tax rates associated with certain earnings from the Company’s operations in lower tax jurisdictions throughout the world but is also impacted by discrete tax adjustments during each fiscal period.
For the three months ended January 31, 2026, the Company recorded $85 million of net income tax benefits related to various items discrete to the period. The amount primarily included $67 million of net income tax benefits related to costs incurred as a result of the merger (which was inclusive of a $42 million net income tax benefit from the tax impact of integration transactions) and $22 million of net excess tax benefits related to stock-based compensation.
For the three months ended January 31, 2025, the Company recorded $17 million of net income tax benefits related to various items discrete to the period. The amount primarily included $30 million of net excess tax benefits related to stock-based compensation and $10 million of net income tax benefits related to acquisition, disposition and other charges, partially offset by $22 million of net income tax charges resulting from the gain on the CTG divestiture.
Uncertain Tax Positions
As of January 31, 2026 and October 31, 2025, the amount of unrecognized tax benefits was $482 million and $474 million, respectively, of which up to $336 million and $326 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.
For tax liabilities pertaining to unrecognized tax benefits, the Company recognizes interest income from favorable settlements and interest expense and penalties in Benefit (provision) for taxes in the Condensed Consolidated Statements of Earnings. As of January 31, 2026 and October 31, 2025, the Company had accrued $42 million, in both periods for interest and penalties in the Condensed Consolidated Balance Sheets.
The Company engages in continuous discussion and negotiation with tax authorities regarding tax matters in various jurisdictions. The Company is no longer subject to U.S. federal tax audits for years prior to 2020. The Internal Revenue Service (“IRS”) is conducting audits of the Company's fiscal 2020 through 2022 U.S. federal income tax returns. During the first quarter of fiscal 2026, the IRS issued notices of proposed adjustments (“NOPAs”) for fiscal 2020, 2021, and 2022 relating to the Company’s intercompany transfer pricing. The IRS is seeking to materially increase taxable income across the three fiscal years. However, the Company disagrees with the IRS’ adjustments and believes the positions taken on its tax returns are more likely than not to prevail on technical merits, and the Company will defend these positions through the IRS administrative processes, as necessary. Accordingly, no changes have been made to the Company’s reserves for uncertain tax positions in
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
fiscal 2026 relating to the IRS’ adjustments. Juniper Networks is no longer subject to U.S. federal tax audits for years prior to 2022 and is not currently under examination by the IRS for other tax years. The Company does not expect complete resolution of any IRS audit cycle within the next 12 months. With respect to major state and foreign tax jurisdictions, the Company is no longer subject to tax authority examinations for years prior to 2005. It is reasonably possible that certain foreign tax issues may be concluded in the next 12 months, including issues involving resolution of certain intercompany transactions and other matters.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities included in the Condensed Consolidated Balance Sheets were as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Deferred tax assets | $ | 2,975 | $ | 2,952 | |||||||
| Deferred tax liabilities | (404) | (473) | |||||||||
| Deferred tax assets net of deferred tax liabilities | $ | 2,571 | $ | 2,479 |
Note 5: Balance Sheet Details
Cash, Cash Equivalents and Restricted Cash
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Cash and cash equivalents | $ | 4,841 | $ | 5,773 | |||||||
| Restricted cash(1) | 84 | 86 | |||||||||
| Total | $ | 4,925 | $ | 5,859 |
(1) The Company included restricted cash in Other current assets in the accompanying Condensed Consolidated Balance Sheets.
Inventory
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Purchased parts and fabricated assemblies | $ | 4,929 | $ | 4,139 | |||||||
| Finished goods | 1,984 | 2,213 | |||||||||
| Total | $ | 6,913 | $ | 6,352 |
Property, Plant and Equipment, net
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Land | $ | 309 | $ | 309 | |||||||
| Internal use software | 2,318 | 2,259 | |||||||||
| Buildings and leasehold improvements | 2,056 | 2,075 | |||||||||
| Machinery and equipment, including equipment held for lease | 8,025 | 7,987 | |||||||||
| Gross property, plant and equipment | 12,708 | 12,630 | |||||||||
| Accumulated depreciation | (6,797) | (6,628) | |||||||||
| Property, plant and equipment, net | $ | 5,911 | $ | 6,002 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Supplier Financing Arrangements
The Company enters into supplier financing arrangements with external financial institutions. Under these arrangements, suppliers can choose to settle outstanding payment obligations at a discount. The Company holds no economic interest in suppliers' participation, nor does it provide guarantees or pledge assets under these arrangements. Invoices are settled with the financial institutions based on the original supplier payment terms. These arrangements do not alter the Company's rights and obligations towards suppliers, including scheduled payment terms. Liabilities associated with the funded participation in these arrangements, are presented within Accounts payable on the Condensed Consolidated Balance Sheets, amounted to $406 million, and $488 million as of January 31, 2026 and October 31, 2025, respectively.
The rollforward of outstanding obligations confirmed as valid under its supplier finance program was as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Balance at beginning of period | $ | 488 | $ | 466 | |||||||
| Invoices confirmed during the year | 405 | 1,895 | |||||||||
| Confirmed invoices paid during the year | (487) | (1,873) | |||||||||
| Balance at end of period | $ | 406 | $ | 488 |
Warranties
The Company's aggregate product warranty liabilities and changes for the three months ended January 31, 2026, and the fiscal year ended October 31, 2025 were as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Balance at beginning of period | $ | 284 | $ | 301 | |||||||
| Charges | 36 | 206 | |||||||||
| Adjustments related to pre-existing warranties | — | (55) | |||||||||
| Settlements made | (33) | (168) | |||||||||
| Balance at end of period(1) | $ | 287 | $ | 284 |
(1)The Company included the current portion in Other accrued liabilities, and amounts due after one year in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.
Severance Charges
The Company incurs costs related to employee severance and records a liability for these costs when it is probable that employees will be entitled to termination benefits and the amounts can be reasonably estimated. As of January 31, 2026, $158 million and $28 million was recorded in Other Accrued Liabilities and Other Non-current liabilities, respectively. As of October 31, 2025, $204 million and $34 million was recorded in Other accrued liabilities and Other Non-current liabilities, respectively.
The following table presents the activity related to the Company’s severance liability for the period indicated:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Balance at beginning of period | $ | 238 | $ | 49 | |||||||
| Severance charges | 45 | 418 | |||||||||
| Cash paid and other | (97) | (229) | |||||||||
| Balance at end of period | $ | 186 | $ | 238 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents severance charges as included in the Condensed Consolidated Statements of Earnings for the periods indicated:
| For the three months ended | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| In millions | ||||||||||||||||||||
| Cost of sales | $ | 5 | $ | 1 | ||||||||||||||||
| Research and development | 4 | 8 | ||||||||||||||||||
| Selling, general and administrative | 9 | 68 | ||||||||||||||||||
| Acquisition, disposition and other charges | 27 | — | ||||||||||||||||||
| Total severance charges | $ | 45 | $ | 77 |
Transformation Programs
Restructuring activities related to the Company's employees and infrastructure under the Cost Optimization and Prioritization Plan and HPE Next Plan are presented in the table below:
| Cost Optimization and Prioritization Plan | HPE Next Plan | ||||||||||||||||
| Employee Severance | Infrastructure and other | Infrastructure and other | |||||||||||||||
| In millions | |||||||||||||||||
| Balance at October 31, 2025 | $ | 37 | $ | 61 | $ | 14 | |||||||||||
| Charges | — | — | — | ||||||||||||||
| Cash paid and other | (7) | (4) | (1) | ||||||||||||||
| Balance at January 31, 2026 | $ | 30 | $ | 57 | $ | 13 |
The current restructuring liability related to the transformation programs, reported in Other accrued liabilities in the Consolidated Balance Sheets as of January 31, 2026 and October 31, 2025 was $40 million and $42 million, respectively. The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Consolidated Balance Sheets as of January 31, 2026 and October 31, 2025 was $60 million and $70 million, respectively.
