Post-market crash! Expensive AI chips squeeze profit margins, Hewlett Packard Enterprise Co. Technology (HPE.US) new fiscal year profit and cash flow guidance lower than expected.

Hewlett Packard Enterprise Co. (HPE.US) forecasts for its profit and cash flow for the next fiscal year are lower than analysts' expectations, reflecting a problem of shrinking profit margins in the era of artificial intelligence. Hewlett Packard Enterprise Co. expects adjusted earnings per share for the fiscal year ending in October 2026 to be between $2.20 and $2.40. The company stated on Wednesday in a statement that its free cash flow will be between $1.5 billion and $2 billion. Analysts' average profit forecast is $2.41, with free cash flow at $24.1 billion. As one of the largest computer equipment manufacturers, Hewlett Packard Enterprise Co. is making its network business a key pillar for future expansion. The company acquired Juniper Networks, Inc. for about $13 billion in July. Additionally, there is an increased demand for high-performance servers for artificial intelligence workloads. CEO Antonio Neri stated in the declaration, "We are prepared to capture more market share in the most important markets for our customers." This statement was released simultaneously with the company's analyst day activities. However, Hewlett Packard Enterprise Co. is facing a shrinking profit margin issue partially due to the expensive artificial intelligence chips used in their servers, which lowers the profitability of these machines. According to the statement, the company plans to "achieve higher profit levels in the coming years and increase the ability to generate free cash flow, in order to provide shareholders with higher capital returns." Hewlett Packard Enterprise Co. announced that it will raise its dividend by 10% for the next fiscal year, increasing it from the current 13 cents per share per quarter to a higher level. The board also approved an additional $30 billion for stock repurchases. For the fiscal year ending in October 2028, Hewlett Packard Enterprise Co. expects adjusted earnings per share to reach at least $3, and free cash flow to exceed $3.5 billion. These forecasts are slightly higher than analysts' average expectations of $2.95 per share and $34.2 billion in free cash flow. The company also stated that as part of the integration with Juniper Networks, Inc., it will be cutting a certain number of employees. This downsizing will result in approximately $240 million in losses, with most of the job cuts expected to be completed within the next year. However, Hewlett Packard Enterprise Co. mentioned that the downsizing plan may continue even up to three years after the acquisition is completed. Following the earnings announcement, as of writing, Hewlett Packard Enterprise Co. has dropped around 9% in after-hours trading. The stock has risen by 17% so far this year.