Hewlett Packard Enterprise Company (NYSE:HPE) shares are trading lower premarket on Thursday. On Wednesday, the company disclosed its long-term guidance and strategic priorities through fiscal year 2028.
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HPE plans to refocus its portfolio toward higher-growth, higher-margin segments to strengthen long-term profitability.
The company aims to boost earnings and free cash flow over the next several years, enabling greater returns to shareholders.
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HPE expects to drive customer growth and wallet share through GreenLake, its unified cloud platform that simplifies IT and lowers costs.
The company also aims to capitalize on the surging demand for AI infrastructure, particularly among enterprise and sovereign clients, while strengthening its leadership in hybrid cloud solutions.
Cost-Saving Initiative
HPE launched a new initiative called Catalyst to boost growth while driving structural cost savings and efficiency.
The company projects Catalyst to deliver at least $350 million in gross savings by FY28, alongside $600 million in synergies from the Juniper integration.
These savings are projected to reduce costs, enhance adjusted gross and operating profit, and support reinvestment in long-term growth.
Outlook
For the fiscal year 2026, the company projects revenue growth of 5%–10% year-over-year and an adjusted operating profit increase of 10%–18%.
The adjusted operating profit guidance excludes about $2.9 billion in costs related to intangible amortization, stock-based compensation, acquisitions, divestitures, and restructuring efforts.
The company anticipates roughly $650 million in headwinds from interest and other items for the year.
HPE forecasts FY26 adjusted EPS of $2.20–$2.40, excluding about $1.63 per share in after-tax adjustments related to amortization, stock-based compensation, and acquisition-related charges.
HPE sees free cash flow of $1.5 billion and $2.0 billion for the year.
The company plans to increase its dividend by 10% and allocate an additional $3 billion in share repurchase capacity, bringing the total authorization to approximately $3.7 billion.
HPE targets compound annual revenue growth of 5%–7% and adjusted operating profit growth on a pro forma basis of 11%–17%.
By FY28, the company targets generating free cash flow of over $3.5 billion and adjusted EPS of at least $3.00.
Recent Earnings
In September, HPE reported third-quarter earnings of 44 cents per share, which beat the analyst estimate of 43 cents.
Quarterly revenue came in at $9.13 billion, which beat the Street estimate of $8.49 billion.
At that time, HPE raised its fiscal 2025 adjusted EPS guidance to between $1.88 and $1.92, surpassing the $1.85 analyst estimate, and increased its revenue outlook to between $34.34 billion and $34.94 billion, exceeding the $33.45 billion estimate.
Investors can gain exposure to the stock via First Trust S&P 500 Diversified Dividend Aristocrats ETF (NASDAQ:KNGZ) and First Trust Exchange-Traded Fund First Trust S&P 500 Diversified Free Cash Flow ETF (NYSE:FCFY).
Price Action: HPE shares are down 9.07% at $22.77 premarket at the last check on Thursday.
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