Contract Balances
The Company’s contract balances consist of contract assets, contract liabilities, and costs to obtain a contract with a customer.
Contract Assets
A summary of accounts receivable, net, including unbilled receivables was as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Accounts receivable | $ | 4,576 | $ | 4,916 | |||||||
| Unbilled receivables | 379 | 396 | |||||||||
| Allowances | (24) | (22) | |||||||||
| Total | $ | 4,931 | $ | 5,290 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The allowances for credit losses related to accounts receivable and changes for the three months ended January 31, 2026, and the fiscal year ended October 31, 2025 were as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Balance at beginning of period | $ | 22 | $ | 10 | |||||||
| Provision for credit losses | 5 | 33 | |||||||||
| Adjustments to existing allowances, including write offs | (3) | (21) | |||||||||
| Balance at end of period | $ | 24 | $ | 22 |
Sale of Trade Receivables
The Company has third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers. For the three months ended January 31, 2026, the Company sold $1.2 billion. For the fiscal year ended October 31, 2025, the Company sold $3.7 billion of trade receivables. The Company recorded an obligation of $60 million and $59 million within Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of January 31, 2026 and October 31, 2025, respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.
Contract Liabilities and Remaining Performance Obligations
Contract liabilities consist of deferred revenue and customer deposits. A summary of contract liabilities were as follows:
| As of | ||||||||||||||
| January 31, 2026 | October 31, 2025 | |||||||||||||
| Location | In millions | |||||||||||||
| Customer deposits | Other accrued liabilities | $ | 309 | $ | 616 | |||||||||
| Customer deposits - non-current | Other non-current liabilities | 87 | 72 | |||||||||||
| Total customer deposits | $ | 396 | $ | 688 | ||||||||||
| Deferred revenue | Deferred revenue | $ | 5,483 | $ | 5,358 | |||||||||
| Deferred revenue - non-current | Other non-current liabilities | 5,114 | 4,980 | |||||||||||
| Total deferred revenue | $ | 10,597 | $ | 10,338 |
For the three months ended January 31, 2026, approximately $2.0 billion of revenue was recognized relating to contract liabilities recorded as of October 31, 2025.
Revenue allocated to remaining performance obligations represents contract work that has not yet been performed and does not include contracts where the customer is not committed. Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations, changes in the scope of contracts, adjustments for revenue that has not materialized and adjustments for currency. As of January 31, 2026, the aggregate amount of deferred revenue, was $10.6 billion. The Company expects to recognize approximately 43% of this balance over fiscal 2026, 25% over fiscal 2027, 16% over fiscal 2028, 9% over fiscal 2029, and 5% over fiscal 2030 and thereafter. The Company receives payments in advance of completion of its contractual obligations; these payments are considered customer deposits. As customer acceptance milestones are met, the Company will recognize revenue and reduce the amount of contract liabilities. As of January 31, 2026, the aggregate amount of customer deposits was $396 million. The Company expects to recognize $309 million over the next twelve months and the remaining balance thereafter.
Costs to Obtain a Contract
As of January 31, 2026, the current and non-current portions of the capitalized costs to obtain a contract were $92 million and $132 million, respectively. As of October 31, 2025, the current and non-current portions of the capitalized costs to obtain a contract were $109 million and $128 million, respectively. The current and non-current portions of the capitalized costs to
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
obtain a contract were included in Other current assets, and Long-term financing receivables and other assets, respectively, in the Condensed Consolidated Balance Sheets. For the three months ended January 31, 2026 and 2025, the Company amortized $28 million and $27 million, of capitalized costs to obtain a contract. The amortized capitalized costs to obtain a contract are included in Selling, general and administrative expense in the Condensed Consolidated Statements of Earnings.
Note 6: Accounting for Leases as a Lessor
Financing receivables represent sales-type and direct-financing leases of the Company and third-party products. These receivables typically have terms ranging from two to five years and are usually collateralized by a security interest in the underlying assets. Financing receivables also include billed receivables from operating leases. The allowance for credit losses represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations. The components of financing receivables were as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Minimum lease payments receivable | $ | 10,187 | $ | 10,310 | |||||||
| Unguaranteed residual value | 716 | 694 | |||||||||
| Unearned income | (1,244) | (1,264) | |||||||||
| Financing receivables, gross | 9,659 | 9,740 | |||||||||
| Allowance for credit losses | (211) | (198) | |||||||||
| Financing receivables, net | 9,448 | 9,542 | |||||||||
| Less: current portion | (3,835) | (3,826) | |||||||||
| Amounts due after one year, net | $ | 5,613 | $ | 5,716 |
Sale of Financing Receivables
The Company enters into arrangements to transfer the contractual payments due under certain financing receivables to third party financial institutions. For the three months ended January 31, 2026 and the fiscal year ended October 31, 2025, the Company sold $83 million and $196 million of financing receivables, respectively.
Credit Quality Indicators
Due to the homogeneous nature of its leasing transactions, the Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risk. Credit risk is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and geographic regions. The Company evaluates the credit quality of an obligor at lease inception and monitors that credit quality over the term of a transaction. The Company assigns risk ratings to each lease based on the creditworthiness of the obligor and other variables that augment or mitigate the inherent credit risk of a particular transaction and periodically updates the risk ratings when there is a change in the underlying credit quality. Such variables include the underlying value and liquidity of the collateral, the essential use of the equipment, the term of the lease, and the inclusion of credit enhancements, such as guarantees, letters of credit or security deposits.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The credit risk profile of gross financing receivables, based on internal risk ratings as of January 31, 2026, presented on amortized cost basis by year of origination was as follows:
| As of January 31, 2026 | |||||||||||||||||
| Risk Rating | |||||||||||||||||
| Low | Moderate | High | |||||||||||||||
| Fiscal Year | In millions | ||||||||||||||||
| 2026 | $ | 307 | $ | 228 | $ | 1 | |||||||||||
| 2025 | 2,363 | 1,136 | 25 | ||||||||||||||
| 2024 | 1,941 | 888 | 34 | ||||||||||||||
| 2023 | 1,016 | 565 | 46 | ||||||||||||||
| 2022 and prior | 583 | 434 | 92 | ||||||||||||||
| Total | $ | 6,210 | $ | 3,251 | $ | 198 |
The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2025, presented on amortized cost basis by year of origination was as follows:
| As of October 31, 2025 | |||||||||||||||||
| Risk Rating | |||||||||||||||||
| Low | Moderate | High | |||||||||||||||
| Fiscal Year | In millions | ||||||||||||||||
| 2025 | $ | 2,245 | $ | 1,016 | $ | 17 | |||||||||||
| 2024 | 2,160 | 942 | 36 | ||||||||||||||
| 2023 | 1,189 | 645 | 47 | ||||||||||||||
| 2022 | 579 | 347 | 26 | ||||||||||||||
| 2021 and prior | 213 | 206 | 72 | ||||||||||||||
| Total | $ | 6,386 | $ | 3,156 | $ | 198 |
Accounts rated low risk typically have the equivalent of a Standard & Poor's rating of BBB– or higher, while accounts rated moderate risk generally have the equivalent of BB+ or lower. The Company classifies accounts as high risk when it considers the financing receivable to be impaired or when management believes there is a significant near-term risk of impairment. The credit quality indicators do not reflect any mitigation actions taken to transfer credit risk to third parties.
