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What changed in Hewlett Packard Enterprise's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Hewlett Packard Enterprise's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+598 added−541 removedSource: 10-K (2024-12-19) vs 10-K (2023-12-22)

Top changes in Hewlett Packard Enterprise's 2024 10-K

598 paragraphs added · 541 removed · 390 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

107 edited+39 added−60 removed73 unchanged
Biggest changeWe also continue to invest in our silicon design capability to accelerate the development and delivery of our technology. For a discussion of risks attendant to our R&D activities, see “Risk Factors—If we cannot successfully execute our go-to-market strategy, including our ongoing transition to an aaS consumption-based business model, our business, and financial performance may suffer” in Item 1A.
Biggest changeWe also continue to invest in our silicon design capability to accelerate the development and delivery of our technology. 7 Table of Conte n t For a discussion of risks attendant to our R&D activities, see “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K under the heading “If we cannot successfully execute our go-to-market strategy, including offering our entire portfolio aaS, our business, operating results, and financial performance may suffer.” Patents Our general policy is to seek patent protection for those inventions likely to be incorporated into our products and services or where obtaining such proprietary rights will improve our competitive position.
The HPE GreenLake edge-to-cloud platform is an open, secure, fully integrated platform that brings a unified experience across the edge, data center, colocation, and cloud. It is automated and easy to consume with capacity available to scale up and down on demand.
The HPE GreenLake cloud is an open, secure, fully integrated platform that brings a unified experience across the edge, data center, colocation, and cloud. It is automated and easy to consume with capacity available to scale up and down on demand.
Financial Services. In our financing business, our primary competitors are captive financing companies, such as IBM Global Financing, Dell Financial Services, and Cisco Capital, as well as banks and other financial institutions. Our primary IT Asset Disposition (“ITAD”) competitors are ERI, Ingram Micro, Sage Sustainable Electronics, and Sims Recycling Solutions.
In our financing business, our primary competitors are captive financing companies, such as IBM Global Financing, Dell Financial Services, and Cisco Capital, as well as banks and other financial institutions. Our primary IT Asset Disposition (“ITAD”) competitors are ERI, Ingram Micro, Sage Sustainable Electronics, and Sims Recycling Solutions.
Our customers range from small-and-medium-sized businesses (“SMBs”) to large global enterprises and governmental entities. Our legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.
Our customers range from small-and-medium-sized businesses to large global enterprises and governmental entities. Our legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.
To enable market access across the globe and aid customers in selecting more sustainable IT solutions, many of our products are certified by eco-labels such as Electronic Product Environment Assessment Tool, TCO Certified, Energy STAR, China SEPA and the China Energy Conservation Program.
To enable market access across the globe and aid customers in selecting more sustainable IT solutions, many of our products are certified by eco-labels such as Electronic Product Environment Assessment Tool, Energy STAR, China SEPA and the China Energy Conservation Program.
A summary of our domestic and international results is set forth in Note 2, “Segment Information,” to our Consolidated Financial Statements in Item 8 of Part II. Approximately 64% of our overall net revenue in fiscal 2023 came from sales outside the United States.
A summary of our domestic and international results is set forth in Note 2, “Segment Information,” to our Consolidated Financial Statements in Item 8 of Part II. Approximately 64% of our overall net revenue in fiscal 2024 came from sales outside the United States.
We recognize the opportunity to innovate technologies for a carbon-constrained world and are committed to delivering products and services that empower our customers to reduce the carbon footprints of their IT estates while also gaining maximum productivity from their IT investments and reducing costs.
We recognize the opportunity to innovate technologies for a carbon-constrained world and are committed to delivering products and solutions that empower our customers to reduce the carbon footprints of their IT estates while also gaining maximum productivity from their IT investments and reducing costs.
Our efforts also are focused on identifying the areas where we believe we can make a unique contribution and where partnering with other leading technology companies will leverage our cost structure and maximize our customers' experiences. Expenditures for R&D were $2.3 billion in fiscal 2023 and $2.0 billion in fiscal 2022 and 2021, respectively.
Our efforts also are focused on identifying the areas where we believe we can make a unique contribution and where partnering with other leading technology companies will leverage our cost structure and maximize our customers' experiences. Expenditures for R&D were $2.2 billion in fiscal 2024, $2.3 billion fiscal 2023, and $2.0 billion in fiscal 2022.
Mottram; Executive Vice President, General Manager of Intelligent Edge Mr. Mottram has served as Executive Vice President and General Manager of our Intelligent Edge business since March 2022. Previously, he served as the President of our Intelligent Edge business from June 2021 to March 2022. Prior to that, Mr.
Philip J. Mottram; Executive Vice President, General Manager of Intelligent Edge Mr. Mottram has served as Executive Vice President and General Manager of our Intelligent Edge business since March 2022. Previously, he served as the President of our Intelligent Edge business from June 2021 to March 2022. Prior to that, Mr.
For a discussion of the risks associated with government regulations that may materially impact us, see “Regulatory and Government Risks” within “Risk Factors” in Item 1A.
For a discussion of the risks associated with government regulations that may materially impact us, see “Regulatory and Government Risks” within “Risk Factors” in Item 1A of Part I.
Consumption-based IT offers solutions to these challenges by providing greater agility, which empowers people to shift from managing infrastructure to driving innovation by leveraging insights from their data, while also eliminating 6 Table of Content capital and operating expenses tied to infrastructure over-provisioning. HPE is distinctly differentiated in delivering a true consumption-based IT experience. • Open platforms.
Consumption-based IT offers solutions to these challenges by providing greater agility, which empowers people to shift from managing infrastructure to driving innovation by leveraging insights from their data, while also eliminating capital and operating expenses tied to infrastructure over-provisioning. HPE is distinctly differentiated in delivering a true consumption-based IT experience. • Open platforms.
Most product life cycles are relatively short, and to 10 Table of Content remain competitive we must develop new products and services, continuously enhance our existing products and services and compete effectively on the basis of the factors listed above, among others.
Most product life cycles are relatively short, and to remain competitive we must develop new products and services, continuously enhance our existing products and services and compete effectively on the basis of the factors listed above, among others.
We believe geographic diversity allows us to meet demand on a worldwide basis for our customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends, and offers us an opportunity to access new markets for maturing products.
International Our products and services are available worldwide. We believe geographic diversity allows us to meet demand on a worldwide basis for our customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends, and offers us an opportunity to access new markets for maturing products.
Through our FS segment, we help customers create investment capacity to accelerate their transformations by helping them free up capital, capture value from older assets, achieve sustainability goals, invest in new technologies as-a-service, and weather financial volatility.
Through our FS segment, we help customers create investment capacity to accelerate their transformations by helping them free up capital, capture value from older assets, achieve sustainability goals, invest in new technologies aaS, and weather financial volatility.
In those countries where we have a direct sales presence, we follow a bifurcated sales operational model with separate go-to-market routes for high-velocity, transactional hardware sales, on the one hand and 7 Table of Content for services and solutions, on the other hand.
In those countries where we have a direct sales presence, we follow a bifurcated sales operational model with separate go-to-market routes for high-velocity, transactional hardware sales, on the one hand and for services and solutions, on the other hand.
Our company always strives to be an engine of innovation, and our approximately 62,000 employees as of October 31, 2023, are proud of the ways our technology enables our customers to achieve meaningful outcomes like curing disease, modernizing farming, addressing world-hunger, and democratizing transportation through autonomous vehicles.
Our company strives to be an engine of innovation, and our approximately 61,000 employees as of October 31, 2024, are proud of the ways our technology enables our customers to achieve meaningful outcomes like curing disease, modernizing farming, addressing world-hunger, and democratizing transportation through autonomous vehicles.
Our inventory management and distribution practices in both building products to order and configuring products to order seek to minimize inventory holding periods by taking delivery of the inventory and manufacturing shortly before the sale or distribution of products to our customers. We purchase materials, supplies, and product subassemblies from a substantial number of vendors.
Our inventory management and distribution practices in both building products to order and configuring products to order seek to minimize inventory holding periods by taking delivery of the inventory and manufacturing shortly before the sale or distribution of products to our customers. 5 Table of Conte n t We purchase materials, supplies, and product subassemblies from a substantial number of vendors.
We have one of the largest go-to-market capabilities in our industry, including a large ecosystem of channel partners, which enables us to market and deliver our product offerings to customers located virtually anywhere in the world.
We have expansive go-to-market capabilities, including a large ecosystem of channel partners, which enables us to market and deliver our product offerings to customers located virtually anywhere in the world.
Our strategy is to deliver superior products, high-value technology support services, and differentiated integrated solutions that combine our infrastructure, software, and services capabilities. Our competitive advantages include our broad end-to-end solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Our strategy is to deliver superior products, high-value technology support services, and differentiated 8 Table of Conte n t integrated solutions that combine our infrastructure, software, and services capabilities. Our competitive advantages include our broad end-to-end solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Intelligent Edge operates in the highly competitive networking and connectivity infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition. Our primary competitors are technology vendors, such as Cisco Systems, Inc., Extreme Networks, Inc., Arista Networks Inc, Palo Alto Networks, Fortinet, and Juniper Networks, Inc.
Intelligent Edge operates in the highly competitive networking and connectivity infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition. Our primary competitors are technology vendors, such as Cisco Systems, Inc., Extreme Networks, Inc., Arista Networks Inc, Palo Alto Networks, Fortinet, Juniper Networks, Ruckus Networks, and Ubiquiti and networking-as-a-service vendors such as Nile and Meter.
As data grows and evolves and enterprises become increasingly distributed, HPE’s edge-to-cloud strategy is uniquely designed to enable customers to securely access, control, and maximize the value of all their workloads and data assets to accelerate business outcomes.
As data grows and evolves, enterprises become increasingly distributed, and customers realize the potential in AI technology, HPE’s edge-to-cloud strategy is uniquely designed to enable customers to securely access, control, and maximize the value of all their workloads and data assets to accelerate business outcomes.
Our primary competitors are compute technology vendors that can design and build solutions that deliver performance scalability and connectivity necessary to handle super-compute and AI workloads, including Dell Technologies Inc., Super Micro Computer, Inc,, Lenovo Group Ltd., IBM, Fujitsu Network Communications, Inc., and Atos Information Technology Incorporated.
Our primary competitors in high performance infrastructure include technology vendors that can design and build solutions that deliver performance scalability and connectivity necessary to handle super-compute and AI workloads, including Dell Technologies Inc., Super Micro Computer, Inc., Lenovo Group Ltd., Fujitsu Network Communications, Inc., and Atos Information Technology Incorporated.
Stockholders may request free printed copies of these documents from: Hewlett Packard Enterprise Company Attention: Investor Relations 1701 East Mossy Oaks Road, Spring, Texas 77389 http://investors.hpe.com/financial/requested-printed-reports 16 Table of Content
Stockholders may request free printed copies of these documents from: Hewlett Packard Enterprise Company Attention: Investor Relations 1701 East Mossy Oaks Road, Spring, Texas 77389 http://investors.hpe.com/financial/requested-printed-reports 15 Table of Conte n t
Board Oversight - Our Board of Directors plays an active role in overseeing our human capital management strategy and programs. Our HR and Compensation Committee provides oversight of our human resources and workforce management programs, including but not limited to those related to corporate culture; compensation plans and policies; diversity and inclusion; and talent acquisition, development, and retention.
Board Oversight - Our Board of Directors oversees our human capital management strategy and programs. Our HR and Compensation Committee provides oversight of our human resources and workforce management programs, including but not limited to those related to corporate culture; compensation plans and policies; diversity and inclusion; and talent acquisition, development, and retention.
We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings.
We encounter strong competition in all areas of our business. We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings.
We recognize the AI market will be driven by computational capability, data-intensive workloads, and the need for specialized architecture; thus, we are targeting three areas: supercomputing, AI infrastructure, and AI platform software.
We recognize the AI market will be driven by computational capability, data-intensive workloads, and the need for specialized architecture; thus, we have been targeting, and continue to target three areas: supercomputing, AI infrastructure, and AI platform software.
As a result of our efforts, our most recent pay equity review demonstrated that we have achieved pay parity for base compensation and bonus targets between male and female team 3 Table of Content members in the U.S. (including among underrepresented ethnicities), U.K., and India, when accounting for job title, time-in-role, experience, and location.
As a result of our efforts, our most recent pay equity review demonstrated that we have achieved pay parity for base compensation and bonus targets between male and female team members in the U.S. (including among underrepresented ethnicities), and a dozen additional countries throughout the world, when accounting for job title, time-in-role, experience, and location.
Our primary competitors are technology vendors, such as Dell Technologies Inc., Super Micro Computer, Inc., Cisco Systems, Inc., Lenovo Group Ltd., International Business Machines Corporation (“IBM”), and NetApp Inc. In certain regions, we also experience competition from local companies and from generically branded or “white-box” manufacturers.
Our primary competitors in data center infrastructure are technology vendors, such as Dell Technologies Inc., Super Micro Computer, Inc., Cisco Systems, Inc., Lenovo Group Ltd. In certain regions, we also experience competition from local companies and from generically branded or “white-box” manufacturers.
In Hewlett Packard Labs, in addition to the aforementioned HPC & AI-related work, we are focused on disruptive innovation and applied research in collaboration with other HPE business groups to deliver differentiated intellectual property. Our innovation agenda is focused on developing technologies in the areas of system architecture, networking, AI, accelerators, quantum computing, silicon photonics, and sustainability.
In Hewlett Packard Labs, we are focused on disruptive innovation and applied research in collaboration with other HPE business groups to deliver differentiated intellectual property. Our innovation agenda is focused on developing technologies in the areas of system architecture, networking, AI, sustainability, edge-to-cloud, quantum computing, and sustainability.
Russo was Senior Vice President and General Manager of the Cloud Services business unit at VMware from May 2020 to September 2021, the Chief Technology Officer and Executive Vice President of Global Technology & Operations at Iron Mountain, Inc. from March 2017 to May 2020, and Senior Vice President and General Manager of Enterprise Storage and Software at EMC Corp. from January 2011 to January 2017.
Russo was Senior Vice President and General Manager of the Cloud Services business unit at VMware from May 2020 to September 2021 and the Chief Technology Officer and Executive Vice President of Global Technology & Operations at Iron Mountain, Inc. from March 2017 to May 2020. Additionally, Ms.
Supply Chain Responsibility and Human Rights We manage our supply chain to help reduce risk, improve product quality, achieve environmental and social goals, and improve overall performance and value creation for our customers, partners, and suppliers.
Supply Chain Responsibility and Human Rights We manage our supply chain to help reduce risk, improve product quality, achieve environmental and social goals, and improve overall performance and value creation for our customers, partners, and suppliers. We are conscious of the importance of the responsible use of our products.
Jeremy K. Cox; Senior Vice President, Chief Financial Officer, Corporate Controller, Chief Tax Officer, and Principal Account Officer Mr. Cox has served as our Senior Vice President, Chief Financial Officer, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer since August 2023.
Jeremy K. Cox; Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer Mr. Cox has served as our Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer since January 2024.
Within our Ethernet Switch portfolio, we are investing in new Data Center Networking platforms and features to expand our total addressable market within our core market. We are leveraging the HPE GreenLake edge-to-cloud platform to provide consistent access to our aaS capabilities and to enable new network-as-a-service business models.
In our Ethernet Switch portfolio, we are investing in new Data Center Networking platforms and features to expand our total addressable market to complement the campus and branch segment. We leverage the HPE GreenLake cloud to provide consistent access to our aaS capabilities and enable new business models, including network-as-a-service.
We have expanded our security investments with the recent acquisition of Security Service Edge provider Axis Security and are integrating security with our software-defined wide area network (“SD-WAN”) capabilities to deliver a single vendor Secure Access Services Edge solution.
We have expanded our security capabilities with last year’s acquisition of Secure Service Edge (“SSE”) provider Axis Security and delivering stand-alone SSE, and integrating security with our software-defined wide area network (“SD-WAN”) capabilities to deliver a single-vendor Secure Access Services Edge solution.
Patents generally have a term of up to 20 years from the date they are filed. As our patent portfolio has been built over time, the remaining terms of the individual patents across our patent portfolio vary.
As of October 31, 2024, our worldwide patent portfolio included approximately 13,000 issued and pending patents. Patents generally have a term of up to 20 years from the date they are filed. As our patent portfolio has been built over time, the remaining terms of the individual patents across our patent portfolio vary.
