HPE's Networking Business Improves: What's Driving the Growth?

Core Insights - Hewlett Packard Enterprise (HPE) has significantly enhanced its networking capabilities through the acquisition of Juniper Networks, leading to a substantial increase in revenues and operating profit in the Networking segment [2][3][4]. Group 1: Acquisition Impact - The acquisition of Juniper Networks on July 2, 2025, has expanded HPE's networking portfolio, introducing cloud-native and AI-driven networks, resulting in a 54.3% revenue increase to $1.73 billion in Q3 2025 [2][8]. - HPE's Networking operating profit reached $360 million, reflecting a 43% year-over-year increase, driven by the Juniper acquisition and improvements in the Intelligent Edge segment [3][8]. - The acquisition has allowed HPE to diversify its offerings beyond campus and branch networking, incorporating routers, data-center networking, and firewalls, which is expected to enhance margins and reduce competitive pressure [4][8]. Group 2: Competitive Landscape - HPE's acquisition positions it competitively against major players like Cisco and Arista Networks in the networking space, with similar product offerings in switches and routers [5][6]. - The competitive dynamics in the networking sector are intensified as HPE now competes directly with Cisco and Arista for market leadership following the Juniper acquisition [6]. Group 3: Financial Performance and Valuation - HPE's shares have increased by 16.4% year to date, while the Zacks Computer - Integrated Systems industry has grown by 37.7% [7]. - The Zacks Consensus Estimate for HPE's fiscal 2025 earnings is $1.91 per share, indicating a 4% decrease year-over-year, while the estimate for fiscal 2026 is $2.40 per share, reflecting a 25.5% increase [9]. - HPE currently trades at a forward price-to-sales ratio of 0.83, significantly lower than the industry's average of 3.78, suggesting potential undervaluation [10].