Allowance for Credit Losses
The allowance for credit losses for financing receivables as of January 31, 2026 and October 31, 2025 and the respective changes for the three and twelve months then ended were as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Balance at beginning of period | $ | 198 | $ | 194 | |||||||
| Provision for credit losses | 8 | 77 | |||||||||
| Adjustment to the existing allowance | 9 | (1) | |||||||||
| Deductions | (4) | (72) | |||||||||
| Balance at end of period | $ | 211 | $ | 198 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Non-Accrual and Past-Due Financing Receivables
The following table summarizes the aging and non-accrual status of gross financing receivables:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| In millions | |||||||||||
| Billed:(1) | |||||||||||
| Current 1-30 days | $ | 363 | $ | 349 | |||||||
| Past due 31-60 days | 26 | 26 | |||||||||
| Past due 61-90 days | 21 | 13 | |||||||||
| Past due > 90 days | 81 | 70 | |||||||||
| Unbilled sales-type and direct-financing lease receivables | 9,168 | 9,282 | |||||||||
| Total gross financing receivables | $ | 9,659 | $ | 9,740 | |||||||
| Gross financing receivables on non-accrual status(2) | $ | 166 | $ | 168 | |||||||
| Gross financing receivables 90 days past due and still accruing interest(2) | $ | 104 | $ | 114 |
(1)Includes billed operating lease receivables and billed sales-type and direct-financing lease receivables.
(2)Includes billed operating lease receivables and billed and unbilled sales-type and direct-financing lease receivables.
The following table presents amounts included in the Condensed Consolidated Statements of Earnings related to lessor activity:
| For the three months ended January 31, | |||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Location | In millions | ||||||||||||||||||||||||||||
| Interest income from sales-type leases and direct financing leases | Financing Income | $ | 195 | $ | 186 | ||||||||||||||||||||||||
| Lease income from operating leases | Services | 508 | 547 | ||||||||||||||||||||||||||
| Total lease income | $ | 703 | $ | 733 |
Variable Interest Entities
The Company has issued asset-backed debt securities under a fixed-term securitization program to private investors. The asset-backed debt securities are collateralized by the U.S. fixed-term financing receivables and leased equipment in the offering, which is held by a Special Purpose Entity (“SPE”). The SPE meets the definition of a Variable Interest Entity (“VIE”) and is consolidated, along with the associated debt, into the Condensed Consolidated Financial Statements as the Company is the primary beneficiary of the VIE. The SPE is a bankruptcy-remote legal entity with separate assets and liabilities. The purpose of the SPE is to facilitate the funding of customer receivables and leased equipment in the capital markets.
The Company’s risk of loss related to securitized receivables and leased equipment is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents the assets and liabilities held by the consolidated VIE as of January 31, 2026 and October 31, 2025, which are included in the Condensed Consolidated Balance Sheets. The assets in the table below include those that can be used to settle the obligations of the VIE. Additionally, general creditors of the Company do not have recourse to the assets of the VIE.
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| Assets held by VIE: | In millions | ||||||||||
| Other current assets | $ | 74 | $ | 73 | |||||||
| Financing receivables | |||||||||||
| Short-term | 787 | 885 | |||||||||
| Long-term | 1,097 | 1,283 | |||||||||
| Property, plant and equipment, net | 631 | 775 | |||||||||
| Liabilities held by VIE: | |||||||||||
| Notes payable and short-term borrowings, net of unamortized debt issuance costs | 1,005 | 1,159 | |||||||||
| Long-term debt, net of unamortized debt issuance costs | $ | 1,066 | $ | 1,287 |
For the three months ended January 31, 2026, the Company did not transfer any financing receivables and leased equipment via securitization through the SPE. For the fiscal year ended October 31, 2025, financing receivables and leased equipment transferred via securitization through the SPE were $1.3 billion and $0.4 billion, respectively.
Note 7: Acquisitions and Dispositions
Pending Telco Solutions Divestiture
On December 18, 2025, the Company announced an agreement to divest its Telco Solutions business to HCLTech.
Pending Divestiture of H3C Shares
On November 17, 2025, HPE’s subsidiary, H3C Holdings Limited (“H3C Holdings”), entered into (i) share purchase agreements with five counterparties, including Unisplendour International Technology Limited (“UNIS”), whereby such counterparties, in the aggregate, agreed to purchase 10% of the total issued share capital of H3C Technologies Co., Limited (“H3C”) for cash consideration of approximately $714 million and (ii) a side letter with UNIS, amending the Agreement on Subsequent Arrangements that was previously entered into on May 24, 2024, whereby, among other things, H3C Holdings and UNIS shall retain their put option and call option, respectively, relating to the remaining issued share capital of H3C held by H3C Holdings and have the right to exercise their respective option rights in respect of such shares up to three times, subject to the timing and terms as set forth therein. The agreement referenced in clause (ii) above revises the arrangements governing the sale of all of the remaining issued share capital of H3C held by us through H3C Holdings. On November 28, 2025, H3C Holdings entered into three additional share purchase agreements, including one with UNIS, whereby such counterparties, in the aggregate, agreed to purchase the remaining 9% of the total issued share capital of H3C for cash consideration of approximately $643 million. Such transactions and the transactions referenced in clause (i) remain subject to regulatory approvals.
Acquisition of Juniper Networks
On July 2, 2025, the Company completed the Juniper Networks merger (the “Merger”). Under the terms of the Agreement and Plan of Merger (the “Merger Agreement”), HPE agreed to pay $40.00 per share of Juniper Networks common stock, issued and outstanding as of July 2, 2025, representing a cash consideration of approximately $13.4 billion, which was paid through cash on hand, including proceeds and term loan drawdowns from the financings in fiscal 2024, and commercial paper issuances. During the first quarter of fiscal 2026, the Company recorded measurement period adjustments resulting in an increase to goodwill of $104 million, primarily related to adjustments to deferred tax assets.
