Morgan Stanley maintains Overweight rating on HP Enterprise stock

Hewlett Packard Enterprise (HPE) reported stronger-than-expected Q3 2025 financial results, with non-GAAP EPS of $0.44 and revenue of $9.1 billion, both surpassing analyst forecasts. Morgan Stanley reiterated an Overweight rating and $28.00 price target, highlighting solid execution, better-than-expected end-market demand, and a favorable mix shift to Networking, while attributing AI server margin concerns to a single large deal rather than a structural issue. The firm characterized the earnings as a "small step in the right direction," with the upcoming October 15th Analyst Day anticipated as a key catalyst for detailing long-term growth targets and capital allocation.

Analysis

Hewlett Packard Enterprise (HPE) reported a solid third quarter for 2025, exceeding consensus estimates with revenue of $9.1 billion against a forecast of $8.35 billion and non-GAAP EPS of $0.44 versus an anticipated $0.42. This performance, coupled with 11.8% revenue growth over the last twelve months, prompted Morgan Stanley to reiterate its Overweight rating and $28.00 price target. The positive results were driven by solid execution, stronger-than-expected end-market demand, and an accelerated mix shift toward the high-margin Networking segment. This shift is particularly notable, as Networking accounted for 46% of operating income with only one month of contribution from the newly acquired Juniper Networks, suggesting significant future accretion. While concerns were raised regarding AI server margins, Morgan Stanley attributes this to a single large deal rather than a structural weakness. The company's forward guidance for October is viewed as in-line to slightly better than consensus. The upcoming October 15th Analyst Day is positioned as a major catalyst, where the market expects detailed long-term growth targets, margin profiles, and updates on capital allocation and Juniper synergies.

Key Decisions for Investors

• Given the earnings beat, positive analyst commentary, and the stock trading below Morgan Stanley's $28 price target, investors could consider the current position a constructive holding or a potential entry point.
• The upcoming October 15th Analyst Day is a critical catalyst; investors should closely monitor management's guidance on long-term growth, margin expansion, and Juniper synergy realization to validate the investment thesis.
• While the AI server margin pressure was explained as a one-off event, it remains a key risk to monitor in future earnings reports to ensure it does not become a structural issue impacting profitability in a key growth area.