Our HPE GreenLake edge-to-cloud platform provides open cloud application programming interfaces to our partners, enabling them to better offer their unique solutions to customers. • Custom financial solutions.
Our HPE GreenLake cloud provides open cloud application programming interfaces to our partners, enabling them to better offer their unique solutions to customers. 4 Table of Conte n t • Custom financial solutions.
Mottram 55 Executive Vice President, General Manager of Intelligent Edge Jeremy K. Cox 46 Senior Vice President, Chief Financial Officer, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer Kirt P. Karros 54 Senior Vice President, Treasurer and Investor Relations Antonio Neri; President and Chief Executive Officer Mr.
MacDonald 56 Executive Vice President, General Manager of Server Philip J. Mottram 56 Executive Vice President, General Manager of Intelligent Edge Jeremy K. Cox 47 Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer Kirt P. Karros 55 Senior Vice President, Treasurer and Financial Planning & Analysis Antonio Neri; President and Chief Executive Officer Mr.
From May 2018 to February 2023, she served as the Senior Vice President and Chief Operating Officer of HPE Financial Services, and from 14 Table of Content August 2015 to May 2018, as the Vice President Global Accounts, Sales, Marketing and Managing Director Asset Management of HPE Financial Services. Prior to that, Ms.
From May 2018 to February 2023, she served as the Senior Vice President and Chief Operating Officer of HPE Financial Services, and from August 2015 to May 2018, as the Vice President Global Accounts, Sales, Marketing and Managing Director Asset Management of HPE Financial Services. Fidelma Russo; Executive Vice President, General Manager of Hybrid Cloud and Chief Technology Officer Ms.
The class of similar product categories within each segment which accounted for more than 10% of our consolidated net revenue in each of the past three years was as follows: • Fiscal 2023 - Compute products, Intelligent Edge products, HPC & AI products • Fiscal 2022 - Compute products, Compute services, Intelligent Edge products • Fiscal 2021 - Compute products, Compute services, Storage products The Company has one customer which represented 11% of the Company's total net revenue in fiscal 2023, primarily within the Intelligent Edge and Compute segments.
The class of similar product categories within each segment which accounted for more than 10% of our consolidated net revenue in each of the past three years was as follows: • Fiscal 2024 - Server products, Server services, Intelligent Edge products, Hybrid Cloud products • Fiscal 2023 - Server products, Intelligent Edge products, Server services, Hybrid Cloud products • Fiscal 2022 - Server products, Server services, Hybrid Cloud products, Intelligent Edge products The Company had two distributors which represented approximately 14% and 11% of the Company's total net revenue in fiscal 2024, primarily within the Intelligent Edge and Server segments.
Research and Development Innovation is a key element of our culture and critical to our success. Our research and development efforts (“R&D”) are focused on designing and developing products, services, and solutions that anticipate customers' changing needs and desires and emerging technological trends.
Our research and development efforts (“R&D”) are focused on designing and developing products, services, and solutions that anticipate customers' changing needs and desires and emerging technological trends.
Our HPE GreenLake edge-to-cloud platform is a centerpiece of our strategy; it accelerates multi-generation IT transformation through a unified cloud services experience that empowers customers to access, analyze, and extract value from their data across public clouds, data centers, colocation facilities, and at the edge.
In hybrid cloud, we have redefined the cloud space by delivering an experience that is hybrid by design with our HPE GreenLake cloud as the centerpiece of our strategy; it accelerates multi-generation IT transformation through a unified cloud-native and AI-driven experience that empowers customers to access, analyze, and extract value from their data across public clouds, data centers, colocation facilities, and at the edge.
FS is also an enabler of our consumption-based IT models by helping spread our upfront solution costs over the duration of the customer contract. Through Financial Services' Technology Renewal Centers, we are helping customers achieve their own sustainability goals by recovering over 3 million IT assets in fiscal 2022 and refurbishing more than 82% for reuse. • Experienced leadership team.
FS is also an enabler of our consumption-based IT models by helping spread our upfront solution costs over the duration of the customer contract. Through FS’ Technology Renewal Centers, we are helping customers achieve their own sustainability goals by refurbishing technology assets for reuse. • Experienced leadership team. Our management team has an extensive track record of performance and execution.
In this role, she leads HPE Financial Services, the global financing and asset management organization that supports HPE’s edge-to-cloud strategy, and helps customers and partners accelerate their transformation.
Gold has served as Executive Vice President, President and Chief Executive Officer of HPE Financial Services since February 2023. In this role, she leads HPE Financial Services, the global financing and asset management organization that supports HPE’s edge-to-cloud strategy, and helps customers and partners accelerate their transformation.
We are also investing in automation, machine learning, and AI-based network operations to optimize user experience and improve operator efficiency, as exemplified by our cloud-native Aruba Central cloud service that provides manageability for our entire portfolio, including Wireless LAN, Campus & Data Center Switches, and SD-Branch.
We also are investing in automation, machine learning, and AI-based network operations to optimize user experience and improve operator efficiency, as exemplified by our cloud-native Aruba Central cloud service, which is expected to provide manageability across our entire portfolio, including Wireless LAN, Ethernet switching, SD-WAN, and security.
For a discussion of certain risks attendant to our international operations, see “Risk Factors—Due to the international nature of our business, political or economic changes and the laws and regulatory regimes applying to international transactions or other factors could harm our future revenue, costs and expenses, and financial condition,” and “Risk Factors—We are exposed to fluctuations in foreign currency exchange rates” in Item 1A of Part I, “Quantitative and Qualitative Disclosure about Market Risk” in Item 7A of Part II, and Note 13, “Financial Instruments,” to our Consolidated Financial Statements in Item 8 of Part II.
For a discussion of certain risks attendant to our international operations, see “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K under the headings “Due to the international nature of our business, political or economic changes and the laws and regulatory regimes applying to international transactions or other factors could harm our future revenue, costs and expenses, and financial condition,” and “We are exposed to fluctuations in foreign currency exchange rates,” “Quantitative and Qualitative Disclosure about Market Risk” in Item 7A of Part II, and Note 13, “Financial Instruments,” to our Consolidated Financial Statements in Item 8 of Part II. 6 Table of Conte n t Research and Development Innovation is a key element of our culture and critical to our success.
Our vision to be the edge-to-cloud company has led us to innovate our solutions across connectivity, cloud, and data. We have shifted our mix of products and services, and how we deliver that mix to customers. HPE has evolved to a platform-based model, fueled by a portfolio richer in software and services.
We have shifted our mix of products and services, and how we deliver that mix to customers. HPE has evolved to a platform-based model, fueled by a portfolio richer in software and services.
In the midst of the above, we continually seek feedback from our team members to better understand and improve their experiences and identify opportunities to continually strengthen our culture.
In the midst of the above, we continually seek feedback from our team members to better understand and improve their experiences and identify opportunities to continually strengthen our culture. Diversity, Equity, and Inclusion - At HPE, we are committed to cultivating a diverse and inclusive workplace.
It offers true pay per use consumption so customers only pay for what they use, and they can have the entire hybrid cloud experience managed for them through our HPE Managed Services offerings. • Comprehensive portfolio. We have a distinctive and industry leading portfolio of edge-to-cloud solutions and capabilities to help accelerate our customers' digital transformations.
It offers true pay per use consumption so customers only pay for what they use, and they can have the entire hybrid cloud experience managed for them through our HPE Managed Services offerings. • Comprehensive portfolio.
Financial Services Financial Services (“FS”) 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.
Upon closing of the pending acquisition of Juniper Networks, we expect to offer an even more comprehensive portfolio of networking solutions. 3 Table of Conte n t Financial Services Financial Services (“FS”) 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.
Included in the R&D work currently taking place at the Company are the following initiatives: In Compute, we are developing high quality next-generation compute solutions (servers, server attached options, and software) that integrate the latest industry technology, which coupled with other innovations from HPE are aligned to the requirements of our customers.
Included in the R&D work currently taking place at the Company are the following initiatives: In Server, we are developing high-quality next-generation compute solutions that encompass servers, server-attached options, and software, integrating the latest industry technology and aligning with our customers' evolving needs.
Prior to that, he served as our Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer from July 2022 to August 2023. Previously, he served as Senior Vice President, Global Tax and Head of Products and Services Finance from May 2021 to July 2022. Prior to that, Mr.
Prior to that, he served as Senior Vice President, Interim Chief Financial Officer, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer from August 2023 to January 2024, as Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer from July 2022 to August 2023, as Senior Vice President, Global Tax and Head of Products and Services Finance from May 2021 to July 2022, and as Senior Vice President, Global Tax, Financial Planning and Analysis, and Global Functions Finance from November 2018 to May 2021, among numerous other leadership positions.
Beginning in the first quarter of fiscal 2024, we will report our results under the realigned six reportable segments. Our Strengths We believe that we possess a number of competitive advantages that distinguish us from our competitors, including: • Edge-to-cloud strategy and solutions uniquely solve customer challenges.
Our Strengths We believe that we possess a number of competitive advantages that distinguish us from our competitors, including: • Edge-to-cloud strategy and solutions uniquely solve customer challenges.
Our competitive advantages include our deep expertise and capabilities designing and delivering these solutions, broad end-to-end heterogeneous and open solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Our competitive advantage includes our broad end-to-end solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem. Financial Services.
Schultz was a partner in the litigation practice at Morgan, Lewis & Bockius LLP, a law firm, from March 2005 to September 2008, where, among other clients, he supported HP Co. as external counsel on a variety of litigation and regulatory matters. Alan May; Executive Vice President and Chief People Officer Mr.
Schultz served as Deputy General Counsel for Litigation, Investigations and Global Functions at HP Co. from September 2008 to April 2012 and as a partner in the litigation practice at Morgan, Lewis & Bockius LLP, a law firm, where, among other clients, he supported HP Co. as external counsel on a variety of litigation and regulatory matters.
The HPE Board of Directors, including through its committees, provides oversight of our ESG strategy, risks, practices, policies, and disclosures, to support integration with our core business strategy. Sustainable Value Creation - Sustainability performance is a core business discipline within HPE.
The HPE Board of Directors, including through its committees, provides oversight of our Living Progress strategy, risks, practices, policies, and disclosures, to support integration with our core business strategy. Sustainability performance is a core business discipline within HPE. HPE aims to become a net-zero enterprise by 2040, with interim targets set across our value chain for 2030.
For a discussion of risks attendant to intellectual property rights, see “Risk Factors—Our financial performance may suffer if we cannot continue to develop, license or enforce the intellectual property rights on which our businesses depend” and “—Our products and services depend in part on intellectual property and technology licensed from third parties” in Item 1A.
For a discussion of risks attendant to intellectual property rights, see “Risk factors” in Item 1A of Part I of this Annual Report on Form 10-K under the headings “Our financial performance may suffer if we cannot continue to develop, license or enforce the intellectual property rights on which our businesses depend” and “Our products and services depend in part on intellectual property and technology licensed from third parties.” Seasonality From time to time, the markets in which we sell our products, services, and solutions experience weak economic conditions that may negatively affect sales.
See “Risk Factors—Our uneven sales cycle and supply chain disruptions make planning and inventory management difficult and future financial results less predictable” in Item 1A. Competition We have a broad technology portfolio of enterprise IT infrastructure products, solutions, and services which includes our as-a-service offerings. We encounter strong competition in all areas of our business.
See “Risk factors” in Item 1A of Part I of this Annual Report on Form 10-K under the heading “Our uneven sales cycle and supply chain disruptions make planning and inventory management difficult and future financial results less predictable.” Competition We have a broad technology portfolio of enterprise IT infrastructure products, solutions, and services which includes our aaS offerings.
Prior to joining HP Inc. in 2008, Mr. Cox was Senior Tax Counsel for Electronic Data Systems. 15 Table of Content Kirt P. Karros; Senior Vice President, Treasurer and Investor Relations Mr. Karros has served as our Senior Vice President, Treasurer and Investor Relations since May 2022.
Prior to joining HP Inc. in 2008, Mr. Cox was Senior Tax Counsel for Electronic Data Systems. Kirt P. Karros; Senior Vice President, Treasurer and Financial Planning & Analysis Mr.
While the HPE Board of Directors and all of its committees take an integrated, rather than siloed, approach to providing oversight of ESG matters, including environmental sustainability, supply chain responsibility, and human rights, our Nominating, Governance and Social Responsibility Committee is primarily responsible for oversight of our broader ESG strategy, initiatives, risks, policies, and disclosures.
While the HPE Board of Directors and all of its committees take an integrated, rather than siloed, approach to providing oversight of Living Progress matters, including environmental sustainability, supply chain responsibility, and human rights, our Nominating, Governance and Social Responsibility Committee is primarily responsible for oversight of our broader Living Progress strategy, initiatives, risks, and policies. 11 Table of Conte n t Material Government Regulations Our business activities are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations.
Seasonality From time to time, the markets in which we sell our products, services, and solutions experience weak economic conditions that may negatively affect sales. We experience some seasonal trends in the sale of our products and services. For example, European sales are often weaker in the summer months.
We experience some seasonal trends in the sale of our products and services. For example, European sales are often weaker in the summer months.
Our commitment is supported by our Net-Zero Roadmap, which defines the levers we plan to prioritize to enable us to deliver on our near- and long-term carbon emissions reduction targets and outlines key assumptions with respect to our reduction targets. In 2023, the majority of our greenhouse gas emissions (“GHG”) resulted from our customers' use of our products and solutions.
These climate targets are approved by the Science Based Target initiative and align with the latest climate science. Our commitment is supported by our Net-Zero Roadmap, which defines the levers we plan to prioritize to enable us to deliver on our near- and long-term carbon emissions reduction targets and outlines key assumptions with respect to our reduction targets.
Schultz previously served as Executive Vice President, General Counsel and Secretary from November 2015 to December 2017, performing a similar role at HP Co. from April 2012 to November 2015. Prior to that, Mr. Schultz served as Deputy General Counsel for Litigation, Investigations and Global Functions at HP Co. from September 2008 to April 2012. Before joining HP Co., Mr.
Prior to that, he served as Executive Vice President, Chief Legal and Administrative Officer and Secretary from December 2017 to July 2020 and as Executive Vice President, General Counsel and Secretary from November 2015 to December 2017, performing a similar role at HP Co. from April 2012 to November 2015. Prior to that, Mr.
Previously, he served as our Senior Vice President, Finance and Treasurer from November 2015 to May 2022. Prior to that, Mr. Karros served in a similar role at HP Co., leading its Treasury and Investor Relations from May 2015 to October 2015. He also has served as the Executive Chairman of H3C Technologies since August 2022. Mr.
Previously, he served as our Senior Vice President, Finance and Treasurer from November 2015 to May 2022. Prior to that, Mr. Karros served in a similar role at HP Co., leading its treasury and investor relations functions. 14 Table of Conte n t Available Information Our website is located at www.hpe.com.
In our software platform for AI model development and deployment, we both compete and cooperate with cloud service providers and start-up companies that deliver platforms for AI model training, tuning, and inferencing. Similar to the compute space, our strategy is to deliver superior products, high-value technology support services, and differentiated integrated solutions that combine our infrastructure, software, and services capabilities.
In our software platform for AI model development and deployment, we both compete and cooperate with cloud service providers and start-up companies that deliver platforms for AI model training, tuning, and inferencing.
Corporate Investments and Other 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; the Communications and Media Solutions business (“CMS”), which primarily offers software and related services to the telecommunications industry and includes Athonet, which provides private mobile core networks to enterprises and communication services providers; the HPE Software business, which offers the HPE Ezmeral Software Container Platform and HPE Ezmeral Software Data Fabric; OpsRamp which provides a software-as-a-service platform for managed service providers and enterprise IT teams to monitor and manage their cloud and on-premises (“hybrid”) infrastructure; and Hewlett Packard Labs, which is responsible for research and development.
Corporate Investments and Other Corporate Investments and Other includes the Advisory and Professional Services business, which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities; the Communications and Media Solutions business, which primarily offers software and related services to the telecommunications industry; and Hewlett Packard Labs, which is responsible for research and development.
We conduct a number of compensation analyses in other countries to provide competitive and equitable pay and, where permissible, we intend to incorporate similar third-party pay assessments into our existing processes.
We conduct a number of compensation analyses in other countries to provide competitive and equitable pay.
