Hewlett Packard Enterprise Co. (NYSE:HPE)

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

Hewlett Packard Enterprise Co., effective income tax rate (EITR) reconciliation

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
U.S. federal statutory income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%	23.30%
State income taxes, net of federal tax benefit	0.90%	2.80%	0.70%	0.90%	-0.10%	4.30%
Lower rates in other jurisdictions, net	-4.40%	-0.90%	-7.60%	13.60%	-7.30%	-121.40%
Valuation allowance	-2.80%	-31.50%	-10.00%	20.80%	5.80%	-59.80%
U.S. permanent differences	-1.50%	6.00%	3.60%	-3.40%	6.00%	39.30%
U.S. R&D credit	-2.10%	-5.10%	-1.30%	8.40%	-2.30%	-7.00%
Uncertain tax positions	-2.00%	-15.60%	-0.90%	7.60%	-14.70%	-694.80%
Goodwill impairment	0.00%	21.50%	0.00%	-41.20%	0.00%	0.00%
Tax law changes	0.00%	0.00%	-1.10%	-0.40%	24.50%	158.00%
Other, net	0.10%	2.70%	0.10%	-0.20%	-0.40%	7.40%
Effective tax rate	9.20%	0.90%	4.50%	27.10%	32.50%	-650.70%

The effective income tax rate (EITR) exhibited extreme volatility between 2018 and 2023, transitioning from a significant negative position to a relatively low single-digit range. While the U.S. federal statutory rate remained constant at 21% from 2019 through 2023, the realized tax burden was heavily influenced by non-recurring adjustments, jurisdictional differences, and valuation changes.

Primary Drivers of Volatility: Uncertain tax positions served as a primary catalyst for rate fluctuations, most notably in 2018 where a negative adjustment of 694.80% contributed heavily to the overall negative EITR. This volatility appeared again in 2022 with a negative adjustment of 15.60%.
Jurisdictional and Statutory Impacts: Tax rates in other jurisdictions provided substantial downward pressure on the EITR in 2018 (-121.40%) before stabilizing into a more moderate range between -7.60% and 13.60% in the following years. Additionally, tax law changes created significant upward pressure in the early part of the period, specifically adding 158.00% in 2018 and 24.50% in 2019.
Valuation and Impairment Adjustments: The EITR was further influenced by valuation allowances and goodwill impairments. A significant goodwill impairment in 2020 reduced the rate by 41.20%, whereas a positive adjustment of 21.50% was recorded in 2022. Valuation allowances also showed inconsistent swings, including a 20.80% increase in 2020 and a 31.50% decrease in 2022.
Recent EITR Trend: Following a peak of 32.50% in 2019, the EITR entered a general downward trend, reaching a low of 0.90% in 2022 before moderately recovering to 9.20% in 2023. This progression indicates that the company has consistently operated at a tax rate significantly below the U.S. federal statutory benchmark since 2021.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

Hewlett Packard Enterprise Co., components of deferred tax assets and liabilities

US$ in millions

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Loss and credit carryforwards	5,802)	7,222)	7,526)	7,596)	8,110)	9,149)
Inventory valuation	90)	87)	79)	75)	59)	77)
Intercompany prepayments	325)	321)	308)	295)	179)	48)
Warranty	49)	61)	50)	69)	72)	81)
Employee and retiree benefits	184)	247)	287)	571)	584)	498)
Restructuring	52)	55)	93)	118)	65)	101)
Deferred revenue	658)	601)	517)	565)	531)	518)
Intangible assets	107)	113)	91)	94)	130)	48)
Capitalized R&D	44)	—)	—)	—)	—)	—)
Lease liabilities	209)	185)	184)	166)	—)	—)
Other	196)	269)	259)	237)	284)	495)
Deferred tax assets	7,716)	9,161)	9,394)	9,786)	10,014)	11,015)
Valuation allowance	(5,294)	(6,817)	(7,368)	(7,724)	(8,225)	(8,209)
Deferred tax assets net of valuation allowance	2,422)	2,344)	2,026)	2,062)	1,789)	2,806)
Unremitted earnings of foreign subsidiaries	(190)	(170)	(168)	(172)	(233)	(161)
ROU assets	(192)	(167)	(159)	(165)	—)	—)
Fixed assets	(102)	(200)	(170)	(237)	(352)	(470)
Deferred tax liabilities	(484)	(537)	(497)	(574)	(585)	(631)
Net deferred tax assets and assets (liabilities)	1,938)	1,807)	1,529)	1,488)	1,204)	2,175)