Acquisition costs related to the Merger were primarily included within Acquisition, disposition and other charges in the Condensed Consolidated Statements of Earnings. For the three months ended January 31, 2026 and 2025, acquisition costs were $123 million and $33 million, respectively.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 8: Goodwill
Goodwill is tested for impairment at the reporting unit level. As of November 1, 2025, the Company reassessed its reporting units and determined that the former Server and Hybrid Cloud reporting units met the criteria to qualify as a single Cloud & AI (excluding Financial Services) reporting unit, and Intelligent Edge and Juniper Networks met the criteria to qualify as a single Networking reporting unit. The Cloud & AI segment contains the Cloud & AI (excluding Financial Services) and Financial Services reporting units. The Corporate Investments and Other segment contains the A & PS, Telco Solutions and Instant On reporting units. The following table represents the carrying value of goodwill, by segment as of January 31, 2026 and October 31, 2025.
| Networking | Cloud & AI | Corporate Investments and Other | Total | ||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Balance as of October 31, 2025(1) | $ | 10,121 | $ | 13,599 | $ | 50 | $ | 23,770 | |||||||||||||||
| Goodwill reclassified as held for sale(2) | — | — | (46) | (46) | |||||||||||||||||||
| Purchase price and other currency adjustments | 104 | — | — | 104 | |||||||||||||||||||
| Balance as of January 31, 2026(1) | $ | 10,225 | $ | 13,599 | $ | 4 | $ | 23,828 |
(1) There has been no change to the accumulated impairment loss from the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2025.
(2) Reclassified to assets held for sale and is reported in Other current assets in the Condensed Consolidated Balance Sheets.
Goodwill is tested annually for impairment, as of the first day of the fourth quarter, at the reporting unit level. Additionally, an interim impairment test was performed as of November 1, 2025 based on organizational changes impacting the reporting units. The interim impairment test did not result in any impairment of goodwill. For all reporting units other than Cloud & AI (excluding Financial Services), a qualitative test was performed and there were no indicators of impairment of goodwill. For the Cloud & AI (excluding Financial Services) reporting unit a quantitative assessment was performed, and the excess of fair value over carrying amount was 10%. In order to evaluate the sensitivity of the estimated fair value of the reporting units in the goodwill impairment test, the Company applied a 10% decrease to the fair value of the Cloud & AI, (excluding Financial Services) reporting unit. Based on the results of this hypothetical 10% decrease, this reporting unit did not have an excess of fair value over carrying value.
The Cloud & AI (excluding Financial Services) reporting unit has goodwill of $13.5 billion as of January 31, 2026. In the current macroeconomic and inflationary environment, customers are investing selectively. This has resulted in moderate unit growth and competitive pricing in traditional servers offerings. While AI servers 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. In addition, the business is managing a storage product model transition 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 Cloud & AI (excluding Financial Services) reporting unit continues to focus on capturing market share in both traditional and AI servers and storage while maintaining operating margin and leveraging its strong portfolio of products and services. If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if the Company has significant or sustained decline in its stock price, it is possible its estimates about this reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the Cloud & AI (excluding Financial Services) reporting unit exceeding its estimated fair value and potential impairment charges.
Note 9: Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
The Company uses valuation techniques that are based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis:
| As of January 31, 2026 | As of October 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measured Using | Fair Value Measured Using | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Remaining Inputs (Level 2) | Significant Other Unobservable Remaining Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Remaining Inputs (Level 2) | Significant Other Unobservable Remaining Inputs (Level 3) | Total | ||||||||||||||||||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash Equivalents: | |||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | $ | — | $ | 830 | $ | — | $ | 830 | $ | — | $ | 997 | $ | — | $ | 997 | |||||||||||||||||||||||||||||||
| Money market funds | 1,933 | — | — | 1,933 | 2,741 | — | — | 2,741 | |||||||||||||||||||||||||||||||||||||||
| Total cash equivalents | 1,933 | 830 | — | 2,763 | 2,741 | 997 | — | 3,738 | |||||||||||||||||||||||||||||||||||||||
| Available-for-sale Debt Investments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign bonds | — | 115 | — | 115 | — | 111 | — | 111 | |||||||||||||||||||||||||||||||||||||||
| Other debt securities(1) | — | — | 48 | 48 | — | — | 46 | 46 | |||||||||||||||||||||||||||||||||||||||
| Total available-for-sale debt investments | — | 115 | 48 | 163 | — | 111 | 46 | 157 | |||||||||||||||||||||||||||||||||||||||
| Equity Investments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Mutual funds | — | 61 | — | 61 | — | 59 | — | 59 | |||||||||||||||||||||||||||||||||||||||
| Equity securities in public companies | 8 | — | — | 8 | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||
| Total equity investments | 8 | 61 | — | 69 | 6 | 59 | — | 65 | |||||||||||||||||||||||||||||||||||||||
| Derivatives Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | — | 127 | — | 127 | — | 193 | — | 193 | |||||||||||||||||||||||||||||||||||||||
| Other derivatives | — | 1 | — | 1 | — | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||
| Total assets | 1,941 | 1,134 | 48 | 3,123 | 2,747 | 1,362 | 46 | 4,155 | |||||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | — | 50 | — | 50 | — | 51 | — | 51 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | — | 482 | — | 482 | — | 238 | — | 238 | |||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | — | $ | 532 | $ | — | $ | 532 | $ | — | $ | 289 | $ | — | $ | 289 |
(1) Available-for-sale debt securities with carrying values that approximate fair value.
Other Fair Value Disclosures
Short-Term and Long-Term Debt: As of January 31, 2026, the estimated fair value and carrying value of the Company's short-term and long-term debt was $21.7 billion and $21.6 billion, respectively. As of October 31, 2025, the estimated fair value and carrying value of the Company's short-term and long-term debt was $22.5 billion and $22.4 billion, respectively. If measured at fair value in the Condensed Consolidated Balance Sheets, short-term and long-term debt would be classified in Level 2 of the fair value hierarchy.
Other Financial Instruments: For the balance of the Company's financial instruments, primarily accounts receivable, accounts payable and financial liabilities included in other accrued liabilities, the carrying amounts approximate fair value due to their short-term nature. If measured at fair value in the Condensed Consolidated Balance Sheets, these other financial instruments would be classified in Level 2 or Level 3 of the fair value hierarchy.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Non-Recurring Fair Value Measurements
Equity Investments without Readily Determinable Fair Value: Equity investments are recorded at cost and adjusted for impairments or observable price changes. For the three months ended January 31, 2026 and 2025, the Company recognized immaterial unrealized gains or losses, and cumulative adjustments as of January 31, 2026 were immaterial. Refer to Note 10 ‘Financial Instruments’ for further information.
Non-Financial Assets: The Company's non-financial assets, such as intangible assets, goodwill, and property, plant and equipment, are recorded at cost. The Company records right-of-use assets based on the lease liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs. Fair value adjustments are made to these non-financial assets in the period an impairment charge is recognized.