We have identified four key cultural beliefs that guide how we lead on a daily basis: accelerating what’s next, bold moves, the “power of yes we can,” and being a force for good. We embed these beliefs in a deep-rooted DNA that puts customers first, enabling us to partner, innovate, and act with integrity.
Our Culture - We recognize the importance of talent and culture to the success of HPE and our ability to fulfill our purpose. We have identified four key cultural beliefs that guide how we lead on a daily basis: accelerating what’s next, bold moves, the “power of yes we can,” and being a force for good.
Prior to that, he served as Senior Vice President and General Manager of the Compute Solutions group of the then Hybrid IT business segment, from November 2018 to February 2020. Mr. MacDonald previously served as Vice President and General Manager of BladeSystem from August 2015 to October 2018, having first joined HP Co. in 1996. Philip J.
Prior to that, he served as Executive Vice President and General Manager of our Compute business from March 2022 to January 2024, as Senior Vice President and General Manager of our Compute business from February 2020 to March 2022, and as Senior Vice President and General Manager of the Compute Solutions group of the then Hybrid IT business segment, from November 2018 to February 2020.
Pay Equity - We believe people should be paid equitably for what they do and how they do it, regardless of their gender, race, or other personal characteristics.
Our annual talent and succession review, conducted with our CEO and Executive Committee, aims to accelerate talent development, enhance succession pipelines, and improve diversity in our key positions. Pay Equity - We believe people should be paid equitably for what they do and how they do it, regardless of their gender, race, or other personal characteristics.
We believe that we are differentiated from our competition in the ability to capture significant value from the growing AI market through our intellectual property portfolio, trusted expertise, and long-term sustained market leadership in supercomputing. 2 Table of Content Human Capital Resources At HPE we are united by our purpose, which is to advance the way people live and work.
We believe that we are differentiated from our competition by our unique and compelling value proposition, which positions us to capture significant value from the growing AI market through our intellectual property portfolio, trusted expertise, and long-term sustained market leadership in supercomputing. The pending acquisition of Juniper Networks, Inc.
Our management team has an extensive track record of performance and execution. We are led by our President and Chief Executive Officer, Antonio Neri, who has proven experience in developing transformative business models, building global brands, and driving sustained growth and expansion in the technology industry. Mr.
We are led by our President and Chief Executive Officer, Antonio Neri, who has proven experience in developing transformative business models, building global brands, and driving sustained growth and expansion in the technology industry. Mr. Neri's experience includes more than 25 years combined at HPE and Hewlett-Packard Company (“HP Co.”) in various leadership positions.
Our strategy is to deliver superior enterprise wired and wireless local-area networking components and software, high-value technology support services, and differentiated integrated solutions that combine our infrastructure, software, and services capabilities. Our competitive advantage includes our broad end-to-end solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Our strategy is to deliver superior enterprise wired and wireless local-area, wide-area and data-center networking components and software, routing technology, high-value technology support services, and differentiated integrated solutions that combine our infrastructure, software, and services capabilities.
May has served as our Executive Vice President, Chief People Officer since June 2015. At Hewlett Packard Enterprise, he leads a global HR function, driving business growth and transformation through employee engagement; diversity, equity and inclusion; talent management; rewards; and culture development.
Kristin Major; Executive Vice President and Chief People Officer Ms. Major has served as our Executive Vice President, Chief People Officer since February 2024, leading the global HR function, driving business growth and transformation through employee engagement; performance-led talent management; comprehensive rewards; and culture development.
We combine our software-defined infrastructure and services capabilities to provide what we believe is the strongest portfolio of enterprise solutions in the IT industry.
We have a distinctive and industry leading portfolio of edge-to-cloud solutions and capabilities to help accelerate our customers' digital transformations and help them capture the opportunity that AI presents for their businesses. We combine our software-defined infrastructure and services capabilities to provide what we believe is the strongest portfolio of enterprise solutions in the IT industry.
Material Government Regulations Our business activities are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Costs and accruals incurred to comply with these governmental regulations are 12 Table of Content presently not material to our capital expenditures, results of operations and competitive position.
Costs and accruals incurred to comply with these governmental regulations are presently not material to our capital expenditures, results of operations and competitive position.
A discussion of certain factors potentially affecting our operations is set forth in Item 1A, “Risk Factors.” Compute Our Compute portfolio consists of both general-purpose servers for multi-workload computing and workload-optimized servers to deliver the best performance and value for demanding applications.
A discussion of certain factors potentially affecting our operations is set forth in Item 1A of Part I, “Risk Factors.” Server Our Server segment offerings consist of general-purpose servers for multi-workload computing and workload-optimized servers to deliver the high 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), artificial intelligence, data analytics, and transaction processing workloads for government and commercial customers globally.
Intelligent Edge The Intelligent Edge business is comprised of a portfolio of secure edge-to-cloud solutions operating under the Aruba brand that includes wired and wireless local area network (“LAN”), campus, branch, and data center switching, software-defined wide-area networking, network security, and associated services that enable secure connectivity for businesses of any size.
Hybrid Cloud segment also includes data lifecycle management and protection through our suite of offerings, including Zerto Disaster Recovery. Intelligent Edge The Intelligent Edge segment offers wired and wireless local area networks, campus, branch, and data center switching, software-defined wide-area-networks, private and public cellular network software, network security, and associated services that enable secure connectivity for businesses of any size.
Gold 65 Executive Vice President, President and Chief Executive Officer, HPE Financial Services Fidelma Russo 60 Executive Vice President, Chief Technology Officer, and General Manager of Hybrid Cloud Justin Hotard 49 Executive Vice President, General Manager of HPC & AI Neil B. MacDonald 55 Executive Vice President, General Manager of Compute Philip J.
Schultz 60 Executive Vice President, Chief Operating and Legal Officer Kristin Major 52 Executive Vice President and Chief People Officer Gerri A. Gold 66 Executive Vice President, President and Chief Executive Officer, HPE Financial Services Fidelma Russo 61 Executive Vice President, Chief Technology Officer, and General Manager of Hybrid Cloud Neil B.
Sales, Marketing, and Distribution We manage our business and report our financial results based on the segments described above.
Our senior management team has many years of experience in our industry and possesses extensive knowledge of and experience in the enterprise IT business and the markets in which we compete. Sales, Marketing, and Distribution We manage our business and report our financial results based on the segments described above.
We are expanding our wireless access portfolio to include 4G, LTE, and 5G cellular to complement our leadership position in Wi-Fi, Bluetooth, and Zigbee, with an emphasis on hybrid deployments.
We are expanding our wireless access portfolio to include new Wi-Fi (e.g., Wi-Fi 7) and private cellular (4G, LTE, and 5G) products to complement our existing portfolio.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSee also the risk factors below under the heading “Risks Related to Prior Separations.” Risks associated with business combination and investment transactions include the following, any of which could adversely affect our financial results, including our effective tax rate: • We may not successfully combine product or service offerings or fully realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to retain employees, customers, distributors, and suppliers; (2) increase in unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations; and (3) significant increase in costs and expenses, including those related to severance pay, early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans. • Our ability to conduct due diligence with respect to business combination and investment transactions, and our ability to evaluate the results of such due diligence, is dependent upon the veracity and completeness of statements and disclosures made or actions taken by third parties or their representatives.
Biggest changeRisks associated with business combination and investment transactions include the following, any of which could adversely affect our financial results, including our effective tax rate: • We may not successfully combine product or service offerings or realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to execute on our business strategy; (2) failure to coordinate sales and marketing efforts to effectively position our capabilities; (3) failure to retain employees, customers, distributors, and suppliers or attract new business and operational relationships; (4) increase in unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations; and (5) pay, early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans. • We may fail to successfully and efficiently (1) integrate financial forecasting and controls, procedures and reporting cycles; (2) consolidate and integrate corporate, information technology, finance and administrative infrastructures; (3) coordinate and integrate operations, including in countries in which we have not previously operated; (4) integrate employees and related human capital management systems and benefits; or (5) address redundant processes and functions in an adequate manner (thereby impacting our ability to achieve all or any of the anticipated synergies) • Our ability to conduct due diligence with respect to business combination and investment transactions, and our ability to evaluate the results of such due diligence, is dependent upon the veracity and completeness of statements and disclosures made or actions taken by third parties or their representatives.
Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, intellectual property, or sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such data as a result of fraud, trickery, or other forms of deception, could expose us, our customers, or the individuals affected to a risk of loss or misuse of this information; result in regulatory fines, litigation, and potential liability for us; damage our brand and reputation; or otherwise harm our business.
Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, intellectual property, or sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such data as a result of fraud or other forms of deception, could expose us, our customers, or the individuals affected to a risk of loss or misuse of this information; result in regulatory fines, litigation, and potential liability for us; damage our brand and reputation; or otherwise harm our business.
Additional impacts from cybersecurity incidents could include remediation costs to our customers, suppliers, or distributors, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to our competitiveness, stock price, and long-term shareholder value.
Additional impacts from cybersecurity incidents could include reimbursement of remediation costs to our customers, suppliers, or distributors, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to our competitiveness, stock price, and long-term shareholder value.
Our most critical accounting estimates are described in the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations.” In addition, as discussed in Note 1, “Overview and Summary of Significant Accounting Policies—Use of Estimates” and Note 17, “Litigation and Contingencies,” to our Consolidated Financial Statements in Item 8 of Part II, we make certain estimates, including decisions related to provisions for legal proceedings and other contingencies.
Our most critical accounting estimates are described in the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations.” In addition, as discussed in Note 1, “Overview and Summary of Significant Accounting Policies—Use of Estimates” and Note 17, “Litigation, Contingencies, and Commitments” to our Consolidated Financial Statements in Item 8 of Part II, we make certain estimates, including decisions related to provisions for legal proceedings and other contingencies.
As competition for highly skilled employees in our industry has grown increasingly intense, we have experienced, and may in the future experience, higher than anticipated levels of employee attrition, which has resulted in increased costs to hire new employees with the desired skills and may do so again in the future.
As competition for highly skilled employees in our industry has grown increasingly intense, we have in the past experienced, and may in the future experience, higher than anticipated levels of employee attrition, which has resulted in increased costs to hire new employees with the desired skills and may do so again in the future.
Additionally, we have at times experienced, and may experience, other security issues that are not results of any action or attack from malicious parties, whether due to employee or insider error or malfeasance, system errors or vulnerabilities in our or other parties’ systems.
Additionally, we have at times experienced, and may experience, other security issues that are not the results of any action or attack from malicious parties, whether due to employee or insider error or malfeasance, system errors or vulnerabilities in our or other parties’ systems.
In addition, our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of new information in the course of our tax return preparation process.
In addition, our effective tax rate in the future could be adversely affected by acquisitions, changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of new information in the course of our tax return preparation process.
Our contracts with federal, state, provincial, and local governmental customers are subject to various government procurement laws and regulations, required contract provisions, and other requirements relating to contract formation, administration, and performance, as well as local content, manufacturing, and security requirements.
Our contracts with federal, state, provincial, and local governmental customers are subject to various government procurement laws and regulations, required contract provisions, and other requirements relating to contract formation, administration, and performance, as well as local content, manufacturing, information security and security requirements.
Additionally, transition to this business model also means that our historical results, especially those from before the transition, may not be indicative of future results, which may adversely affect our ability to accurately forecast our future operating results.
Additionally, implementing this business model also means that our historical results, especially those from before the transition, may not be indicative of future results, which may adversely affect our ability to accurately forecast our future operating results.
Such variables have in the past negatively impacted our financial performance, and may do so again in the future. Delays or reductions in IT spending by our customers or potential customers could have a material adverse effect on demand for our products and services, which could result in a significant decline in revenue.
Such variables have in the past negatively impacted our financial performance, and may do so again in the future. Delays or reductions in discretionary IT spending by our customers or potential customers have had, and in the future could have a material adverse effect on demand for our products and services, which could result in a significant decline in revenue.
Evolving stakeholder expectations and our efforts and ability to manage these issues and accomplish our goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have adverse impacts on our business, including on our stock price.
Evolving stakeholder expectations and our efforts and ability to manage these issues and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have adverse impacts on our business, including on our stock price.
In addition, volatility and disruption in the financial sector and capital markets and other events negatively affecting macroeconomic conditions or contributing to the instability or volatility thereof, such as rising interest rates, have from time to time in the past impacted, and may in the future impact, our liquidity, capital position, and access to capital markets.
In addition, volatility and disruption in the financial sector and capital markets and other events negatively affecting macroeconomic conditions or contributing to the instability or volatility thereof, such as changing interest rates, have from time to time in the past impacted, and may in the future impact, our liquidity, capital position, and access to capital markets.
We may fail to identify significant issues with the acquired company’s product quality, financial disclosures, accounting practices or internal control deficiencies or all of the factors necessary to estimate reasonably accurate costs, timing and other matters. • In order to complete a business combination and investment transaction, we may issue common stock, potentially creating dilution for our existing stockholders or we may enter into financing arrangements, which could affect our liquidity and financial condition. • For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls, which could impact our exposure to data security incidents and potentially increase anticipated costs or time to integrate the business. 20 Table of Content • Business combination and investment transactions may lead to litigation, which could impact our financial condition and results of operations. • We have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination and investment transaction becomes impaired, we may be required to incur additional material charges relating to the impairment of those assets. • For a divestiture, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, or we may dispose of a business at a price or on terms that are less desirable than we had anticipated. • The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.
We may fail to identify significant issues with the acquired company’s product quality, financial disclosures, workplace culture, accounting practices or internal control deficiencies or all of the factors necessary to estimate reasonably accurate costs, timing and other matters. • In order to complete a business combination and investment transaction, we may issue common stock, potentially creating dilution for our existing stockholders or we may enter into financing arrangements, which could affect our liquidity and financial condition. 22 Table of Conte n t • For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls, which could impact our exposure to data security incidents and potentially increase anticipated costs or time to integrate the business. • Business combination and investment transactions may lead to litigation, which could impact our financial condition and results of operations. • We have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination and investment transaction becomes impaired, we may be required to incur additional material charges relating to the impairment of those assets. • For a divestiture, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, or we may dispose of a business at a price or on terms that are less desirable than we had anticipated. • The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.
This collective amount of debt could have important adverse consequences to us and our investors, including requiring a substantial portion of our cash flow from operations to make principal and interest payments; making it more difficult to satisfy other obligations; increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; increasing our vulnerability to general adverse economic and industry conditions; reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; limiting our flexibility in planning for, or reacting to, changes in our business and industry; and limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase our common stock.
This collective 30 Table of Conte n t amount of debt could have important adverse consequences to us and our investors, including requiring a substantial portion of our cash flow from operations to make principal and interest payments; making it more difficult to satisfy other obligations; increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; increasing our vulnerability to general adverse economic and industry conditions; reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; limiting our flexibility in planning for, or reacting to, changes in our business and industry; and limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase our common stock.
The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income. The Organisation for Economic Co-operation and Development, an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%.
The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income. The Organization for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%.
Given our broad and diverse network environment, resource limitations, and operational constraints, we have in the past failed, and may in the future fail, to patch certain security vulnerabilities in time to prevent successful disruptions of our infrastructure or expose information.
Given our broad and diverse network environment, resource limitations, and operational constraints, we have in the past failed, and may in the future fail, to patch certain security vulnerabilities in time to prevent successful disruptions of our infrastructure or exposure of information.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the United States, Puerto Rico, Czech Republic, Mexico, China, Malaysia, Taiwan, South Korea, and Singapore.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the United States, Puerto Rico, Costa Rica, Czech Republic, Malaysia, Mexico, China, Taiwan, South Korea, and Singapore.
This may cause those government contractors to become unable to meet their obligations under contracts with us. 29 Table of Content Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance. We are subject to income and other taxes in the United States and numerous foreign jurisdictions.
This may cause those government contractors to become unable to meet their obligations under contracts with us. Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance. We are subject to income and other taxes in the United States and numerous foreign jurisdictions.
Given the wide variety of solutions that we 17 Table of Content offer, the large and diverse distribution of our suppliers and contract manufacturers, and the long lead times required to manufacture, assemble, and deliver certain solutions, problems have, from time to time in the past, arisen, and could in the future arise, in production, planning, and inventory management that could harm our business.