The net deferred tax asset position exhibits a general upward trajectory from 2019 through 2023, rising from 1,204 million USD to 1,938 million USD. While the gross deferred tax assets have decreased over the same period, the net position has been bolstered by a significant reduction in the associated valuation allowance.

Loss and Credit Carryforwards and Valuation Allowance: A consistent downward trend is observed in loss and credit carryforwards, which declined from 9,149 million USD in 2018 to 5,802 million USD in 2023. Parallel to this, the valuation allowance decreased from 8,209 million USD to 5,294 million USD. The reduction in the valuation allowance suggests an increased corporate expectation of future taxable income against which these carryforwards can be realized, effectively increasing the net deferred tax assets despite the decrease in gross asset values.
Operational Deferred Tax Asset Components: Intercompany prepayments showed substantial growth, increasing from 48 million USD in 2018 to 325 million USD in 2023. Deferred revenue also trended upward, moving from 518 million USD to 658 million USD over the analyzed period. Conversely, deferred tax assets related to employee and retiree benefits experienced a sharp decline, falling from a peak of 584 million USD in 2019 to 184 million USD in 2023.
Deferred Tax Liabilities and Asset Offsets: Deferred tax liabilities related to fixed assets decreased significantly in absolute terms, moving from 470 million USD in 2018 to 102 million USD in 2023. Total deferred tax liabilities remained relatively stable, fluctuating between 484 million USD and 631 million USD. The introduction of Right-of-Use (ROU) assets and lease liabilities starting in 2020 indicates a shift in accounting for leases, with ROU assets creating a deferred tax liability that grew from 165 million USD in 2020 to 192 million USD in 2023.
Net Deferred Tax Position Analysis: The net deferred tax assets, after accounting for valuation allowances and liabilities, improved from 2,175 million USD in 2018 to a low of 1,204 million USD in 2019, before recovering to 1,938 million USD by 2023. This recovery is primarily driven by the more aggressive reduction of the valuation allowance compared to the utilization of the loss carryforwards.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

Hewlett Packard Enterprise Co., deferred tax assets and liabilities, classification

US$ in millions

		Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
	Deferred tax assets	2,264)	2,127)	2,023)	1,778)	1,515)	2,403)
	Deferred tax liabilities	326)	320)	494)	290)	311)	228)

The analysis of the deferred tax accounts from 2018 to 2023 reveals a consistent net deferred tax asset position, characterized by a significant recovery in assets following an initial decline and relatively stable, though fluctuating, liabilities.

Deferred Tax Asset Trajectory: A notable contraction in deferred tax assets was observed between October 2018 and October 2019, where values decreased from 2,403 million to 1,515 million. Subsequent to this decline, a consistent upward trend was established over the next four fiscal years, with assets increasing steadily to reach 2,264 million by October 2023. This recovery indicates a gradual accumulation of future tax benefits.
Deferred Tax Liability Volatility: Deferred tax liabilities remained substantially lower than assets throughout the period. An upward trend was noted from 2018 to 2021, peaking at 494 million. Following this peak, a correction occurred in 2022, with liabilities decreasing to 320 million and remaining relatively flat at 326 million by the end of 2023.
Net Deferred Tax Position: The organization maintained a strong net deferred tax asset position across all reporting periods. Despite the fluctuation in individual balances, the substantial margin between assets and liabilities suggests that the company holds significant temporary differences that will likely reduce future taxable income or provide tax offsets, outweighing the deferred tax obligations.