Note 10: Financial Instruments
Cash Equivalents and Available-for-Sale Debt Investments
Cash equivalents and available-for-sale debt investments were as follows:
| As of January 31, 2026 | As of October 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Fair Value | Cost | Gross Unrealized Gains | Fair Value | ||||||||||||||||||||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash Equivalents | |||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | $ | 830 | $ | — | $ | 830 | $ | 997 | $ | — | $ | 997 | |||||||||||||||||||||||||||||||||||
| Money market funds | 1,933 | — | 1,933 | 2,741 | — | 2,741 | |||||||||||||||||||||||||||||||||||||||||
| Total cash equivalents | 2,763 | — | 2,763 | 3,738 | — | 3,738 | |||||||||||||||||||||||||||||||||||||||||
| Available-for-sale Investments | |||||||||||||||||||||||||||||||||||||||||||||||
| Debt Securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign bonds | 111 | 4 | 115 | 107 | 4 | 111 | |||||||||||||||||||||||||||||||||||||||||
| Other debt securities | 45 | 3 | 48 | 44 | 2 | 46 | |||||||||||||||||||||||||||||||||||||||||
| Total debt securities | 156 | 7 | 163 | 151 | 6 | 157 | |||||||||||||||||||||||||||||||||||||||||
| Equity Securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities in public companies | 6 | 2 | 8 | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||
| Mutual funds | 61 | — | 61 | 59 | — | 59 | |||||||||||||||||||||||||||||||||||||||||
| Total equity securities | 67 | 2 | 69 | 65 | — | 65 | |||||||||||||||||||||||||||||||||||||||||
| Total available-for-sale investments | 223 | 9 | 232 | 216 | 6 | 222 | |||||||||||||||||||||||||||||||||||||||||
| Total cash equivalents and available-for-sale investments | $ | 2,986 | $ | 9 | $ | 2,995 | $ | 3,954 | $ | 6 | $ | 3,960 |
As of January 31, 2026 and October 31, 2025, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. Time deposits were primarily issued by institutions outside the U.S. as of January 31, 2026 and October 31, 2025. The estimated fair value of the available-for-sale debt investments may not be representative of values that will be realized in the future.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Contractual maturities of investments in available-for-sale debt securities were as follows:
| As of January 31, 2026 | |||||||||||||||||||||||
| Amortized Cost | Fair Value | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Due in one year | $ | 34 | $ | 34 | |||||||||||||||||||
| Due in one to five years | 5 | 5 | |||||||||||||||||||||
| Due in more than five years | 117 | 124 | |||||||||||||||||||||
| Total | $ | 156 | $ | 163 |
Equity Investments
Non-marketable equity investments in privately held companies are included in Long-term financing receivables and other assets in the Condensed Consolidated Balance Sheets. These non-marketable equity investments are carried at cost under measurement alternative and adjusted for impairments or observable price changes. The carrying amount of investments was $69 million and $61 million as of January 31, 2026 and October 31, 2025, respectively. For the three months ended January 31, 2026 and 2025, the Company recognized immaterial unrealized gains or losses that are reflected in Interest and other, net in the Condensed Consolidated Statement of Earnings.
Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets
The gross notional and fair value of derivative instruments in the Condensed Consolidated Balance Sheets were as follows:
| As of January 31, 2026 | As of October 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding Gross Notional | Other Current Assets | Long-Term Financing Receivables and Other Assets | Other Accrued Liabilities | Long-Term Other Liabilities | Outstanding Gross Notional | Other Current Assets | Long-Term Financing Receivables and Other Assets | Other Accrued Liabilities | Long-Term Other Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedging Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | $ | 600 | $ | — | $ | — | $ | — | $ | 50 | $ | 600 | $ | — | $ | — | $ | — | $ | 51 | |||||||||||||||||||||||||||||||||||||||
| Cash Flow Hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | 7,624 | 43 | 18 | 179 | 108 | 7,062 | 81 | 29 | 95 | 67 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net Investment Hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | 2,061 | 14 | 19 | 49 | 45 | 2,126 | 20 | 24 | 30 | 20 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | 10,285 | 57 | 37 | 228 | 203 | 9,788 | 101 | 53 | 125 | 138 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | 7,092 | 31 | 2 | 93 | 8 | 7,167 | 37 | 2 | 22 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other derivatives | 160 | 1 | — | — | — | 153 | 2 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total derivatives not designated as hedging instruments | 7,252 | 32 | 2 | 93 | 8 | 7,320 | 39 | 2 | 22 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total derivatives | $ | 17,537 | $ | 89 | $ | 39 | $ | 321 | $ | 211 | $ | 17,108 | $ | 140 | $ | 55 | $ | 147 | $ | 142 |
Offsetting of Derivative Instruments
The Company recognizes all derivative instruments on a gross basis in the Condensed Consolidated Balance Sheets. The Company's derivative instruments are subject to master netting arrangements and collateral security arrangements. The Company does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under collateral security agreements. The information related to the potential effect of the Company's use of the master netting agreements and collateral security agreements were as follows:
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
| As of January 31, 2026 | ||||||||||||||||||||||||||||||||||||||
| In the Condensed Consolidated Balance Sheets | ||||||||||||||||||||||||||||||||||||||
| (i) | (ii) | (iii) = (i)–(ii) | (iv) | (v) | (vi) = (iii)–(iv)–(v) | |||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||||||||||||||||
| Gross Amount Recognized | Gross Amount Offset | Net Amount Presented | Derivatives | Financial Collateral | Net Amount | |||||||||||||||||||||||||||||||||
| In millions | ||||||||||||||||||||||||||||||||||||||
| Derivative assets | $ | 128 | $ | — | $ | 128 | $ | 115 | $ | — | (1) | $ | 13 | |||||||||||||||||||||||||
| Derivative liabilities | $ | 532 | $ | — | $ | 532 | $ | 115 | $ | 408 | (2) | $ | 9 |
| As of October 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| In the Condensed Consolidated Balance Sheets | ||||||||||||||||||||||||||||||||||||||
| (i) | (ii) | (iii) = (i)–(ii) | (iv) | (v) | (vi) = (iii)–(iv)–(v) | |||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||||||||||||||||
| Gross Amount Recognized | Gross Amount Offset | Net Amount Presented | Derivatives | Financial Collateral | Net Amount | |||||||||||||||||||||||||||||||||
| In millions | ||||||||||||||||||||||||||||||||||||||
| Derivative assets | $ | 195 | $ | — | $ | 195 | $ | 121 | $ | 16 | (1) | $ | 58 | |||||||||||||||||||||||||
| Derivative liabilities | $ | 289 | $ | — | $ | 289 | $ | 121 | $ | 136 | (2) | $ | 32 |
(1)Represents the cash collateral posted by counterparties as of the respective reporting date for the Company's asset position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.
(2)Represents the collateral posted by the Company in cash or through the re-use of counterparty cash collateral as of the respective reporting date for the Company's liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. As of January 31, 2026, the $408 million of collateral posted was entirely in cash. As of October 31, 2025, of the $136 million of collateral posted, $120 million was in cash and $16 million was through the re-use of counterparty collateral.