Given the wide variety of solutions that we offer, the large and diverse distribution of our suppliers and contract manufacturers, and the long lead times required to manufacture, assemble, and deliver certain solutions, problems have, from time to time in the past, arisen, and could in the future arise, in production, planning, and inventory management that could harm our business.
As such, our future business and financial performance could suffer due to a variety of international factors in addition to those otherwise already disclosed, including: • ongoing uncertainties as a result of instability or changes in geopolitical conditions, including military or political conflicts, such as those caused by the ongoing conflicts between Russia and Ukraine or Israel and Hamas (the potential escalation or geographic expansion of which could heighten other risks identified in this report), or the relationship between China and the U.S.
As such, our future business and financial performance could suffer due to a variety of international factors in addition to those otherwise already disclosed, including: • ongoing uncertainties as a result of instability or changes in geopolitical conditions, including military or political conflicts, such as those caused by the ongoing conflicts between Russia and Ukraine or in the Middle East (the potential escalation or geographic expansion of which could heighten other risks identified in this report), or the relationship between China and the U.S.
While these measures have been taken to shorten lead times to deliver products to customers, they may also result in excess or obsolete components in the future if the demand for our products is less than we anticipate, which could adversely affect our business and financial performance.
While these measures have been taken to shorten lead times to deliver products to customers, they may also result in excess or obsolete components in the future if the demand for our products is less than we anticipate or orders are cancelled, which could adversely affect our business and financial performance.
(which could, among other things, impact the enforceability of certain contracts or the timing and form of certain payments); • inflationary pressures, such as those the market is currently experiencing, which have increased, and may continue to increase, costs for materials, supplies, and services; • adverse or uncertain macroeconomic conditions, including a rising interest rate environment and fears of a potential global economic downturn or recession, which have at times in the past slowed customer demand for our products and services, and may do so again in the future; • network security, privacy, and data sovereignty concerns, which could make foreign customers reluctant to purchase products and services from U.S.-based technology companies; • longer collection cycles and financial instability among customers, which could impact our ability to collect on accounts receivable and consequently recognize revenue; • local labor conditions and regulations, including local labor issues faced by specific suppliers and OEMs, or changes to immigration and labor law policies which may adversely impact our access to technical and professional talent; • managing our geographically dispersed workforce, which has necessitated, and may in the future require, incurring costs to promote seamless workforce connectivity and to comply with changing laws, regulations and workers’ rights councils across multiple jurisdictions; • differing technology standards or customer requirements, which have required us to incur additional development and production costs to modify or adapt our offerings, and may do so again in the future; • local content and manufacturing requirements, which have impacted, and could further impact, our ability to sell into those markets; • difficulties associated with repatriating earnings in restricted countries, and changes in tax laws, which introduces uncertainty to our results of operations and financial performance; and • fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for our products and shipments, which have from time to time adversely impacted, and any of which could in the future adversely impact, our results of operations and ability to meet customer demand.
(which could, among other things, impact the enforceability of certain contracts or the timing and form of certain payments); • inflationary pressures, which have in the past increased, and may in the future increase costs for materials, supplies, and services, including those of third parties with whom we do business; • adverse or uncertain macroeconomic conditions, including a changing interest rate environment and fears of a potential global economic downturn or recession, which have at times in the past slowed customer demand for our products and services, and may do so again in the future; • network security, privacy, and data sovereignty concerns, which could make foreign customers reluctant to purchase products and services from U.S.-based technology companies; • longer collection cycles and financial instability among customers, which could impact our ability to collect on accounts receivable and consequently recognize revenue; • local labor conditions and regulations, including local labor issues faced by specific suppliers and OEMs, or changes to immigration and labor law policies which may adversely impact our access to technical and professional talent; • managing our geographically dispersed workforce, which has necessitated, and may in the future require, incurring costs to promote seamless workforce connectivity and to comply with changing laws, regulations and workers’ rights councils across multiple jurisdictions; • differing technology standards or customer requirements, which have required us to incur additional development and production costs to modify or adapt our offerings, and may do so again in the future; • local content and manufacturing requirements, which have impacted, and could further impact, our ability to sell into those markets; • difficulties associated with repatriating earnings in restricted countries, and changes in tax laws, which introduces uncertainty to our results of operations and financial performance; and • fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for our products and shipments, which have from time to time adversely impacted, and any of which could in the future adversely impact, our results of operations and ability to meet customer demand.
Because the availability and cost of licenses from third parties depends upon the willingness of third parties to deal with us on the terms we request, there is a risk that third parties who license to our competitors will either refuse to license us at all, or 26 Table of Content refuse to license us on terms equally favorable to those granted to our competitors.
Because the availability and cost of licenses from third parties depends upon the willingness of third parties to deal with us on the terms we request, there is a risk that third parties who license to our competitors will either refuse to license us at all, or refuse to license us on terms equally favorable to those granted to our competitors.
Environmental regulations may also impact the availability and cost of energy or emissions related to energy consumption which may increase our cost of manufacturing and/or the cost of powering and cooling owned IT infrastructures. In addition, our business is subject to an ever-growing number of laws addressing privacy and information security.
Environmental regulations may also impact the availability and cost of energy or emissions related to energy consumption which may increase our cost of manufacturing and/or the cost of powering and cooling owned IT infrastructures. In addition, our business is subject to an ever-growing number of laws and regulations addressing privacy and information security, including the use of AI.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or 19 Table of Content water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; and health epidemics or pandemics.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; and health epidemics or pandemics.
Our long-term strategy is focused on leveraging our portfolio of hardware, software, and services as we deliver global edge-to-cloud platform as-a-service to help customers accelerate outcomes by unlocking value from all of their data, everywhere. We continue our transition to an aaS company, to provide our entire portfolio through a range of subscription and consumption-based, pay-per-use, and aaS offerings.
Our long-term strategy is focused on leveraging our portfolio of hardware, software, and services as we deliver global edge-to-cloud platform as-a-service to help customers accelerate outcomes by unlocking value from all of their data, everywhere. We provide our entire portfolio through a range of subscription and consumption-based, pay-per-use, and aaS offerings.
These goals, commitments, and targets reflect our current plans and aspirations, are based on available data and estimates, and are not guarantees that we will be able to achieve them.
These goals reflect our current plans and aspirations, are based on available data and estimates, and are not guarantees that we will be able to achieve them.
ITEM 1A. Risk Factors. You should carefully consider the following risks and other information in this Form 10-K in evaluating Hewlett Packard Enterprise and its common stock. Any of the following risks could materially and adversely affect our results of operations or financial condition.
ITEM 1A. Risk Factors. You should carefully consider the following risks and other information in this Form 10-K in evaluating Hewlett Packard Enterprise. Any of the following risks could materially and adversely affect our results of operations or financial condition.
If we fail to anticipate customer demand properly, a temporary oversupply could result in excess or obsolete components, which has at times adversely impacted and could in the future adversely impact our business and financial performance. • Contractual terms .
If we fail to anticipate customer demand properly, a temporary oversupply can result in excess or obsolete components (which has happened at times in the past), which has at times adversely impacted and could in the future adversely impact our business and financial performance. • Contractual terms.
If the anticipated value of such equity-based incentive awards does not materialize, if our equity-based compensation otherwise ceases to be viewed as a valuable benefit, if our total compensation package is not viewed as being competitive, or if we do not obtain the stockholder approval needed to continue granting equity-based incentive awards in the amounts we believe are necessary, our ability to attract, retain, and motivate executives and key employees could be weakened.
If the anticipated value of such equity-based incentive awards does not materialize, if our equity-based compensation otherwise ceases to be viewed as a valuable benefit, if our total compensation package is not 23 Table of Conte n t viewed as being competitive, or if we do not obtain the stockholder approval needed to continue granting equity-based incentive awards in the amounts we believe are necessary, our ability to attract, retain, and motivate executives and key employees could be weakened.
There is no assurance that we will be able to successfully implement these adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from them. These solutions generally are multiyear agreements, which result in recurring revenue streams over the term of the arrangement.
There is no assurance that we will be able to implement these adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from them. Our HPE GreenLake solutions generally are multiyear agreements, which result in recurring revenue streams over the term of the arrangement.
Any loss of or limitations on their output or their inability to operate 25 Table of Content could have an adverse effect on our ability to timely deliver our products and services, which would in turn negatively impact our financial performance.
Any loss of or limitations on their output or their inability to operate could have an adverse effect on our ability to timely deliver our products and services, which would in turn negatively impact our financial performance.
Further, dependence on AI without adequate safeguards to make certain 22 Table of Content business decisions may introduce additional operational vulnerabilities by impacting our relationships with customers, partners, and suppliers; by producing inaccurate outcomes based on flaws in the underlying data; or other unintended results.
Further, dependence on AI without adequate safeguards to make certain business decisions may introduce additional operational vulnerabilities by impacting our relationships with customers, partners, and suppliers; by producing inaccurate outcomes based on flaws in the underlying data; or other unintended results.
Such 24 Table of Content actions have impacted, and may further impact our ability, desire, or the timing of seeking funding for various investment opportunities. Economic downturns also may lead to restructuring actions and associated expenses.
Such actions have impacted, and may further impact our ability, desire, or the timing of seeking funding for various investment opportunities. Economic downturns also may lead to restructuring actions and associated expenses.
We must make sufficient long-term investments in strategic growth areas, such as developing, obtaining, and protecting appropriate intellectual property and committing significant R&D and other resources before knowing whether our projections will reasonably reflect customer demand for our solutions.
We must make sufficient long-term investments in strategic growth areas, such as developing, obtaining, and protecting appropriate intellectual property, and commit or transition significant R&D and other resources before knowing whether our projections will reasonably reflect customer demand for our solutions.
Any such indemnity obligations could be material. We continue to face a number of risks related to our separation from HP Inc., our former parent, including those associated with ongoing indemnification obligations, which could adversely affect our financial condition and results of operations, and shared use of certain intellectual property rights, which could in the future adversely impact our reputation.
We continue to face a number of risks related to our separation from HP Inc., our former parent, including those associated with ongoing indemnification obligations, which could adversely affect our financial condition and results of operations, and shared use of certain intellectual property rights, which could in the future adversely impact our reputation.
Our stock price, like that of other technology companies, can be volatile and can be affected by, among other things, speculation, coverage, or sentiment in the media or the investment community; the announcement of new, planned or contemplated products, services, technological innovations, acquisitions, divestitures, or other significant transactions by us or our competitors; developments in our transformation programs or in our transition to an as-a-service business model; our quarterly financial results and comparisons to estimates by the investment community or financial outlook provided by us; the financial results and business strategies of our competitors; inflation; market volatility or downturns caused by outbreaks, epidemics, pandemics, geopolitical tensions or conflicts, or other macroeconomic dynamics; developments relating to pending investigations, claims, and disputes; or the timing and amount of our share repurchases.
Our stock price, like that of other technology companies, can be volatile and can be affected by, among other things, speculation, coverage, or sentiment in the media or the investment community; the announcement and anticipated timing of new, planned or contemplated products, services, technological innovations, acquisitions, divestitures, or other significant transactions by us or our competitors; developments in our as-a-service business model; our perceived progress in integrating acquired companies; our quarterly financial results and comparisons to estimates by the investment community or financial outlook provided by us; the financial results and business strategies of our competitors; inflation; market volatility or downturns caused by outbreaks, epidemics, pandemics, geopolitical tensions or conflicts, or other macroeconomic dynamics; developments relating to pending investigations, claims, and disputes; or the timing and amount of our share repurchases.
If we were to violate or become liable under laws or regulations associated with privacy or security, we could incur substantial costs or be exposed to potential regulatory fines, civil or criminal sanctions, third-party claims, and reputational damage.
If we were to violate or become liable under laws or regulations associated with privacy or security or the use of AI, we could incur substantial costs or be exposed to potential regulatory fines, civil or criminal sanctions, third-party claims, and reputational damage.
While we seek to mitigate the business risks associated with climate change through site selection, infrastructure technological investments and robust environmental programs, this may require us to incur substantial costs, and we may be unsuccessful in doing so as there are inherent climate-related risks wherever business is conducted.
While we seek to mitigate business risks, including those associated with climate change, through site selection, infrastructure technological investments, business continuity planning, and robust environmental programs, this may require us to incur substantial costs, and we may be unsuccessful in doing so as there are inherent climate-related risks wherever business is conducted.
Jurisdictions in which we have significant operations and assets, such as the U.S., China, India, and the E.U., each have exercised and continue to exercise significant influence over many aspects of their domestic economies including, but not limited to fair competition, tax practices, anti-corruption, anti-trust, price controls and international trade, which have had and may continue to have an adverse effect on our business operations and financial condition.
Jurisdictions in which we have significant operations and assets, such as the U.S., China, India, and the E.U., each have exercised and continue to exercise significant influence over many aspects of their domestic economies including, but not limited to fair competition, tax practices, anti-corruption, anti-trust, responsible sourcing and human rights (including the use of conflict minerals), price controls and international trade, which have had and may continue to have an adverse effect on our business operations and financial condition.
Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.
Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the 24 Table of Conte n t acceptance of AI solutions or cause harm to individuals or society. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.
If predicted demand is substantially greater than orders, there may be excess inventory; and alternatively, if orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be canceled, all of which we experienced from time to time in the past and may do so again in the future.
If predicted demand is substantially greater than orders, there may be excess inventory; and alternatively, if 31 Table of Conte n t orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be canceled, all of which we experienced from time to time in the past and may do so again in the future.
Although some of these attacks have caused disruptions or exposure of information, so far, these attacks have not resulted in material impacts to HPE, nor have any of HPE’s consumers, customers, or employees informed HPE that these 18 Table of Content attacks resulted in material harm to them.
Although some of these attacks have caused disruptions or exposure of information, so far, these attacks have not resulted in material negative impacts to HPE, nor have any of HPE’s consumers, customers, or employees informed HPE that these attacks resulted in material harm to them.
In the course of conducting our business, we must adequately address quality issues associated with our products, services, and solutions, including defects in our engineering, design, and manufacturing processes and unsatisfactory performance under service contracts, as well as defects in third-party components included in our products and unsatisfactory performance or even malicious acts by third-party contractors or subcontractors or their employees.
In the course of conducting our business, we must adequately address quality issues associated with our products, services, and solutions (whether developed by us or by a company we acquire), including defects in our engineering, design, and manufacturing processes and unsatisfactory performance under service contracts, as well as defects in third-party components included in our products and unsatisfactory performance or even malicious acts by third-party contractors or subcontractors or their employees.
As a result, our business has in the past been impacted by forced material price increases, which in turn resulted in price increases for our offerings, which subsequently limited demand or reduced margins for our offerings, all of which may impact us again from time to time in the future.
As a result, our business has in the past been impacted by forced material price increases, which in turn resulted 27 Table of Conte n t in price increases for our offerings, which subsequently limited demand or reduced margins for our offerings, all of which may impact us again from time to time in the future.
Moreover, actions or statements that we may take based on expectations, assumptions, or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation. Initiatives to address such ESG issues may be costly and may not have the desired effect.
Moreover, actions or statements that we may take based on expectations, assumptions, or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation. Initiatives to address sustainability and corporate responsibility issues may be costly and may not have the desired effect.
Further, our software consumption offerings could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal or other costs. We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.
Our aaS offerings also could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal, regulatory, or other costs. We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.
To the extent such disruptions adversely affect our business, results of operations, financial condition, and stock price, they may also have the effect of heightening many of the other risks described in this Item 1A of Part I of this Form 10-K.
To the extent such disruptions adversely affect our business, results of operations, financial condition, and stock price, they may also have the effect of heightening many of the other risks described in this Item 1A of Part I of this Form 10-K . Failure to complete the Merger with Juniper Networks may adversely affect our business and our stock price.
These have resulted in increased expenses due to higher allowances for doubtful accounts and potential goodwill and asset impairment charges, and made it more difficult for us to manage inventory and make accurate forecasts of revenue, gross margin, cash flows, and expenses, and may have such effects again in the future.
These have, at times in the past, resulted in increased expenses due to higher allowances for doubtful accounts and potential goodwill and asset impairment charges (among other financial impacts), and made it more difficult for us to manage inventory and make accurate forecasts of revenue, gross margin, cash flows, and expenses, and may have such effects again in the future.
Industry consolidation may also affect competition by creating larger, more homogeneous, and potentially stronger competitors in the markets in which we operate. Additionally, our competitors may affect our business by entering into exclusive arrangements with our existing or potential customers or suppliers.