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Hewlett Packard Enterprise Co., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

Hewlett Packard Enterprise Co., adjustments to financial statements

US$ in millions

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Adjustment to Total Assets
Total assets (as reported)	57,153)	57,123)	57,699)	54,015)	51,803)	55,493)
Less: Noncurrent deferred tax assets, net	2,264)	2,127)	2,023)	1,778)	1,515)	2,403)
Total assets (adjusted)	54,889)	54,996)	55,676)	52,237)	50,288)	53,090)
Adjustment to Total Liabilities
Total liabilities (as reported)	35,915)	37,214)	37,682)	37,919)	34,654)	34,219)
Less: Noncurrent deferred tax liabilities, net	326)	320)	494)	290)	311)	228)
Total liabilities (adjusted)	35,589)	36,894)	37,188)	37,629)	34,343)	33,991)
Adjustment to Total HPE Stockholders’ Equity
Total HPE stockholders’ equity (as reported)	21,182)	19,864)	19,971)	16,049)	17,098)	21,239)
Less: Net deferred tax assets (liabilities)	1,938)	1,807)	1,529)	1,488)	1,204)	2,175)
Total HPE stockholders’ equity (adjusted)	19,244)	18,057)	18,442)	14,561)	15,894)	19,064)
Adjustment to Net Earnings (loss) Attributable To HPE
Net earnings (loss) attributable to HPE (as reported)	2,025)	868)	3,427)	(322)	1,049)	1,908)
Add: Deferred income tax expense (benefit)	(67)	(249)	(167)	(294)	1,079)	(38)
Net earnings (loss) attributable to HPE (adjusted)	1,958)	619)	3,260)	(616)	2,128)	1,870)

The removal of deferred taxes results in a consistent reduction across the primary balance sheet components, indicating that deferred tax assets and liabilities represent a significant portion of the reported financial position over the analyzed period.

Impact on Asset Valuation: Reported total assets consistently exceed adjusted total assets throughout the six-year period. The variance remained substantial, fluctuating from a low of approximately 1.5 billion US$ in 2019 to a high of approximately 2.3 billion US$ in 2023. This pattern demonstrates that deferred tax assets contribute a meaningful percentage to the total asset base.
Liabilities and Equity Adjustments: A consistent downward adjustment is observed in total liabilities, although the magnitude of this change is significantly smaller than that of the assets. Consequently, adjusted stockholders' equity is lower than reported equity in every year. The most significant disparities occurred in 2018 and 2023, where reported equity exceeded adjusted equity by approximately 2.2 billion US$ and 1.9 billion US$, respectively.
Net Earnings Variance: The effect of deferred tax adjustments on net earnings is non-linear and varies by year. In 2019, adjusted net earnings were substantially higher than reported earnings, suggesting that reported figures were weighed down by deferred tax charges. In contrast, from 2021 through 2023, reported net earnings exceeded adjusted net earnings, indicating that deferred tax benefits positively impacted the reported bottom line during these years.

The overall trend indicates that the exclusion of deferred taxes lowers the reported book value of the entity and modifies the perceived profitability. The recurring gap between reported and adjusted equity emphasizes the sensitivity of the financial position to tax-related accounting entries.

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Hewlett Packard Enterprise Co., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

Hewlett Packard Enterprise Co., adjusted financial ratios

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Net Profit Margin
Reported net profit margin	6.95%	3.05%	12.33%	-1.19%	3.60%	6.18%
Adjusted net profit margin	6.72%	2.17%	11.73%	-2.28%	7.30%	6.06%
Total Asset Turnover
Reported total asset turnover	0.51	0.50	0.48	0.50	0.56	0.56
Adjusted total asset turnover	0.53	0.52	0.50	0.52	0.58	0.58
Financial Leverage
Reported financial leverage	2.70	2.88	2.89	3.37	3.03	2.61
Adjusted financial leverage	2.85	3.05	3.02	3.59	3.16	2.78
Return on Equity (ROE)
Reported ROE	9.56%	4.37%	17.16%	-2.01%	6.14%	8.98%
Adjusted ROE	10.17%	3.43%	17.68%	-4.23%	13.39%	9.81%
Return on Assets (ROA)
Reported ROA	3.54%	1.52%	5.94%	-0.60%	2.02%	3.44%
Adjusted ROA	3.57%	1.13%	5.86%	-1.18%	4.23%	3.52%

