Hewlett Packard Enterprise (HPE) shares took a tumble Friday morning after the company delivered one of those classic good news/bad news earnings reports that leaves Wall Street scratching its head.

The Numbers Game

HPE posted adjusted earnings of 62 cents per share, comfortably beating the 58-cent consensus. That's the good part. The not-so-good part? Revenue came in at $9.67 billion, falling short of the $9.93 billion analysts were expecting.

There were some bright spots in the details. The company notched record quarterly gross profit with solid margin expansion across both GAAP and non-GAAP measures compared to last year. Perhaps more telling, HPE's annualized revenue run-rate jumped 63% year-over-year, a sign that its shift toward subscription-based business is gaining real traction.

Segment performance was all over the map. Networking showed strong growth, while Server and Hybrid Cloud retreated. Financial Services basically held the line. Management credited cost discipline, a streamlined portfolio, and structural efficiencies for the improving profitability picture.

Looking Ahead

For the first quarter, HPE expects adjusted earnings between 57 cents and 61 cents per share, which actually tops the 54-cent consensus. But revenue guidance of $9.00 billion to $9.4 billion? That's a miss against the $9.89 billion estimate.

The full-year fiscal 2026 outlook tells a similar story. HPE raised its earnings guidance to a range of $2.25 to $2.45 per share, up from prior guidance and well above the $1.90 consensus. Revenue is projected between $40.12 billion and $41.84 billion, versus expectations of $34.54 billion.

After the initial selloff, HPE shares recovered most of their losses, trading roughly flat at $22.78.