Industry consolidation may also affect competition by creating larger, more homogeneous, and potentially stronger 26 Table of Conte n t competitors in the markets in which we operate. Additionally, our competitors may affect our business by entering into exclusive arrangements with our existing or potential customers or suppliers.
HPE is proceeding with the exit of our remaining business in Russia and Belarus as planned; however, we cannot provide any assurance that such exit will be efficient or uninterrupted, which may negatively impact our operational expenses. We implement policies, procedures, and training designed to facilitate compliance with anti-corruption laws around the world, including the U.S.
HPE is continuing to execute on the exit of our remaining business in Russia and Belarus as planned; however, we cannot provide any assurance that such exit will be efficient or uninterrupted, which may negatively impact our operational expenses. 28 Table of Conte n t We implement policies, procedures, and training designed to facilitate compliance with anti-corruption laws around the world, including the U.S.
The costs associated with cybersecurity tools and infrastructure and fierce competition for scarce cybersecurity and IT talent have at times limited, and may in the future limit, our ability to efficiently identify, eliminate, or remediate cyber or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network.
The costs associated with cybersecurity tools and infrastructure and competition for cybersecurity and IT talent have at times limited, and may in the future limit, our ability and the ability of third parties on whom we rely to efficiently identify, eliminate, or remediate cyber or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network.
We compete primarily on the basis of our technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, portfolio of products, ease of use, account relationships, customer training, service and support, and security of our offerings.
We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings.
Volatility in the price of our securities could result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources. 31 Table of Content ITEM 1B. Unresolved Staff Comments. None.
Volatility in the price of our securities could result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources. 35 Table of Conte n t ITEM 1B. Unresolved Staff Comments. None.
We have, in some instances, responded to such constraints by committing to higher inventory purchases and balances relative to our historical positions in order to secure manufacturing capacity.
We have, in some instances, responded to such constraints by committing to higher inventory purchases and balances relative to our historical positions in order to secure manufacturing capacity, components to fulfill orders, or both.
As customer demand for our software consumption-based offerings increases, we will experience differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our aaS offerings (for which revenue is generally recognized ratably over the term of the arrangement).
As customer demand for our aaS offerings increases, we have experienced, and will continue to experience, differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our aaS offerings (for which revenue is generally recognized ratably over the term of the arrangement).
In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including flaws that could unexpectedly interfere with the operation of the system.
In addition, sophisticated hardware and operating system software and applications that we produce, procure or integrate from third parties, including those of companies we have acquired, may contain defects in design or manufacturing, including flaws that could unexpectedly interfere with the operation of the system.
Interest and other expenses have varied, and could continue to vary, materially from expectations depending on changes in interest rates, borrowing costs, currency exchange rates, costs of hedging activities and the fair value of derivative instruments. For example, in response to increasing inflation, the U.S.
Interest and other expenses have varied, and could continue to vary, materially from expectations depending on changes in interest rates, borrowing costs, currency exchange rates, costs of hedging activities, and the fair value of derivative instruments.
Our business and financial performance depend significantly on worldwide economic conditions and the demand for technology hardware, software, and services in, and continued access to, the markets in which we compete. Economic weakness and uncertainty and constrained spending on network and enterprise infrastructure have in the past adversely affected the demand for our products, services, and solutions.
Our business and financial performance depend significantly on worldwide economic conditions and the demand for technology hardware, software, and services in, and continued access to, the markets in which we compete. Economic weakness and uncertainty and the volatile inflationary environment have constrained spending on network and enterprise infrastructure.
Such developments could result in material payment delays, payment reductions, or contract terminations by our governmental customers, which in turn may adversely impact the results of operations and financial condition of government contractors with whom we conduct business.
Such developments could result in material payment delays, payment reductions, or contract terminations by our governmental customers, which may impact our results of operations and financial condition. These may also adversely impact the results of operations and financial condition of government contractors with whom we 33 Table of Conte n t conduct business.
Laws and regulations may change in ways that will require us to modify our business model and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright.
We are subject to various US (federal, state, and local), and foreign laws and regulations. Laws and regulations may change in ways that will require us to modify our business model and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright.
To successfully execute this strategy and transition, we must continue to improve cost structure, align sales coverage with strategic goals, improve channel execution and strengthen our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic capabilities in areas such as edge computing, hybrid cloud, artificial intelligence, data center networking, network security and high-performance compute.
To successfully execute on these strategic pillars, we must continue to improve cost structures, align sales coverage with strategic goals, improve channel execution, and strengthen our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic 17 Table of Conte n t capabilities in areas such as edge computing, hybrid cloud, artificial intelligence, data center networking, network security, and high-performance compute.
Further, incorporating AI gives rise to litigation risk and risk of non-compliance and unknown cost of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed (including potential liability for breaching intellectual property or privacy rights or laws).
Further, incorporating AI gives rise to litigation risk and risk of non-compliance and unknown cost of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed and which may vary from jurisdiction to jurisdiction, creating complex compliance issues (including potential liability for breaching intellectual property or privacy rights or laws or for the misuse of personal data).
Any violation of government contracting laws and regulations or contract terms could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and fines, treble damages, and suspension from future government contracting. Such failures could also cause reputational damage to our business.
Any violation of government contracting laws and regulations or contract terms could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and fines, treble damages, and suspension from future government contracting.
In addition, it is possible that as a consequence of a merger or acquisition, third parties may obtain licenses to some of our intellectual property rights or our business may be subject to certain restrictions that were not in place prior to such transaction.
In 29 Table of Conte n t addition, it is possible that as a consequence of a merger or acquisition, we may acquire intellectual property subject to licensing obligations to third parties, other third parties may obtain licenses to some of our intellectual property rights or our business may be subject to certain restrictions that were not in place prior to such transaction.
For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including through both proprietary and open source licenses.
Much of our business and many of our products rely on key technologies developed or licensed by third parties. For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including through both proprietary and open-source licenses.
Government contracts impose additional challenges and risks to our sales efforts. Government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, including in connection with an extended federal government shutdown, with funding reductions, or delays adversely affecting public sector demand for our products and services.
Government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, including in connection with an extended government shutdown, with funding reductions, or delays adversely affecting public sector demand for our products and services.
If the distribution of Everett SpinCo or Seattle SpinCo, as applicable, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of 30 Table of Content the Code, in general, we would recognize taxable gain as if we had sold the stock of Everett SpinCo or Seattle SpinCo, as applicable, in a taxable sale for its fair market value, and our stockholders who receive Everett SpinCo shares or Seattle SpinCo shares in the relevant distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
If the distribution of Everett SpinCo or Seattle SpinCo, as applicable, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, in general, we would recognize taxable gain as if we had sold the stock of Everett SpinCo or Seattle SpinCo, as applicable, in a taxable sale for its fair market value, and our stockholders who receive Everett SpinCo shares or Seattle SpinCo shares in the relevant distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. 34 Table of Conte n t We obtained private letter rulings from the IRS regarding certain U.S. federal income tax matters relating to the separation of our Enterprise Services business and Software Segment.
While we seek to identify and remediate vulnerabilities in our products, services, IT systems, controls, and software that could be exploited by any malicious parties, we may not be aware of all such vulnerabilities, and we have at times failed, and may fail, to anticipate, detect, identify, and/or remediate such vulnerabilities before they are exploited.
While we seek to identify and remediate vulnerabilities in our products, services, IT systems, controls, and software that could be exploited by any malicious parties, we may not be aware of all such vulnerabilities, and we have at times failed, and may fail, to anticipate, detect, identify, and/or remediate such vulnerabilities before they are exploited or such vulnerabilities may persist after issuing security patches because system software updates may occur asynchronously across our customer base.
Our HPE GreenLake edge-to-cloud platform faces competition from peer companies with their own cloud platform offerings, and any delay in the development, production, or marketing of a new product, service or solution, including new features of the HPE GreenLake edge-to-cloud platform, could result in our offerings being late to reach the market, which could further harm our competitive position.
These offerings face competition from peer companies with their own cloud platform and artificial intelligence computing offerings, and any delay in the development, production, or marketing of a new product, service, or solution could result in our offerings being late to reach the market, which could harm our competitive position.
Having developed a cloud platform product in HPE GreenLake, we must be able to continue to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements, which we may not succeed at doing.
Having developed a cloud platform product in HPE GreenLake and the hardware capabilities to support artificial intelligence computing, we must be able to continue integrating new features that are relevant to our customers and to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements, which we may not succeed at doing.
Risks arising from climate change and the transition to a lower-carbon economy may impact our business Climate change serves as a risk multiplier that could increase both the frequency and severity of natural disasters that may affect our worldwide business operations and those of suppliers and customers.
Climate change serves as a risk multiplier that could increase both the frequency and severity of natural disasters that may affect our worldwide business operations and those of suppliers and customers.
If we were to violate or become liable under environmental or certain ESG-related laws or if our products become non-compliant with such laws or market access requirements, it could result in loss of market access or limit offerings in those markets or our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.
In addition, other sustainability reporting-related laws, regulations, treaties, and similar initiatives and programs are being proposed, adopted, and implemented throughout the world If we were to violate or become liable under environmental or certain sustainability-related laws or if our products become non-compliant with such laws or market access requirements, it could result in loss of market access or limit offerings in those markets or our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.
The process of improving our HPE GreenLake edge-to-cloud platform’s aaS solutions and enhancing existing hardware, software, and cloud-based solutions is complex, costly, and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately, to invest sufficiently in strategic growth areas, or to otherwise successfully execute this strategy could significantly harm our market share, results of operations, and financial performance.
The process of improving our HPE GreenLake cloud offerings, enhancing existing hardware, software, and cloud-based solutions, and developing and improving the systems necessary for new and evolving data-intensive artificial intelligence-based workloads are all complex, costly, and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately, to invest sufficiently in strategic growth areas, or to otherwise successfully execute this strategy could significantly harm our market share, results of operations, and financial performance.
With our business increasingly providing aaS offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer data and regulatory exposure.
Compliance with data security and privacy laws is complex and costly. With our business increasingly providing aaS offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer or employee data resulting in regulatory exposure.
Management’s attention or other resources may be diverted during business combination and investment transactions and further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives. If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.
Management’s attention or other resources may be diverted during business combination and investment transactions and may be further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives .
We will also continue to provide our hardware and software in a capital expenditure and license-based model, giving our customers choices in consuming HPE products and services.
We will also continue to provide our hardware and software in a capital expenditure and license-based model, giving our customers choices in consuming HPE products and services. Furthermore, subject to our anticipated consummation of the acquisition of Juniper Networks, Inc.
If we fail to manage these and other transition risks in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer. If we cannot continue to produce quality products and services, our reputation, business, and financial performance may suffer.
If we fail to manage these and other transition risks in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer. Industry Risks We operate in an intensely competitive industry, and competitive pressures could harm our business and financial performance.
Currency volatility contributes to variations in our sales of products and services in impacted jurisdictions. Fluctuations in foreign currency exchange rates have, from time to time, adversely affected, and could in future periods adversely affect our revenue recognition and our revenue growth.
Fluctuations in foreign currency exchange rates have, from time to time, adversely affected, and could in future periods adversely affect our revenue recognition and our revenue growth.
Even if we are able to maintain or increase market share for a particular product, its financial performance could decline because the product is in a maturing industry or market segment or contains technology that is becoming obsolete.
Even if we are able to maintain or increase market share for a particular product, its financial performance could decline because the product is in a maturing industry or market segment or contains technology that is becoming obsolete. Financial performance could decline due to increased competition from other types of products that perform similar functions as our offerings.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSubstantially all of our properties are utilized in whole or in part by our Compute, HPC & AI, Storage, and Intelligent Edge segments. Principal Executive Offices Our principal executive offices, including our global headquarters, are located at 1701 East Mossy Oaks Road, Spring, Texas, 77389, United States of America.
Biggest changeSubstantially all of our properties are utilized in whole or in part by our Server, Hybrid Cloud, and Intelligent Edge segments. 37 Table of Conte n t Principal Executive Offices Our principal executive offices, including our global headquarters, are located at 1701 East Mossy Oaks Road, Spring, Texas, 77389, United States of America.
As of October 31, 2023 Owned Leased Total (Square feet in millions) Administration and support 2 4 6 (Percentage) 33 % 67 % 100 % Core data centers, manufacturing plants, research and development facilities, and warehouse operations 1 1 2 (Percentage) 50 % 50 % 100 % Total 3 5 8 (Percentage) 37 % 63 % 100 % We believe that our existing properties are in good condition and are suitable for the conduct of our business.
As of October 31, 2024 Owned Leased Total (Square feet in millions) Administration and support 2 4 6 (Percentage) 33 % 67 % 100 % Core data centers, manufacturing plants, research and development facilities, and warehouse operations 1 1 2 (Percentage) 50 % 50 % 100 % Total 3 5 8 (Percentage) 37 % 63 % 100 % We believe that our existing properties are in good condition and are suitable for the conduct of our business.
ITEM 2. Properties. As of October 31, 2023, we owned or leased approximately 11 million square feet of space worldwide, which included 3 million square feet of vacated space. A summary of the Company's operationally utilized space is provided below.
ITEM 2. Properties. As of October 31, 2024, we owned or leased approximately 11 million square feet of space worldwide, which included 3 million square feet of vacated space. A summary of the Company's operationally utilized space is provided below.
Legal Proceedings. Information with respect to this item may be found in Note 17, “Litigation and Contingencies,” to the Consolidated Financial Statements in Item 8 of Part II, which is incorporated herein by reference. ITEM 4. Mine Safety Disclosures. Not applicable. 32 Table of Content PART II
Legal Proceedings. Information with respect to this item may be found in Note 17, “Litigation, Contingencies, and Commitments,” to the Consolidated Financial Statements in Item 8 of Part II, which is incorporated herein by reference. ITEM 4. Mine Safety Disclosures. Not applicable. 38 Table of Conte n t PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. 10/2018 10/2019 10/2020 10/2021 10/2022 10/2023 Hewlett Packard Enterprise $ 100.00 $ 110.91 $ 60.86 $ 106.76 $ 107.41 $ 119.28 S&P 500 Index $ 100.00 $ 114.32 $ 125.40 $ 179.19 $ 152.98 $ 168.46 S&P Information Technology Index $ 100.00 $ 122.57 $ 164.82 $ 242.15 $ 193.09 $ 252.65 ITEM 6. [Reserved] 34 Table of Content
Biggest changeThis graph assumes the investment of $100 in the stock or the index on October 31, 2019 (and the reinvestment of dividends thereafter). 39 Table of Conte n t The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. 10/2019 10/2020 10/2021 10/2022 10/2023 10/2024 Hewlett Packard Enterprise $ 100.00 $ 54.88 $ 96.26 $ 96.84 $ 107.55 $ 140.18 S&P 500 Index $ 100.00 $ 109.70 $ 156.75 $ 133.82 $ 147.36 $ 203.35 S&P Information Technology Index $ 100.00 $ 134.47 $ 197.56 $ 157.53 $ 206.12 $ 311.72
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The common stock of Hewlett Packard Enterprise is listed on the New York Stock Exchange (“NYSE”) with the ticker symbol “HPE.” Holders As of December 11, 2023, there were 45,876 stockholders of record of Hewlett Packard Enterprise common stock.
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The common stock of Hewlett Packard Enterprise is listed on the New York Stock Exchange with the ticker symbol “HPE.” Holders As of December 9, 2024, there were 43,102 stockholders of record of Hewlett Packard Enterprise common stock.
Issuer Purchases of Equity Securities Fourth Quarter of Fiscal 2023 Total Number of Shares Purchased and Settled Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Month 1 (August 2023) 1,054 $ 17.24 1,054 $ 1,001,632 Month 2 (September 2023) 927 17.21 927 985,676 Month 3 (October 2023) 1,302 16.26 1,302 $ 964,514 Total 3,283 $ 16.84 3,283 On October 13, 2015, the Company's Board of Directors approved a share repurchase program with a $3.0 billion authorization, which was refreshed with additional share repurchase authorizations of $3.0 billion, $5.0 billion and $2.5 billion on May 24, 2016, October 16, 2017 and February 21, 2018, respectively.