The amounts recorded on the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges were as follows:
| Carrying Amount of the Hedged Liabilities | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities | ||||||||||||||||||||||
| As of | As of | ||||||||||||||||||||||
| January 31, 2026 | October 31, 2025 | January 31, 2026 | October 31, 2025 | ||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Long-term debt | $ | (757) | $ | (754) | $ | (5) | $ | (4) |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The pre-tax effect of derivative instruments in cash flow and net investment hedging relationships recognized in Other Comprehensive Income (“OCI”) were as follows:
| (Losses) Gains Recognized in OCI on Derivatives | |||||||||||||||||||||||
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions | |||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | |||||||||||||||||||||||
| Foreign exchange contracts | $ | (191) | $ | 270 | |||||||||||||||||||
| Derivatives in Net Investment Hedging Relationship: | |||||||||||||||||||||||
| Foreign exchange contracts | 59 | 43 | |||||||||||||||||||||
| Total | $ | (132) | $ | 313 |
As of January 31, 2026, the Company expects to reclassify an estimated net accumulated other comprehensive loss of approximately $43 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions associated with cash flow hedges.
Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings
The following table represents the pre-tax effect of derivative instruments on total amounts of income and expense line items presented in the Condensed Consolidated Statements of Earnings in which the effects of fair value hedges and derivatives not designated as hedging instruments are recorded:
| (Losses) Gains Recognized in Income | |||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended January 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Revenue | Interest and Other, net | Net Revenue | Interest and Other, net | ||||||||||||||||||||||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||||||||||||||||||||
| Total net revenue and interest and other, net | $ | 9,301 | $ | (54) | $ | 7,854 | $ | 39 | |||||||||||||||||||||||||||||||||||||||
| (Losses) Gains on Derivatives in Fair Value Hedging Relationships: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate Contracts | |||||||||||||||||||||||||||||||||||||||||||||||
| Hedged items | $ | — | $ | (1) | $ | — | $ | (15) | |||||||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | — | 1 | — | 15 | |||||||||||||||||||||||||||||||||||||||||||
| (Losses) Gains on Derivatives in Cash Flow Hedging Relationships: | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Exchange Contracts | |||||||||||||||||||||||||||||||||||||||||||||||
| Amount of (losses) gains reclassified from accumulated other comprehensive income into income | (10) | (128) | 44 | 170 | |||||||||||||||||||||||||||||||||||||||||||
| Interest Rate Locks | |||||||||||||||||||||||||||||||||||||||||||||||
| Amount of losses reclassified from accumulated other comprehensive income into income | — | — | — | (1) | |||||||||||||||||||||||||||||||||||||||||||
| (Losses) Gains on Derivatives not Designated as Hedging Instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | — | (60) | — | 54 | |||||||||||||||||||||||||||||||||||||||||||
| Other derivatives | — | — | — | 4 | |||||||||||||||||||||||||||||||||||||||||||
| Total (losses) gains | $ | (10) | $ | (188) | $ | 44 | $ | 227 |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 11: Borrowings
Notes Payable, Short-Term Borrowings and Long-Term Debt
Notes payable, short-term borrowings, including the current portion of long-term debt, and long-term debt were as follows:
| As of | |||||||||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||||||||
| In millions | |||||||||||||||||
| Current portion of long-term debt(1) | $ | 3,071 | $ | 3,796 | |||||||||||||
| Commercial paper | 704 | 681 | |||||||||||||||
| Notes payable to banks, lines of credit and other | 131 | 132 | |||||||||||||||
| Total notes payable and short-term borrowings | 3,906 | 4,609 | |||||||||||||||
| Long-term debt | 17,705 | 17,756 | |||||||||||||||
| Total | $ | 21,611 | $ | 22,365 |
(1) As of January 31, 2026 and October 31, 2025, the Current portion of long-term debt, net of discount and issuance costs, included $1.0 billion and $1.2 billion respectively, both associated with the asset-backed debt securities issued by the Company.
Unsecured Senior Notes
In December 2025, the Company repaid the entire $400 million of 1.20% Juniper Global Notes on their original maturity date.
Financing arrangements
The Company maintains two commercial paper programs (the “Parent Programs”) and third program managed by a wholly-owned subsidiary, together with a revolving credit facility, and an uncommitted credit facility. There have been no changes to either of these financing arrangements since October 31, 2025. As of January 31, 2026 and October 31, 2025, no borrowings were outstanding under the Parent Programs, the revolving credit facility, or the uncommitted credit facility. Outstanding borrowings under the subsidiary’s commercial paper program were $704 million and $681 million, respectively. For a detailed description of these programs, refer to Note 14, “Borrowings” in the Consolidated Financial Statements included in Item 8 of Part II of HPE’s Annual Report on Form 10-K for the fiscal year ended October 31, 2025.
Juniper Networks Acquisition Financing
As of January 31, 2026, only the three‑year tranche remains outstanding, with a balance of $2 billion. For more details, refer to Note 14, “Borrowings” in the Consolidated Financial Statements included in Item 8 of Part II of HPE’s Annual Report on Form 10-K for the fiscal year ended October 31, 2025.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 12: Stockholders' Equity
The components of accumulated other comprehensive loss, net of taxes as of January 31, 2026, and changes for the three months ended January 31, 2026 were as follows:
| Net unrealized gains (losses) on available-for-sale securities | Net unrealized (losses) gains on cash flow hedges | Unrealized components of defined benefit plans | Cumulative translation adjustment | Accumulated other comprehensive loss | |||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||
| Balance at beginning of period | $ | 6 | $ | (26) | $ | (2,058) | $ | (670) | $ | (2,748) | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 1 | (191) | — | — | (190) | ||||||||||||||||||||||||
| Reclassifications of losses into earnings | — | 138 | 24 | — | 162 | ||||||||||||||||||||||||
| Tax benefit (provision) | — | 11 | (5) | (2) | 4 | ||||||||||||||||||||||||
| Balance at end of period | $ | 7 | $ | (68) | $ | (2,039) | $ | (672) | $ | (2,772) |
The components of accumulated other comprehensive loss, net of taxes as of January 31, 2025, and changes for the three months ended January 31, 2025 were as follows:
| Net unrealized gains (losses) on available-for-sale securities | Net unrealized (losses) gains on cash flow hedges | Unrealized components of defined benefit plans | Cumulative translation adjustment | Accumulated other comprehensive loss | |||||||||||||||||||||||||
| In millions | |||||||||||||||||||||||||||||
| Balance at beginning of period | $ | 8 | $ | (16) | $ | (2,342) | $ | (627) | $ | (2,977) | |||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (1) | 270 | — | (22) | 247 | ||||||||||||||||||||||||
| Reclassifications of (gains) losses into earnings | — | (213) | 30 | — | (183) | ||||||||||||||||||||||||
| Tax (provision) benefit | — | (10) | (5) | 1 | (14) | ||||||||||||||||||||||||
| Balance at end of period | $ | 7 | $ | 31 | $ | (2,317) | $ | (648) | $ | (2,927) |
Share Repurchase Program
For the three months ended January 31, 2026, the Company repurchased and settled 6.9 million shares under its share repurchase program through open market repurchases. Additionally, as of January 31, 2026, the Company had unsettled open market repurchases of 0.2 million shares. Shares repurchased for the three months ended January 31, 2026 were recorded as a $162 million reduction to stockholders’ equity. As of January 31, 2026, the Company had a remaining authorization of approximately $3.4 billion for future share repurchases.
