HPE tweaks T&Cs so the price it quotes may not be the price you pay
With memory and storage contributing over half the price of a server, Big Green needs to protect its margins
HPE has changed its terms and conditions in ways that allow it to change hardware prices after it’s issued a quote, due to rampant storage and memory price rises.
CEO Antonio Neri announced the change on the company’s Q1 2026 earnings call, during which he said HPE has “expanded our long-term multi-year agreements with our key silicon and memory partners to secure the capacity needed to meet customer demand.” The company has also started “proactively communicating with customers and channel partners, providing lead time and cost visibility, along with alternative configuration recommendations to shape demand.”
Neri said the company is also “protecting our margins” by adopting “an agile pricing posture with price adjustments across the entire portfolio with shorter quote commitment cycles.”
“We have amended our quoting terms with the right to reprice existing orders for commodity cost increases between quoting and shipment,” he added.
Good luck budgeting for that, dear reader, or planning any server purchases at all, given Neri said, “DRAM and NAND now make up over half of the bill of material cost of a traditional server, and this share will continue to rise as component costs increase.”
Neri said he has met with “a lot” of customers in Europe, and none said they will defer purchases due to higher prices.
“All of them said, okay, I understand the price increases. What we can do to shape the demand, maybe a different configuration, some may take a lower-end configuration to get the product. But it was all about speed to get the product, not the price.”
The CEO said the high cost of components is less hurtful to HPE’s networking business, which now includes the former Juniper Networks and therefore delivered 150 percent year-over-year revenue growth to haul in $2.7 billion and produced $640 million of earnings before taxes. HPE calls the rest of its activities “Cloud & AI” and that segment’s revenue was $6.3 billion – down three percent – with $645 million earnings before taxes.
“I am incredibly pleased with our Q1 Networking segment performance and with the excellent progress we have made in integrating Juniper Networks,” Neri said. “Our strategy is paying off. We delivered strong revenue growth, at the high end of our guidance, with orders growing faster than revenue. The Networking segment now represents nearly 30 percent of our total revenues and more than half of our total operating profits.”
Neri was unconcerned by the Cloud & AI business unit going backwards, saying HPE expected that outcome, saw rising orders for traditional servers, and has a $5 billion backlog of orders on its books. CFO Marie Myers said she expects most AI hardware orders will ship in the second half of 2026 and HPE’s balance sheet will reflect that shift.
The CEO mentioned HPE’s growing virtualization portfolio by noting that revenue for VM Essentials, the company’s alternative to the lower-end vSphere products VMware no longer sells with any enthusiasm, “grew sequentially for the third consecutive quarter, with high double-digit new logos growth year-over-year, driven by the escalating cost of legacy virtualization software.”
Myers predicted Q2 revenue of $9.6 billion to $10 billion, and investors seem not to have hated these results as they sent HPE’s share price up by three percent in after-hours trading. ®