Issuer Purchases of Equity Securities Fourth Quarter of Fiscal 2024 Total Number of Shares Purchased and Settled Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Month 1 (August 2024) 115 $ 19.84 115 $ 861,886 Month 2 (September 2024) — — — 861,886 Month 3 (October 2024) 2,363 20.35 2,363 $ 813,792 Total 2,478 $ 20.33 2,478 On October 13, 2015, the Company's Board of Directors approved a share repurchase program with a $3.0 billion authorization, which was refreshed with additional share repurchase authorizations of $3.0 billion, $5.0 billion and $2.5 billion on May 24, 2016, October 16, 2017 and February 21, 2018, respectively.
The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of our Board of Directors.
The payment of any dividends in the future on shares of our common stock and our Preferred Stock, and the timing and amount thereof, is within the sole discretion of our Board of Directors.
As of October 31, 2023, the Company had a remaining authorization of approximately $1.0 billion for future share repurchases. 33 Table of Content Stock Performance Graph and Cumulative Total Return The graph below shows a comparison of cumulative total stockholder return, the S&P 500 Index, and the S&P Information Technology Index.
As of October 31, 2024, the Company had a remaining authorization of approximately $0.8 billion for future share repurchases. Stock Performance Graph and Cumulative Total Return The graph below shows a comparison of cumulative total stockholder return, the S&P 500 Index, and the S&P Information Technology Index. This graph covers the period from October 31, 2019 through October 31, 2024.
Dividends During fiscal 2023, we paid a quarterly dividend of $0.12 per share to our shareholders. On November 28, 2023 we declared a quarterly dividend of $0.13 per share, payable on January 11, 2024, to stockholders of record as of the close of business on December 13, 2023.
Dividends During fiscal 2024, we paid a quarterly dividend of $0.13 per share of common stock to our holders of common stock. On December 5, 2024 we declared a quarterly dividend of $0.13 per share of common stock, payable on January 16, 2025, to stockholders of record as of the close of business on December 20, 2024.
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will continue to pay a dividend in any future period.
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets.
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This graph covers the period from October 31, 2018 through October 31, 2023. This graph assumes the investment of $100 in the stock or the index on October 31, 2018 (and the reinvestment of dividends thereafter).
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We also declared a cash dividend of $0.82604167 per share of our 7.625% Series C Mandatory Convertible Preferred Stock (the “Preferred Stock”), which was paid on December 1, 2024, to holders of record as of the close of business on November 15, 2024.
Added
Furthermore, so long as any share of our Preferred Stock remains outstanding, no dividend on shares of common stock (or any other class of stock junior to the Preferred Stock) shall be declared or paid unless all accumulated and unpaid dividends for all preceding dividend periods for the Preferred Stock have been declared and paid in full in cash, shares of our common stock or a combination thereof, or a sufficient sum of cash or number of shares of our common stock has been set apart for the payment of such dividends, on all outstanding shares of the Preferred Stock.
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We cannot guarantee that we will continue to pay a dividend in any future period.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of operations in dollars and as a percentage of net revenue were as follows: For the fiscal years ended October 31, 2023 2022 2021 Dollars % of Revenue Dollars % of Revenue Dollars % of Revenue Dollars in millions Net revenue $ 29,135 100.0 % $ 28,496 100.0 % $ 27,784 100.0 % Cost of sales 18,896 64.9 % 18,990 66.6 % 18,408 66.3 % Gross profit 10,239 35.1 % 9,506 33.4 % 9,376 33.7 % Research and development 2,349 8.1 % 2,045 7.2 % 1,979 7.1 % Selling, general and administrative 5,160 17.7 % 4,941 17.3 % 4,929 17.7 % Amortization of intangible assets 288 1.0 % 293 1.0 % 354 1.3 % Impairment of goodwill — — % 905 3.2 % — — % Transformation costs 283 1.0 % 473 1.7 % 930 3.3 % Disaster charges 1 — % 48 0.2 % 16 0.1 % Acquisition, disposition and other related charges 69 0.1 % 19 0.1 % 36 0.1 % Earnings from operations 2,089 7.2 % 782 2.7 % 1,132 4.1 % Interest and other, net (156) (0.5) % (188) (0.7) % (211) (0.8) % Tax indemnification and other adjustments 55 0.2 % (67) (0.2) % 65 0.2 % Non-service net periodic benefit (cost) credit (3) — % 134 0.5 % 70 0.3 % Litigation judgment — — % — — % 2,351 8.5 % Earnings from equity interests 245 0.8 % 215 0.8 % 180 0.6 % Earnings before taxes 2,230 7.7 % 876 3.1 % 3,587 12.9 % Provision for taxes (205) (0.7) % (8) (0.1) % (160) (0.6) % Net earnings $ 2,025 7.0 % $ 868 3.0 % $ 3,427 12.3 % 42 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal 2023 compared with fiscal 2022 Net revenue In fiscal 2023, total net revenue of $29.1 billion represented an increase of $639 million, or 2.2% (increased 5.5% on a constant currency basis).
Biggest changeOther companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes. 47 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Results of operations in dollars and as a percentage of net revenue were as follows: For the fiscal years ended October 31, 2024 2023 2022 Dollars % of Revenue Dollars % of Revenue Dollars % of Revenue Dollars in millions Net revenue $ 30,127 100.0 % $ 29,135 100.0 % $ 28,496 100.0 % Cost of sales (exclusive of amortization shown separately below) 20,249 67.2 % 18,896 64.9 % 18,990 66.6 % Gross profit 9,878 32.8 % 10,239 35.1 % 9,506 33.4 % Research and development 2,246 7.5 % 2,349 8.1 % 2,045 7.2 % Selling, general and administrative 4,871 16.2 % 5,160 17.7 % 4,941 17.3 % Amortization of intangible assets 267 0.9 % 288 1.0 % 293 1.0 % Impairment of goodwill — — % — — % 905 3.2 % Transformation costs 93 0.3 % 283 1.0 % 473 1.7 % Disaster charges 7 — % 1 — % 48 0.2 % Acquisition, disposition and other related charges 204 0.6 % 69 0.1 % 19 0.1 % Earnings from operations 2,190 7.3 % 2,089 7.2 % 782 2.7 % Interest and other, net (117) (0.4) % (104) (0.3) % (121) (0.4) % Gain on sale of equity interest 733 2.4 % — 0.1 % — — % Earnings from equity interests 147 0.5 % 245 0.8 % 215 0.8 % Earnings before provision for taxes 2,953 9.8 % 2,230 7.8 % 876 3.1 % Provision for taxes (374) (1.2) % (205) (0.7) % (8) (0.1) % Net earnings attributable to HPE 2,579 8.6 % 2,025 7.0 % 868 3.0 % Preferred stock dividends (25) (0.1) % — — % — — % Net earnings attributable to common stockholders $ 2,554 8.5 % $ 2,025 7.0 % $ 868 3.0 % Fiscal 2024 compared with fiscal 2023 Net revenue In fiscal 2024, total net revenue of $30.1 billion represented an increase of $992 million, or 3.4% (increased 3.3% on a constant currency basis).
Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the extent of receivables factoring, seasonal trends, the timing of revenue recognition and inventory purchases within the period, the impact of commodity costs and acquisition activity.
Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the extent of receivables factoring, seasonal trends, the timing of the revenue recognition and inventory purchases within the period, the impact of commodity costs and acquisition activity.
Segment Information Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker (“CODM”), who is the CEO, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology.
Segment Information Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the CEO, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology.
Recent Tax Developments The Organisation for Economic Co-operation and Development, an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%.
Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%.
We believe that providing the non-GAAP measures stated above, in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision making and allows the reader of our Condensed Consolidated Financial Statements to see our financial results “through the eyes” of management.
We believe that providing the non-GAAP measures stated above, in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision making and allows the reader of our Consolidated Financial Statements to see our financial results “through the eyes” of management.
Further as our transformation costs for these plans have materially fluctuated since 2017, have been materially declining since 2021 and we do not expect to incur material transformation costs related to these programs beyond fiscal 2023, we believe non-GAAP measures excluding these costs are useful to management and investors for comparing operating performance across multiple periods. • We incur costs related to our acquisition, disposition and other related charges.
Further as our transformation costs for these plans have materially fluctuated since 2017, have been materially declining since 2021 and we do not expect to incur material transformation costs related to these programs beyond fiscal 2024, we believe non-GAAP measures excluding these costs are useful to management and investors for comparing operating performance across multiple periods. • We incur costs related to our acquisition, disposition and other related charges.
We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and stockholder dividend payments.
We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases, and shareholder dividend payments.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist the reader in understanding our Consolidated Financial Statements, changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our Consolidated Financial Statements.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist the reader in understanding our Consolidated Financial Statements, changes in certain key items in these financial statements from year to year, and the primary factors that accounted for these changes, as well as how certain accounting principles, policies and estimates affect our Consolidated Financial Statements.
In December 2020, we filed a shelf registration statement with the Securities and Exchange Commission that allows us to sell, at any time and from time to time, in one or more offerings, debt securities, preferred stock, common stock, warrants, depository shares, purchase contracts, guarantees or units consisting of any of these securities.
In December 2023, we filed a shelf registration statement with the Securities and Exchange Commission that allows us to sell, at any time and from time to time, in one or more offerings, debt securities, preferred stock, common stock, warrants, depository shares, purchase contracts, guarantees or units consisting of any of these securities.
The impact of our outstanding interest rate swaps as of October 31, 2023 was factored into the calculation of the future interest payments on long-term debt. Operating lease obligations We enter into various leases as a lessee for assets including office buildings, data centers, vehicles, and aviation.
The impact of our outstanding interest rate swaps as of October 31, 2024 was factored into the calculation of the future interest payments on long-term debt. Operating lease obligations We enter into various leases as a lessee for assets including office buildings, data centers, vehicles, and aviation.
Annualized Revenue Run-rate (“ARR”) Our pivot to aaS continues its strong momentum with the addition of HPE GreenLake Cloud Services. Our mix of ARR is becoming more software-rich as we build our HPE GreenLake edge-to-cloud platform, which is improving our margin profile.
Annualized Revenue Run-rate (“ARR”) Our pivot to aaS continues its strong momentum with the addition of HPE GreenLake cloud services. Our mix of ARR is becoming more software-rich as we build our HPE GreenLake cloud, which is improving our margin profile.
Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, goodwill impairment, transformation costs and acquisition, disposition and other related charges.
Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, transformation costs and acquisition, disposition and other related charges.
We also provide a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure for this fiscal year and prior periods, and we encourage investors to review those reconciliations carefully. 59 Table of Contents
We also provide a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure for this fiscal year and prior periods, and we encourage investors to review those reconciliations carefully. 65 Table of Contents
The following Executive Overview, Results of Operations and Liquidity discussions and analysis compare fiscal 2023 to fiscal 2022 , unless otherwise noted. The Capital Resources and, Cash Requirements and Commitments sections present information as of October 31, 2023, unless otherwise noted.
The following Executive Overview, Results of Operations and Liquidity discussions and analysis compare fiscal 2024 to fiscal 2023 , unless otherwise noted. The Capital Resources and, Cash Requirements and Commitments sections present information as of October 31, 2024, unless otherwise noted.
Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the fiscal year October 31, 2022, as filed with the SEC on December 8, 2022, which is available on the SEC's website at www.sec.gov.
Discussions of fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found in “Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the fiscal year October 31, 2023, as filed with the SEC on December 22, 2023, which is available on the SEC's website at www.sec.gov.
We are subject to income taxes in the U.S. and approximately 85 other countries, and we are subject to routine corporate income tax audits in many of these jurisdictions.
We are subject to income taxes in the U.S. and approximately 80 other countries, and we are subject to routine corporate income tax audits in many of these jurisdictions.
Pursuant to the Shareholders' Agreement among our relevant subsidiaries, Unisplendour International Technology Limited (“UNIS”), and H3C dated as of May 1, 2016, as amended from time to time, and most recently on October 28, 2022, we delivered a notice to UNIS on December 30, 2022, to exercise our right to put to UNIS, for cash consideration, all of the H3C shares held by us, which represent 49% of the total issued share capital of H3C.
Pursuant to the Shareholders' Agreement among our relevant subsidiaries, UNIS, and H3C dated as of May 1, 2016, as amended from time to time, and most recently on October 28, 2022, we delivered a notice to UNIS on December 30, 2022, to exercise our right to put to UNIS, for cash consideration, all of the H3C shares held by us, which represent 49% of the total issued share capital of H3C.
ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four.
ARR represents the annualized revenue of all net HPE GreenLake cloud services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service (“SaaS”), software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four.
Debt benefiting FS totaled $11.6 billion and $11.5 billion at October 31, 2023 and 2022, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at October 31, 2023 and 2022, was $1.7 billion and $1.6 billion, respectively.
Debt benefiting FS totaled $11.8 billion and $11.6 billion at October 31, 2024 and 2023, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at October 31, 2024 and 2023, was $1.7 billion and $1.7 billion, respectively.
An analysis and discussion of changes in our cash flows, financial condition, liquidity, and cash requirements and commitments. • GAAP to Non-GAAP Reconciliation . Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure.
An analysis of changes in our cash flows, financial condition, liquidity, and cash requirements and commitments. • GAAP to Non-GAAP Reconciliations . Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure.
These amounts primarily included: • $104 million of income tax benefits related to transformation costs and acquisition, disposition and other related charges and • $19 million of net excess tax benefits related to stock-based compensation. In fiscal 2022, we recorded $454 million of net income tax benefits related to items discrete to the year.
In fiscal 2023, we recorded $131 million of net income tax benefits related to items discrete to the year. These amounts primarily included: • $104 million of income tax benefits related to transformation costs and acquisition, disposition and other related charges and • $19 million of net excess tax benefits related to stock-based compensation.
This section of this Form 10-K generally discusses fiscal 2023 and fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022.
This section of this Form 10-K generally discusses fiscal 2024 and fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023.
Financing Volume For the fiscal years ended October 31, 2023 2022 2021 In millions Financing volume $ 6,412 $ 6,252 $ 6,168 Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 2.6% in fiscal 2023 as compared to the prior-year period.
Financing Volume For the fiscal years ended October 31, 2024 2023 2022 In millions Financing volume $ 6,616 $ 6,412 $ 6,252 Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 3.2% in fiscal 2024 as compared to the prior-year period.
A discussion of our business and a summary of our financial performance and other highlights, including non-GAAP financial measures, affecting the Company in order to provide context to the remainder of the MD&A. • Critical Accounting Policies and Estimates.
(“Juniper Networks”). • Executive Overview. A discussion of our business and a summary of our financial performance and other highlights, including non-GAAP financial measures, affecting the Company in order to provide context to the remainder of the MD&A. • Critical Accounting Policies and Estimates.
(2) Segment earnings from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges and acquisition, disposition and other related charges.
(2) Segment earnings from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges, divestiture related exit costs, and acquisition, disposition and other related charges.
We believe eliminating impairment of investment for the purposes of calculating non-GAAP measures facilitates the evaluation of our current operating performance and comparisons to operating performance in prior periods. • We utilize a structural long-term projected non-GAAP income tax rate in order to provide consistency across the interim reporting periods and to eliminate the effects of items not directly related to our operating structure that can vary in size and frequency.
We believe eliminating these adjustments for the purposes of calculating non-GAAP measures facilitates the evaluation of our current operating performance. • We utilize a structural long-term projected non-GAAP income tax rate in order to provide consistency across the interim reporting periods and to eliminate the effects of items not directly related to our operating structure that can vary in size, frequency and timing.
The product revenue increase was led by switching and wireless local area network products, which benefited from improvements in the supply availability, and elevated order book levels at the beginning of the period. Services net revenue increased $143 million, or 20.6%, primarily led by our aaS and attached support service offerings.
The product revenue increase was led by switching and wireless local area network products, which benefited from improvements in the supply availability, and elevated order book levels at the beginning of the period. Services net revenue increased $127 million, or 14.8%, primarily led by our aaS and attached support service offerings.
As of October 31, 2023, our finance lease obligations, including interest, was $48 million, of which $6 million is to be due within one year. For more information on our debt, see Note 14, “Borrowings,” to the Consolidated Financial Statements in Item 8 of Part II.
As of October 31, 2024, our finance lease obligations, including interest, was $42 million, of which $7 million is to be due within one year. For more information on our debt, see Note 14, “Borrowings,” to the Consolidated Financial Statements in Item 8 of Part II.
The increase was primarily driven by higher financing of HPE product sales and services, partially offset by lower financing of third-party product sales and services and unfavorable currency fluctuations.