Note 13: Net Earnings Per Share
The Company calculates basic EPS using net earnings and the weighted-average number of shares outstanding during the reporting period.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The reconciliations of the numerators and denominators of each of the basic and diluted net EPS calculations were as follows:
| For the three months ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| In millions, except per share amounts | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net earnings attributable to common stockholders - Basic | $ | 423 | $ | 598 | |||||||||||||||||||
| Plus: 7.625% Series C mandatory convertible preferred stock dividends | — | 29 | |||||||||||||||||||||
| Net earnings - Diluted | $ | 423 | $ | 627 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares used to compute basic net EPS | 1,334 | 1,316 | |||||||||||||||||||||
| Dilutive effect of employee stock plans(1) | 22 | 17 | |||||||||||||||||||||
| Dilutive effect of 7.625% Series C mandatory convertible preferred stock(1) | — | 76 | |||||||||||||||||||||
| Weighted-average shares used to compute diluted net EPS | 1,356 | 1,409 | |||||||||||||||||||||
| Net EPS: | |||||||||||||||||||||||
| Basic | $ | 0.32 | $ | 0.45 | |||||||||||||||||||
| Diluted | $ | 0.31 | $ | 0.44 | |||||||||||||||||||
| Anti-dilutive Share Count(1)(2): | |||||||||||||||||||||||
| Employee stock plans | 7 | 6 | |||||||||||||||||||||
| 7.625% Series C mandatory convertible preferred stock | 76 | — | |||||||||||||||||||||
| Total anti-dilutive weighted-average stock | 83 | 6 |
(1)The impact of dilutive effect of employee stock plans is calculated under the treasury stock method, and the impact of dilutive effect of the 7.625% Series C mandatory convertible preferred stock (“Preferred Stock”) is calculated under the if-converted method.
(2)The Company excludes shares potentially issuable under employee stock plans and Preferred Stock that could dilute basic net EPS in the future from the calculation of diluted net earnings per share, as their effect, if included, would have been anti-dilutive for the periods presented.
Note 14: Litigation, Contingencies, and Commitments
Litigation
Hewlett Packard Enterprise is involved in various lawsuits, claims, investigations and proceedings including those consisting of intellectual property, commercial, securities, employment, employee benefits, and environmental matters, which arise in the ordinary course of business. In addition, as part of the Separation and Distribution Agreement (the “Separation and Distribution Agreement”) entered into in connection with Hewlett Packard Enterprise’s spin-off from HP Inc. (formerly known as “Hewlett-Packard Company”) (the “Separation”), Hewlett Packard Enterprise and HP Inc. agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses. The Separation and Distribution Agreement included provisions that allocate liability and financial responsibility for pending litigation involving the parties, as well as provide for cross-indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party. The Separation and Distribution Agreement also included provisions that assign to the parties responsibility for managing pending and future litigation related to the general corporate matters of HP Inc. arising prior to the Separation. Hewlett Packard Enterprise records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Hewlett Packard Enterprise reviews these matters at least quarterly and adjusts these liabilities to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other updated information and events pertaining to a particular matter. Litigation is inherently unpredictable. However, Hewlett Packard Enterprise believes it has valid defenses with respect to legal matters pending against us. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies. Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of January 31, 2026, it was not reasonably possible
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
that a material loss had been incurred in connection with such matters in excess of the amounts recognized in its financial statements.
Litigation, Proceedings, and Investigations
DOJ Action on the Proposed Acquisition of Juniper Networks. As previously disclosed, on January 9, 2024, the Company entered into the Merger Agreement with Juniper Networks and Jasmine Acquisition Sub, Inc., providing for the acquisition of Juniper Networks by HPE. On January 30, 2025, the Antitrust Division of the United States Department of Justice (“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. On June 27, 2025, HPE, Juniper, and the DOJ filed an Asset Preservation and Hold Separate Stipulation and Order (“Stipulation”) and Proposed Final Judgment with the Court. Pursuant to the Stipulation, HPE has agreed to divest its global Instant On campus and branch business. HPE also has agreed to grant up to two licenses to the Mist AIOps source code, with the licensees determined through an auction process. In exchange, the DOJ agreed to dismiss its action to enjoin the Merger, subject to the Court’s approval of the Proposed Final Judgment under the Antitrust Procedures and Penalties Act (the “Tunney Act”). On June 30, 2025, the Court signed the Stipulation, allowing the Merger to proceed to closing. On October 14, 2025, the Attorneys General of twelve states and the District of Columbia (the “Attorneys General”) filed a motion to intervene in the Court’s Tunney Act process. Following a November 18, 2025 hearing, the Court issued an order granting the Attorneys General’s motion to intervene and set a status conference for December 16, 2025 to determine next steps, including the scope of the Attorneys General’s intervention rights under the Tunney Act. On November 18, 2025, the Attorneys General filed a motion to hold separate, seeking to enjoin further integration and consolidation of HPE and Juniper during the pendency of the Tunney Act proceedings. Following a January 8, 2026 hearing, the Court denied the Attorneys General’s motion to hold separate, allowing further integration of the companies to proceed. The Tunney Act hearing is currently scheduled to begin on March 23, 2026.
India Directorate of Revenue Intelligence Proceedings*.* On April 30 and May 10, 2010, the India Directorate of Revenue Intelligence (the “DRI”) issued notices to Hewlett-Packard India Sales Private Ltd (“HP India”), a subsidiary of HP Inc., seven HP India employees and one former HP India employee alleging that HP India underpaid customs duties while importing products and spare parts into India and seeking to recover an aggregate of approximately $370 million, plus penalties. On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products-related notices affirming duties and penalties against HP India and the named individuals for approximately $386 million (plus interest). On April 20, 2012, the Commissioner issued an order on the spare parts-related notice affirming duties and penalties against HP India and certain of the named individuals for approximately $17 million. HP India filed appeals of the Commissioner’s orders before the Customs Tribunal. The Customs Department filed cross-appeals before the Customs Tribunal. On October 27, 2014, the Customs Tribunal commenced hearings on the cross-appeals of the Commissioner's orders. The Customs Tribunal rejected HP India's request to return the matter to the Commissioner on procedural grounds. After multiple delays and postponements over the last decade, the Customs Tribunal began hearing the parties’ cross-appeals on April 21, 2025. The hearing on the cross-appeals were completed in June 2025. The Company expects a ruling from the Customs Tribunal by 2026. Either party may appeal the ruling to the India Supreme Court.
