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Hewlett Packard Enterprise (HPE) reported mixed results for 4Q25, beating earnings expectations but falling short on revenue, and issuing a cautious outlook for the near-term due to "lumpy" AI server delivery schedules.

• The company's disappointing revenue is being primarily impacted by the timing of AI server shipments and lower-than-expected U.S. federal spending.
• AI server demand is proving to be uneven. This is due to large government and enterprise customers placing orders with extended lead times or delaying their deployment dates, which defers the revenue recognition to future quarters.
• The decline in its core business segments was notable. Server segment revenue decreased 10% qtr/qtr to $4.5 bln.
• Revenue for hybrid cloud declined 12% yr/yr to $1.4 bln, reflecting generally softer trends in this segment.
• The results are disappointing compared to competitor Dell (DELL), which recently reported a $12.4 bln record in AI server orders and saw its Servers and Networking revenue surge 37% yr/yr in its latest reported quarter.
• On the positive side, HPE commented that the underlying demand environment was strong, with robust server order growth across both traditional and AI products. Management noted that orders were growing faster than revenues in the period.

Briefing.com Analyst Insight:

HPE finds itself in a challenging "show-me" position after reporting a noticeable disparity between booming orders and slowing recognized revenue. While the achievement of a record non-GAAP operating margin and an EPS beat proves effective cost management, the stock sell-off reflects skepticism over the revenue generation timeline, particularly when contrasted with the aggressive growth numbers posted by competitor DELL. The concentration of AI bookings in sovereign customers now accounts for the lion's share of the company's backlog, but this customer profile inherently brings extended lead times and significant lumpiness. The near-term outlook suggests the market must wait until the latter half of FY26 for the majority of these major AI deals to ship and contribute meaningfully to the top line. Until HPE demonstrates a more consistent conversion of its AI pipeline into recognized revenue, the stock is likely to trade at a discount compared to its faster-moving infrastructure peers.