The increase was primarily driven by higher financing of HPE product sales and services, partially offset by lower financing of third-party product sales and services.
Intelligent Edge earnings from operations as a percentage of net revenue increased 12.4 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
Intelligent Edge earnings from operations as a percentage of net revenue increased 10.9 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
During the fourth quarter of fiscal 2023, the IRS issued notices of proposed adjustments (“NOPAs”) for fiscal 2017, 2018, and 2019 relating to our intercompany transfer pricing. After the close of fiscal 2023, the IRS issued a Revenue Agent Report (“RAR”) finalizing their position on the NOPAs for the same issues and same fiscal years.
During fiscal 2023, the IRS issued notices of proposed adjustments (“NOPAs”) for 2017, 2018, and 2019 relating to our intercompany transfer pricing. During the first quarter of fiscal 2024, the IRS issued a Revenue Agent Report finalizing their position on the NOPAs for the same issues and same fiscal years.
(2) The maximum aggregate capacity under the uncommitted lines of credit is $1.8 billion of which $0.3 billion was primarily utilized towards issuances of bank guarantees.
(3) The maximum aggregate capacity under the uncommitted lines of credit is $1.5 billion of which $0.6 billion was primarily utilized towards issuances of bank guarantees.
Cash Requirements and Commitments Long-term debt and interest payments on debt As of October 31, 2023, future principal payment obligations on our long-term debt including asset-backed debt securities totaled $11.7 billion of which $4.0 billion is due within one year.
Cash Requirements and Commitments Long-term debt and interest payments on debt As of October 31, 2024, future principal payment obligations on our long-term debt including asset-backed debt securities totaled $17.6 billion of which $4.0 billion is due within one year.
Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S as of October 31, 2023. We utilize a variety of planning and financing strategies in an effort to provide availability of our worldwide cash when and where it is needed.
Our cash balances are held in numerous locations throughout the world, with a substantial amount held in the U.S. as of October 31, 2024. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.
The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs, moderating the decrease was a lower mix of higher-margin support services revenue.
The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs, moderating the decrease was a lower mix of higher-margin support services revenue. Operating expenses as a percentage of net revenue decreased primarily due to our cost containment measures.
As of October 31, 2023, future interest payments relating to our long-term debt is estimated to be approximately $3.5 billion, of which $0.6 billion is expected to be due within one year.
As of October 31, 2024, future interest payments relating to our long-term debt is estimated to be approximately $7.6 billion, of which $0.9 billion is expected to be due within one year.
Capital Resources Debt Levels As of October 31, 2023 2022 2021 Dollars in millions Short-term debt $ 4,868 $ 4,612 $ 3,552 Long-term debt $ 7,487 $ 7,853 $ 9,896 Weighted-average interest rate 5.4 % 4.0 % 2.9 % We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure.
Capital Resources Debt Levels As of October 31, 2024 2023 2022 Dollars in millions Short-term debt $ 4,742 $ 4,868 $ 4,612 Long-term debt $ 13,504 $ 7,487 $ 7,853 Weighted-average interest rate 5.4 % 5.4 % 4.0 % We maintain debt levels that we establish through consideration of several factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure.
Compute earnings from operations as a percentage of net revenue decreased 0.5 percentage points primarily due to an increase in operating expenses as a percentage of net revenue partially offset by a decrease in the cost of products and services as a percentage of net revenue.
Intelligent Edge earnings from operations as a percentage of net revenue decreased 0.4 percentage points primarily due to increase in operating expenses as a percentage of net revenue, partially offset by a decrease in cost of products and services as a percentage of net revenue.
The decline in product revenue was primarily due to lower server unit volume of $1,889 million, or 18.9%, and unfavorable currency fluctuations of $399 million. The product revenue decline was moderated by an increase in AUPs of $864 million, or 8.7%, led by higher sales of server configurations with more complex component architectures in our next generation products.
The decline in product revenue was primarily due to lower server unit volume of $1,281 million, or 10.7%, and unfavorable currency fluctuations of $458 million, or 3.8%. The product revenue decline was moderated by an increase in AUPs of $683 million, or 5.7%, led by higher sales of server configurations with more complex component architectures in our next generation products.
FCF does not represent the total increase or decrease in cash for the period. Our management and investors can use FCF for the purpose of determining the amount of cash available for investment in our businesses, repurchasing stock and other purposes as well as evaluating our historical and prospective liquidity.
Our management and investors can use FCF for the purpose of determining the amount of cash available for investment in our businesses, repurchasing stock and other purposes as well as evaluating our historical and prospective liquidity.
On May 26, 2023, our relevant subsidiaries entered into a Put Share Purchase Agreement with UNIS, whereby UNIS has agreed to purchase all of the H3C shares held by us, through our subsidiaries, for a total pre-tax cash consideration of $3.5 billion.
On May 26, 2023, our relevant subsidiaries entered into a Put Share Purchase Agreement with UNIS, whereby UNIS has agreed to purchase all of the H3C shares held by us, through our subsidiaries.
A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment, supply chain constraints (though easing), uneven demand across our portfolio, increased demand for and adoption of new technologies, conservative customer spending environment, inflationary trend and foreign exchange pressures, and recent tax developments. • Executive Overview.
A discussion of material events and uncertainties known to management, such as the mixed macroeconomic environment of supply chain constraints (though easing), uneven demand across our portfolio, increased demand for and adoption of new technologies, conservative (though recovering) customer spending environment, persistent inflation, foreign exchange pressures, recent tax developments, and pending merger with Juniper Networks, Inc.
Product revenue increased by $1,387 million, or 46.5%, led by higher AUPs of $1,257 million, or 42.2%, and a volume and product mix effect of $236 million, or 7.9%, moderated by unfavorable currency fluctuations of $106 million.
Product revenue increased by $1,396 million, or 46.5%, led by higher AUPs of $1,284 million, or 42.8%, and a volume and product mix effect of $217 million, or 7.2%, moderated by unfavorable currency fluctuations of $106 million, or 3.5%.
We will re-evaluate its long-term rate as appropriate. We believe that making these adjustments for purposes of calculating non-GAAP measures, facilitates a supplemental evaluation of our current operating performance and comparisons to past operating results.
We believe that making these adjustments for purposes of calculating non-GAAP measures, facilitates a supplemental evaluation of our current operating performance and comparisons to past operating results.
For fiscal 2023 and 2022, we used a non-GAAP income tax rate of 14%. The non-GAAP income tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix including due to acquisition activity, or other changes to our strategy or business operations.
The non-GAAP income tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix including due to acquisition activity, or other changes to our strategy or business operations. We will re-evaluate its long-term rate as appropriate.
As of October 31, 2023, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, “Segment Information” to the Consolidated Financial Statements in Item 8 of Part II, with the exception of Corporate Investments and Other which contains five reporting units: Advisory and Professional Services, Athonet, legacy Communications and Media Solutions business, OpsRamp and Software.
As of October 31, 2024, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, “Segment Information” to the Consolidated Financial Statements in Item 8 of Part II, with the exception of Server, which contains two reporting units: Compute and High Performance Computing & AI (“HPC & AI”), and Corporate Investments and Other which contains two reporting units: Advisory and Professional Services, and legacy Communications and Media Solutions.
DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold. Compared to the corresponding three-month period ending October 31, 2022, the decrease in DPO by 15 days in the current period was primarily due to lower inventory purchases during the current period.
DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold. Compared to the corresponding three-month period in fiscal 2023, the increase in DPO by 36 days in the current period was primarily due to higher inventory purchases.
The tables below represent the way in which management reviews cash flows: For the fiscal years ended October 31, 2023 2022 2021 In millions Net cash provided by operating activities $ 4,428 $ 4,593 $ 5,871 Net cash used in investing activities (3,284) (2,087) (2,796) Net cash used in financing activities (1,362) (1,796) (3,364) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36 (279) — Net (decrease) increase in cash, cash equivalents and restricted cash $ (182) $ 431 $ (289) Free Cash Flow $ 2,238 $ 1,794 $ 1,551 Operating Activities Net cash provided by operating activities decrease d by $165 million for fiscal 2023, as compared to fiscal 2022.
The following tables represent the way in which management reviews cash flows: For the fiscal years ended October 31, 2024 2023 2022 In millions Net cash provided by operating activities $ 4,341 $ 4,428 $ 4,593 Net cash used in investing activities (53) (3,284) (2,087) Net cash provided by (used in) financing activities 6,283 (1,362) (1,796) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (47) 36 (279) Change in cash, cash equivalents and restricted cash $ 10,524 $ (182) $ 431 Free cash flow $ 2,297 $ 2,238 $ 1,794 Operating Activities Net cash provided by operating activities decreased by $87 million for fiscal 2024, as compared to fiscal 2023.
Our tax rate for fiscal 2022 also included the effects of the non-deductible goodwill impairment. The jurisdictions with favorable tax rates that had the most significant impact on our effective tax rate in the periods presented include Puerto Rico and Singapore. In fiscal 2023, we recorded $131 million of net income tax benefits related to items discrete to the year.
The jurisdictions with favorable tax rates that had the most significant impact on our effective tax rate in the periods presented include Puerto Rico and Singapore. In fiscal 2024, we recorded $43 million of net income tax charges related to items discrete to the year.
For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A. For more information on the impact from operating assets and liabilities to cash flows, see Note 7, “Balance Sheet Details,” to the Consolidated Financial Statements in Item 8 of Part II.
For more information on the impact of operating assets and liabilities to our cash flows, see Note 7, “Balance Sheet Details,” to the Consolidated Financial Statements in Item 8 of Part II.
Transformation programs and costs Our transformation programs consist of the Cost Optimization and Prioritization Plan (launched in 2020) and the HPE Next Plan (launched in 2017). Transformation costs decreased by $190 million, or 40.2%, due to lower charges incurred in the current period as these plans approach completion.
Transformation programs and costs Our transformation programs consist of the Cost Optimization and Prioritization Plan (launched in 2020) and the HPE Next Plan (launched in 2017). Transformation costs decreased by $190 million, or 67.1%, due to lower charges incurred in the current period as the primary elements of these plans have been substantially completed by the end of fiscal 2023.
When performing the goodwill impairment test, we compare the fair value of each reporting unit to its carrying amount. An impairment exists if the fair value of the reporting unit is less than its carrying amount.
When performing the goodwill impairment test, we compare the fair value of each reporting unit to its carrying amount. An impairment exists if the fair value of the reporting unit is less than its carrying amount. Estimating the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
Uncertain Tax Positions As of October 31, 2023, we had approximately $224 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include $9 million expected to be paid within one year.
Uncertain Tax Positions As of October 31, 2024, we had approximately $186 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions that could result in a cash payment. These liabilities and related interest and penalties include $2 million expected to be paid within one year.
For the fiscal years ended October 31, 2023 2022 2021 In millions Net cash provided by operating activities $ 4,428 $ 4,593 $ 5,871 Litigation judgment, net of taxes paid — — (2,172) Net cash provided by operating activities, excluding litigation judgment, net of taxes paid 4,428 4,593 3,699 Investment in property, plant and equipment (2,828) (3,122) (2,502) Proceeds from sale of property, plant and equipment 602 602 354 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36 (279) — Free cash flow $ 2,238 $ 1,794 $ 1,551 56 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Use of Non-GAAP Financial Measures The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF.
For the fiscal years ended October 31, 2024 2023 2022 In millions Net cash provided by operating activities $ 4,341 $ 4,428 $ 4,593 Investment in property, plant and equipment and software assets (2,367) (2,828) (3,122) Proceeds from sale of property, plant and equipment 370 602 602 Effect of exchange rate changes on cash, cash equivalents, and restricted cash (47) 36 (279) Free cash flow $ 2,297 $ 2,238 $ 1,794 Use of non-GAAP Financial Measures The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF.
Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as tax indemnification and other adjustments, non-service net periodic benefit cost (credit), earnings from equity interests, impairment of investment, and adjustments for taxes.
Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges mentioned above, as well as other items such as adjustments for equity interests, gain or loss on equity investments, other adjustments, and adjustments for taxes.
Taxes on Earnings We calculate our current and deferred tax provisions based on estimates and assumptions that could differ from the final positions reflected in our income tax returns. We adjust our current and deferred tax provisions based on our tax returns which are generally filed in the third or fourth quarters of the subsequent fiscal year.
Taxes on Earnings We calculate our current and deferred tax provisions based on estimates and assumptions that could differ from the final positions reflected in our income tax returns.
This adjustment was reflected in Interest and other, net in the Consolidated Statements of Earnings.
These adjustments are reflected in Interest and other, net in the Consolidated Statements of Earnings.
Although stock-based compensation is a key incentive offered to our employees, we exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense. • Disaster (recovery) charges are primarily related to the exit of our businesses in Russia and Belarus, and include credit losses of financing and trade receivables, employee severance and abandoned assets.
Although stock-based compensation is a key incentive offered to our employees, we exclude these charges for the purpose of calculating these non-GAAP measures, primarily because they are non-cash expenses and our internal benchmarking analyses evidence that many industry participants and peers present non-GAAP financial measures excluding stock-based compensation expense. 63 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) • Disaster recoveries include direct costs or recovery of these costs related to the exit of the Company’s businesses in Russia and Belarus.
Corporate Investments and Other loss from operations as a percentage of net revenue increased 6.5 percenta ge points primarily due to an increase in cost of services and operating expense as a percentage of net revenue.
Corporate Investments and Other loss from operations as a percentage of net revenue increased 5.2 percentage points primarily due to increases in cost of services as a percentage of net revenue while operating expenses as a percentage of net revenue remained relatively flat.
For more information on our unconditional purchase obligations, see Note 19, “Commitments,” to the Consolidated Financial Statements in Item 8 of Part II. 53 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Retirement Benefit Plan Funding In fiscal 2024, we anticipate making contributions of $182 million to our non-U.S. pension plans.
For more information on our unconditional purchase obligations, see Note 17, “Litigation, Contingencies, and Commitments,” to the Consolidated Financial Statements in Item 8 of Part II. Retirement Benefit Plan Funding In fiscal 2024, we anticipate making contributions of $189 million to our non-U.S. pension plans.
The components of the weighted net revenue change by segment were as follows: For the fiscal years ended October 31, 2023 2022 Percentage Points Compute (5.0) 1.6 HPC & AI 2.6 0.1 Storage (0.7) (0.1) Intelligent Edge 5.4 1.3 Financial Services 0.5 (0.2) Corporate Investments and Other — (0.4) Total segment 2.8 2.3 Elimination of intersegment net revenue and other (0.6) 0.3 Total HPE 2.2 2.6 Fiscal 2023 compared with fiscal 2022 From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows: • Compute net revenue decrease of $1,414 million, or 11.0%, primarily due to a decline in server unit volume and unfavorable currency fluctuations moderated by higher AUPs • HPC & AI net revenue increase of $721 million, or 22.6%, primarily due to higher customer acceptances • Storage net revenue decrease of $188 million, or 4.1%, primarily due to unfavorable currency fluctuations • Intelligent Edge net revenue increase of $1,530 million, or 41.6%, primarily due to increased AUPs and volume and product mix effect • Financial Services net revenue increase of $141 million, or 4.2%, primarily due to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment • Corporate Investments and Other net revenue decrease of $5 million, or 0.4%, primarily due to unfavorable currency fluctuations Gross Profit Fiscal 2023 total gross profit margin of 35.1% represents an increase of 1.7 percentage points as compared to the respective prior year period.