ECT Proceedings*.* In January 2011, the postal service of Brazil, Empresa Brasileira de Correios e Telégrafos (“ECT”), notified a former subsidiary of HP Inc. in Brazil (“HP Brazil”) that it had initiated administrative proceedings to consider whether to suspend HP Brazil's right to bid and contract with ECT related to alleged improprieties in the bidding and contracting processes whereby employees of HP Brazil and employees of several other companies allegedly coordinated their bids and fixed results for three ECT contracts in 2007 and 2008. In late July 2011, ECT notified HP Brazil it had decided to apply the penalties against HP Brazil and suspend HP Brazil's right to bid and contract with ECT for five years, based upon the evidence before it. In August 2011, HP Brazil appealed ECT’s decision. In April 2013, ECT rejected HP Brazil’s appeal, and the administrative proceedings were closed with the penalties against HP Brazil remaining in place. In parallel, in September 2011, HP Brazil filed a civil action against ECT seeking to have ECT’s decision revoked. HP Brazil also requested an injunction suspending the application of the penalties until a final ruling on the merits of the case, which was denied. HP Brazil appealed the denial of its request for injunctive relief to the intermediate appellate court, which issued a preliminary ruling denying the request for injunctive relief but reducing the length of the sanctions from five to two years. HP Brazil appealed that decision and, in December 2011, obtained a ruling staying enforcement of ECT’s sanctions until a final ruling on the merits of the case. In September 2025, the Court of Appeals ruled in favor of HPE’s Civil Appeal, annulling the previously-stayed sanctions that, if enforced, would have barred HPE Brazil from participating in public tenders for five years. HPE has filed a motion to recover legal costs incurred during the appeal. ECT has filed a motion requesting the Court to clarify the merits.
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Autonomy-Related Legal Proceedings*.* In 2015, four Hewlett Packard Enterprise subsidiaries (Autonomy Corporation Limited, Hewlett Packard Vision BV, Autonomy Systems Limited, and Autonomy, Inc., hereinafter the “Claimants”) initiated civil proceedings in the U.K. High Court of Justice against two members of Autonomy’s former management, Michael Lynch and Sushovan Hussain, for breach of their fiduciary duties in causing Autonomy group companies to engage in improper transactions and accounting practices before and in connection with the 2011 acquisition of Autonomy. Trial concluded in January 2020. In May 2022, the court issued its liability judgment, finding that the Claimants had succeeded on substantially all claims against Messrs. Lynch and Hussain, and dismissing a counterclaim filed by Mr. Lynch. In February 2024, the court held a two-week trial on damages. The Claimants sought recovery for $4 billion in losses. In May 2025, Claimants reached an agreement with Mr. Hussain to resolve claims against him. On July 22, 2025, the court issued its ruling on the quantum of damages, finding that the Lynch estate owed £740 million. The court held a hearing during the week of November 17, 2025, addressing a number of matters including costs (including attorneys’ fees), pre-judgment interest, issues relating to the currency in which the judgment should be paid, and the Lynch Estate’s right to appeal discrete issues in the Court’s May 2022 liability judgment and its July 2025 quantum judgment. In total, Claimants are seeking a total of $1.786 billion from Lynch’s Estate. Pursuant to the terms of the 2015 Separation and Distribution Agreement, HP and Hewlett Packard Enterprise will share equally in any recovery.
Shared Litigation with HP Inc., DXC Technology Company and Micro Focus International plc.
As part of the Separation and Distribution Agreements between Hewlett Packard Enterprise and HP Inc., Hewlett Packard Enterprise and DXC, and Hewlett Packard Enterprise and Seattle SpinCo, the parties to each agreement agreed to cooperate with each other in managing certain existing litigation related to both parties’ businesses. The Separation and Distribution Agreements also included provisions that assign to the parties responsibility for managing pending and future litigation related to the general corporate matters of HP Inc. (in the case of the separation of Hewlett Packard Enterprise from HP Inc.) or of Hewlett Packard Enterprise (in the case of the separation of DXC from Hewlett Packard Enterprise and the separation of Micro Focus from Hewlett Packard Enterprise), in each case arising prior to the applicable separation.
Environmental
The Company's operations and products are or may in the future become subject to various federal, state, local, and foreign laws and regulations concerning the environment, including laws addressing the discharge of pollutants into the air and water; supply chain due diligence; and sustainability, environment, and emissions-related reporting; environmental claims and statements; the management, movement, and disposal of hazardous substances and wastes; the clean-up of contaminated sites; product safety and compliance; the energy consumption of products, services, and operations; and the operational or financial responsibility for recycling, treatment, and disposal of those products. This includes legislation that makes producers of electrical goods, including servers and networking equipment, responsible for repairability requirements or financially responsible for specified collection, recycling, treatment, and disposal of past and future covered products (sometimes referred to as “product take-back legislation”). The Company could incur substantial costs, its products could be restricted from entering certain jurisdictions, and it could face other sanctions, if it were to violate or become liable under environmental laws, including those related to addressing climate change, sustainability, and other environmental related issues, or if its products become non-compliant with such environmental laws. The Company's potential exposure includes impacts on revenue, fines and civil or criminal sanctions, third-party environmental or property damage or personal injury claims or actions, and clean-up costs. The amount and timing of costs to comply with environmental laws are difficult to predict.
In particular, the Company may become a party to, or otherwise involved in, proceedings brought by U.S. or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), known as “Superfund,” or other federal, state or foreign laws and regulations addressing the clean-up of contaminated sites, and may become a party to, or otherwise involved in, proceedings brought by private parties for contribution towards clean-up costs. The Company is also contractually obligated to make financial contributions to address actions related to certain environmental liabilities, both ongoing and arising in the future, pursuant to its Separation and Distribution Agreement with HP Inc.
Unconditional Purchase Obligations
As of January 31, 2026, the Company had unconditional purchase obligations of approximately $3.8 billion. These unconditional purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction, as well as settlements that the Company has reached
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
with third parties, requiring it to pay determined amounts over a specified period of time. These unconditional purchase obligations are related principally to inventory purchases, software maintenance and support services and other items. Unconditional purchase obligations exclude agreements that are cancellable without penalty. The Company expects the commitments to total $1,834 million, $854 million, $496 million, $401 million, $163 million, and $96 million for fiscal years 2026, 2027, 2028, 2029, 2030, and thereafter, respectively.
Guarantees
In the ordinary course of business, the Company may issue performance guarantees to certain of its clients, customers, and other parties pursuant to which the Company has guaranteed the performance obligations of third parties. Some of those guarantees may be backed by standby letters of credit or surety bonds. In general, the Company would be obligated to perform over the term of the guarantee in the event a specified triggering event occurs as defined by the guarantee. The Company believes the likelihood of having to perform under a material guarantee is remote.
The Company has entered into service contracts with certain of its clients that are supported by financing arrangements. If a service contract is terminated as a result of the Company's non-performance under the contract or failure to comply with the terms of the financing arrangement, the Company could, under certain circumstances, be required to acquire certain assets related to the service contract. The Company believes the likelihood of having to acquire a material amount of assets under these arrangements is remote.
The maximum potential future payments under performance guarantees and financing arrangements was $352 million as of January 31, 2026.
Indemnifications
In the ordinary course of business, the Company enters into contractual arrangements under which the Company may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of the Company or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. The Company also provides indemnifications to certain vendors and customers against claims of intellectual property infringement made by third parties arising from the use by such vendors and customers of the Company's software products and support services and certain other matters. Some indemnifications may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.
Note 15: Subsequent Events
On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on the Company’s business. The Company continues to monitor and evaluate these developments and assess their potential impact on its business, financial condition, and results of operations.
Previous: Cover and table of contents · Next: Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.