The components of the weighted net revenue change by segment were as follows: For the fiscal years ended October 31, 2024 2023 Percentage Points Server 6.4 (3.9) Hybrid Cloud (0.4) 0.9 Intelligent Edge (2.9) 5.3 Financial Services 0.1 0.5 Corporate Investments and Other 0.1 (0.1) Total segment 3.3 2.7 Elimination of intersegment net revenue and other 0.1 (0.5) Total HPE 3.4 2.2 48 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal 2024 compared with fiscal 2023 From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows: • Server net revenue increased $1,844 million, or 12.8%, primarily due to higher AUPs • Hybrid Cloud net revenue decreased $107 million, or 1.9%, primarily due to lower AUPs • Intelligent Edge net revenue decreased $847 million, or 15.7%, primarily due to lower volume and product mix effect • Financial Services net revenue increased $32 million, or 0.9%, primarily due to higher finance income • Corporate Investments and Other net revenue increased $29 million, or 2.9%, primarily due to revenue growth from Advisory and Professional Services (“A & PS”) Fiscal 2023 compared with fiscal 2022 From a segment perspective, the primary factors contributing to the change in total net revenue are summarized as follows: • Server net revenue decreased $1,111 million, or 7.2%, primarily due to lower server unit volume and unfavorable currency fluctuations • Hybrid Cloud net revenue increased $260 million, or 5.0%, primarily due to higher unit volume • Intelligent Edge net revenue increased $1,522 million, or 39.5%, primarily due to increased AUPs and volume and product mix effect • Financial Services net revenue increased $141 million, or 4.2%, primarily due to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment • Corporate Investments and Other net revenue decreased $27 million, or 2.7%, primarily due to unfavorable currency fluctuations Gross Profit Fiscal 2024 total gross profit margin of 32.8% represents a decrease of 2.3 percentage points as compared to the respective prior year period.
Corporate Investments and Other For the fiscal years ended October 31, 2023 2022 2021 2023 vs 2022 % Change Dollars in millions Net revenue $ 1,250 $ 1,255 $ 1,356 (0.4) % Loss from operations $ (172) $ (92) $ (95) 87.0 % Loss from operations as a % of net revenue (13.8) % (7.3) % (7.0) % Fiscal 2023 compared with fiscal 2022 Corporate Investments and Other net revenue decreased by $5 million, or 0.4% (increased 3.3% on a constant currency basis) primarily due to unfavorable currency fluctuations.
Corporate Investments and Other For the fiscal years ended October 31, 2024 2023 2022 2024 vs 2023 % Change 2023 vs 2022 % Change Dollars in millions Net revenue $ 1,014 $ 985 $ 1,012 2.9 % (2.7) % Loss from operations $ (25) $ (77) $ (26) 67.5 % (196.2) % Loss from operations as a % of net revenue (2.5) % (7.8) % (2.6) % Fiscal 2024 compared with fiscal 2023 Corporate Investments and Other net revenue increased by $29 million, or 2.9% (increased 4.3% on a constant currency basis) primarily due to revenue growth from A & PS, partially offset by unfavorable currency fluctuations.
The increase was primarily due to payments made in connection with business acquisitions of $0.8 billion, higher cash utilized in net financial collateral activities of $0.5 billion, lower proceeds from maturities and sales of investments, net of purchases of $0.2 billion, offset by lower investment in property, plant and equipment of $0.3 billion, as compared to the prior-year period.
The decrease was primarily due to proceeds from UNIS in connection with the sale of 30% of the total issued share capital of H3C of $2.1 billion, lower net payments made in connection with business acquisitions of $0.6 billion, lower cash utilized in net financial collateral activities of $0.2 billion, and lower investments in property, plant and equipment and software assets, net of sales proceeds of $0.2 billion, as compared to the prior-year period.
Investing Activities Net cash used in investing activities increased by $1.2 billion in fiscal 2023, as compared to fiscal 2022.
Investing Activities Net cash used in investing activities decreased by $3.2 billion in fiscal 2024, as compared to the corresponding period in fiscal 2023.
We anticipate that the funds made available and cash generated from operations along with our access to capital markets will be sufficient to meet our liquidity requirements for at least the next twelve months and for the foreseeable future thereafter.
We anticipate that the funds made available, including the debt funding related to the pending merger with Juniper Networks, proceeds from issuance of the Preferred Stock and proceeds from the sale of 30% of the total issued share capital of H3C, and cash generated from our operations, along with our access to capital markets, will be sufficient to meet our liquidity requirements for at least the next twelve months (including for the payment of consideration to consummate the Juniper Networks transaction) and for the foreseeable future thereafter.
DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue.
DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue. Compared to the corresponding three-month period in fiscal 2023, the decrease in DSO by 5 days in the current period was primarily due to higher early collections.
For the fiscal years ended October 31, 2023 2022 Dollars % of Revenue Dollars % of Revenue In millions GAAP earnings from operations $ 2,089 7.2 % $ 782 2.7 % Non-GAAP adjustments: Amortization of initial direct costs — — % 4 — % Amortization of intangible assets 288 1.0 % 293 1.0 % Impairment of goodwill — — % 905 3.2 % Transformation costs 283 1.0 % 473 1.6 % Disaster (recovery) charges (12) — % 159 0.6 % Stock-based compensation expense 428 1.5 % 391 1.4 % Acquisition, disposition and other related charges 69 0.2 % 19 0.1 % Non-GAAP earnings from operations $ 3,145 10.8 % $ 3,026 10.6 % 55 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
For the fiscal years ended October 31, 2024 2023 Dollars % of Revenue Dollars % of Revenue In millions GAAP earnings from operations $ 2,190 7.3 % $ 2,089 7.2 % Non-GAAP adjustments: Amortization of intangible assets 267 0.9 % 288 1.0 % Transformation costs 93 0.3 % 283 1.0 % Disaster recovery (51) (0.2) % (12) — % Stock-based compensation expense 430 1.4 % 428 1.5 % Divestiture related exit costs 35 0.1 % — — % Acquisition, disposition and other related charges 204 0.7 % 69 0.2 % Non-GAAP earnings from operations $ 3,168 10.5 % $ 3,145 10.8 % Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
However, intercompany loans and certain accounts that are reflected in the segment balances are eliminated in our Consolidated Financial Statements. 48 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The portfolio assets and ratios derived from the segment balance sheets for FS were as follows: As of October 31 2023 2022 Dollars in millions Financing receivables, gross $ 8,814 $ 8,359 Net equipment under operating leases 4,100 4,103 Capitalized profit on intercompany equipment transactions (1) 263 241 Intercompany leases (1) 109 97 Gross portfolio assets 13,286 12,800 Allowance for doubtful accounts (2) 178 222 Operating lease equipment reserve 36 44 Total reserves 214 266 Net portfolio assets $ 13,072 $ 12,534 Reserve coverage 1.6 % 2.1 % Debt-to-equity ratio (3) 7.0x 7.0x (1) Intercompany activity is eliminated in consolidation.
The portfolio assets and ratios derived from the segment balance sheets for FS were as follows: As of October 31 2024 2023 Dollars in millions Financing receivables, gross $ 9,647 $ 8,814 Net equipment under operating leases 3,632 4,100 Capitalized profit on intercompany equipment transactions (1) 396 263 Intercompany leases (1) 119 109 Gross portfolio assets 13,794 13,286 Allowance for doubtful accounts (2) 177 178 Operating lease equipment reserve 30 36 Total reserves 207 214 Net portfolio assets $ 13,587 $ 13,072 Reserve coverage 1.5 % 1.6 % Debt-to-equity ratio (3) 7.0x 7.0x (1) Intercompany activity is eliminated in consolidation.
We do not expect restrictions or potential taxes incurred on the repatriation of amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
We do not expect restrictions or potential taxes incurred on repatriation of amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition, or results of operations. In connection with the share repurchase program previously authorized by our Board of Directors, during fiscal 2024, we repurchased and settled an aggregate amount of $150 million.
Operating expenses as a percentage of net revenue decreased primarily due to our cost containment measures. 47 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financial Services For the fiscal years ended October 31, 2023 2022 2021 2023 vs 2022 % Change Dollars in millions Net revenue $ 3,480 $ 3,339 $ 3,401 4.2 % Earnings from operations $ 317 $ 399 $ 390 (20.6) % Earnings from operations as a % of net revenue 9.1 % 11.9 % 11.5 % Fiscal 2023 compared with fiscal 2022 FS net revenue increased by $141 million, or 4.2% (increased 5.4% on a constant currency basis) due primarily to higher rental revenue from higher average operating leases and higher finance income on finance leases due to an increasing interest rate environment, partially offset by lower asset management revenue primarily from lower pre-owned asset sales and unfavorable currency fluctuations.
Financial Services For the fiscal years ended October 31, 2024 2023 2022 2024 vs 2023 % Change 2023 vs 2022 % Change Dollars in millions Net revenue $ 3,512 $ 3,480 $ 3,339 0.9 % 4.2 % Earnings from operations $ 316 $ 281 $ 387 12.5 % (27.4) % Earnings from operations as a % of net revenue 9.0 % 8.1 % 11.6 % Fiscal 2024 compared with fiscal 2023 FS net revenue increased by $32 million, or 0.9% (increased 0.6% on a constant currency basis) primarily due to higher finance income from higher average finance leases in a higher interest rate environment, along with favorable currency fluctuations, partially offset by lower rental revenue on lower average operating leases and lower asset management lease buyout revenue.
Under the income approach, the fair value of a reporting unit is based on discounted cash flow analysis of management's short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding revenue growth rates, expected operating margins, and timing of expected future cash flows based on market conditions and customer acceptances.
This analysis includes significant assumptions regarding revenue growth rates, expected operating margins, and timing of expected future cash flows based on market conditions and customer acceptances.
FS earnings from operations as a percentage of net revenue decreased 2.8 percentage points due primarily to an increase in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were relatively flat.
FS earnings from operations as a percentage of net revenue decreased 3.5% percentage points due primarily to an increase in cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue were 53 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) relatively flat.
We maintain a revolving credit facility and two commercial paper programs, "the Parent Programs", and a wholly-owned subsidiary maintains a third program. There have been no changes to our commercial paper programs and revolving credit facility since October 31, 2022.
We maintain a revolving credit facility and two commercial paper programs, “the Parent Programs”, and a wholly-owned subsidiary maintains a third program.
Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying amount, except for Compute. The Compute reporting unit has goodwill of $7.7 billion as of October 31, 2023, and excess of fair value over carrying value of 5% as of the annual test date.
Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying amount, except for HPC & AI and Hybrid Cloud.
DOS measures the average number of days from procurement to sale of our product. DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold. Compared to the corresponding three-month period ending October 31, 2022, the DOS remained relatively flat. DPO measures the average number of days our accounts payable balances are outstanding.
DOS measures the average number of days from procurement to sale of our products. DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold.
Our working capital metrics and cash conversion impacts were as follows: As of October 31, 2023 2022 2021 Days of sales outstanding in accounts receivable (“DSO”) 43 47 49 Days of supply in inventory (“DOS”) 87 88 82 Days of purchases outstanding in accounts payable (“DPO”) (134) (149) (128) Cash conversion cycle (4) (14) 3 The cash conversion cycle is the sum of DSO and DOS less DPO.
The decrease was moderated by favorable working capital, as compared to the prior-year period. 57 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Our working capital metrics and cash conversion impacts were as follows: As of October 31, 2024 2023 2022 Days of sales outstanding in accounts receivable (“DSO”) 38 43 47 Days of supply in inventory (“DOS”) 120 87 88 Days of purchases outstanding in accounts payable (“DPO”) (170) (134) (149) Cash conversion cycle (12) (4) (14) The cash conversion cycle is the sum of DSO and DOS less DPO.
The increase in operating expenses as a percentage of net revenue was primarily due to the scale of the net revenue decline. The decrease in costs of products and services as a percentage of net revenue was primarily due to higher AUPs moderated by unfavorable currency fluctuations and higher supply chain costs.
The increase in cost of products and services as a percentage of net revenue was primarily due to lower margin GreenLake Flex Solutions deals and decrease in storage subscription revenue. The increase in operating expenses as a percentage of net revenue was primarily due to the unfavorable currency fluctuations.
U.S. net revenue increased by $944 million, or 10.0% to $10.4 billion, and net revenue from outside of the U.S. decreased by $305 million, or 1.6%, to $18.7 billion.
U.S. net revenue increased by $521 million, or 5.0% to $10.9 billion, and net revenue from outside of the U.S. increased by $471 million, or 2.5%, to $19.2 billion.
Compute For the fiscal years ended October 31, 2023 2022 2021 2023 vs 2022 % Change Dollars in millions Net revenue $ 11,436 $ 12,850 $ 12,409 (11.0) % Earnings from operations $ 1,569 $ 1,821 $ 1,382 (13.8) % Earnings from operations as a % of net revenue 13.7 % 14.2 % 11.1 % Fiscal 2023 compared with fiscal 2022 Compute net revenue decreased by $1,414 million, or 11.0% (decreased 7.1% on a constant currency basis), primarily due to a $1,424 million, or 14.3%, decrease in product revenue.
Server For the fiscal years ended October 31, 2024 2023 2022 2024 vs 2023 % Change 2023 vs 2022 % Change Dollars in millions Net revenue $ 16,205 $ 14,361 $ 15,472 12.8 % (7.2) % Earnings from operations $ 1,818 $ 1,830 $ 1,958 (0.7) % (6.5) % Earnings from operations as a % of net revenue 11.2 % 12.7 % 12.7 % Fiscal 2024 compared with fiscal 2023 Server net revenue increased by $1,844 million, or 12.8% in actual dollars and constant currency, primarily due to a $1,812 million, or 16.7%, increase in product revenue.
EXECUTIVE OVERVIEW Net revenue of $29.1 billion represented an increase of 2.2% (increased 5.5% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Intelligent Edge and Compute segments, and higher customer acceptances in the High Performance Computing & Artificial Intelligence (“HPC & AI”) segment.
EXECUTIVE OVERVIEW Net revenue of $30.1 billion represented an increase of 3.4% (increased 3.3% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment, moderated by lower volume and product mix effect in the Intelligent Edge segment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed11 unchanged
Biggest changeThe sensitivity analyses indicated that a hypothetical 10% adverse movement in interest rates would result in a loss in the fair values of our debt, debt investments and net portfolio assets, net of interest rate swaps, of $41 million and $32 million at October 31, 2023 and 2022, respectively.
Biggest changeThe sensitivity analyses indicated that a hypothetical 10% adverse movement in interest rates would result in a loss in the fair values of our debt, debt investments and net portfolio assets, net of interest rate swaps, of $233 million and $41 million at October 31, 2024 and 2023, respectively.
We have performed sensitivity analyses as of October 31, 2023 and 2022, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We have performed sensitivity analyses as of October 31, 2024 and 2023, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We have performed sensitivity analyses as of October 31, 2023 and 2022, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of interest rates across the entire yield curve, with all other variables held constant.
We have performed sensitivity analyses as of October 31, 2024 and 2023, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of interest rates across the entire yield curve, with all other variables held constant.
The analyses cover all of our foreign currency derivative contracts offset by underlying exposures. The foreign currency exchange rates we used in performing the sensitivity analysis were based on market rates in effect at October 31, 2023 and 2022, respectively.
The analyses cover all of our foreign currency derivative contracts offset by underlying exposures. The foreign currency exchange rates we used in performing the sensitivity analysis were based on market rates in effect at October 31, 2024 and 2023, respectively.
The analyses cover our debt, debt investments, net portfolio assets, and interest rate swaps. The analyses use actual or approximate maturities for the debt, debt investments, net portfolio assets, and interest rate swaps. The discount rates used were based on the market interest rates in effect at October 31, 2023 and 2022, respectively.
The analyses cover our debt, debt investments, net portfolio assets, and interest rate swaps. The analyses use actual or approximate maturities for the debt, debt investments, net portfolio assets, and interest rate swaps. The discount rates used were based on the market interest rates in effect at October 31, 2024 and 2023, respectively.
For more information about our debt, use of derivative instruments, forward contracts and investments, Refer to Note 1, “Overview and Summary of Significant Accounting Policies”, Note 13, Financial Instruments”, and Note 14, “Borrowings”, of the Notes to the Consolidated Financial Statements section included in this report. 60 Table of Contents
For more information about our debt, use of derivative instruments, forward contracts and investments, Refer to Note 1, “Overview and Summary of Significant Accounting Policies”, Note 13, “Financial Instruments”, and Note 14, “Borrowings”, of the Notes to the Consolidated Financial Statements section included in this report. 66 Table of Contents
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a foreign exchange fair value loss of $48 million and $49 million at October 31, 2023 and 2022, respectively.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a foreign exchange fair value loss of $44 million and $48 million at October 31, 2024 and 2023, respectively.
We transact business in approximately 40 currencies worldwide, of which the most significant foreign currencies to our operations for fiscal 2023 were the euro, Japanese yen, and British pound.
We transact business in approximately 40 currencies worldwide, of which the most significant foreign currencies to our operations for fiscal 2024 were the euro, Japanese yen, and Indian rupee.

Other HPE 10-K year-over-year comparisons