The financial performance between 2018 and 2023 is characterized by significant volatility in profitability metrics, contrasted by relative stability in operational efficiency. The removal of deferred taxes reveals a divergence between reported and adjusted performance, particularly during periods of financial transition.

Profitability and Return Analysis: Net profit margins experienced substantial fluctuations, reaching a minimum in 2020 with a reported margin of -1.19% before spiking to 12.33% in 2021. Return on Equity (ROE) and Return on Assets (ROA) mirrored this volatility. A notable divergence occurred in 2019, where the adjusted ROE of 13.39% significantly exceeded the reported ROE of 6.14%, suggesting that deferred tax adjustments substantially impact the perception of shareholder returns during that period.
Operational Efficiency and Asset Utilization: Total asset turnover remained remarkably consistent over the six-year period, hovering between 0.48 and 0.56. Adjusted asset turnover values were consistently higher than reported values, although the trend remained flat, indicating that the removal of deferred taxes does not materially alter the observed efficiency of asset deployment.
Financial Leverage and Capital Structure: Financial leverage exhibited an upward trend peaking in 2020 at a reported ratio of 3.37, followed by a steady decline to 2.70 by 2023. Adjusted financial leverage remained consistently higher than reported leverage across all years. This indicates that the inclusion of deferred tax liabilities in the reported equity base serves to lower the reported leverage ratio.
Comparative Impact of Tax Adjustments: The effect of removing deferred taxes varies by fiscal year. In 2019, the adjustments improved the appearance of profitability. Conversely, in 2020, the adjustments intensified the negative results, with the adjusted ROE falling to -4.23% compared to the reported -2.01%. By 2023, the reported and adjusted figures converged more closely, suggesting a reduction in the impact of deferred tax volatility on the primary financial ratios.

Overall, the data indicates a recovery phase following a downturn in 2020, with financial leverage stabilizing and profitability returning to levels consistent with 2018. The persistent gap between reported and adjusted leverage underscores a systemic influence of deferred tax accounting on the reported solvency profile.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings (loss) attributable to HPE	2,025)	868)	3,427)	(322)	1,049)	1,908)
Net revenue	29,135)	28,496)	27,784)	26,982)	29,135)	30,852)
Profitability Ratio
Net profit margin¹	6.95%	3.05%	12.33%	-1.19%	3.60%	6.18%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings (loss) attributable to HPE	1,958)	619)	3,260)	(616)	2,128)	1,870)
Net revenue	29,135)	28,496)	27,784)	26,982)	29,135)	30,852)
Profitability Ratio
Adjusted net profit margin²	6.72%	2.17%	11.73%	-2.28%	7.30%	6.06%

2023 Calculations

¹ Net profit margin = 100 × Net earnings (loss) attributable to HPE ÷ Net revenue
= 100 × 2,025 ÷ 29,135 = 6.95%

² Adjusted net profit margin = 100 × Adjusted net earnings (loss) attributable to HPE ÷ Net revenue
= 100 × 1,958 ÷ 29,135 = 6.72%

The financial performance between 2018 and 2023 is characterized by significant volatility in both net earnings and profit margins. A period of instability is evident between 2020 and 2022, during which the organization experienced a transition from a net loss to a peak in profitability, followed by a sharp decline and a subsequent recovery in 2023.

Adjusted Net Profit Margin Trends: The adjusted net profit margin exhibited extreme fluctuations, beginning at 6.06% in 2018 and increasing to 7.30% in 2019. A sharp contraction occurred in 2020, where the margin fell to -2.28%. This was followed by a peak of 11.73% in 2021, the highest margin recorded in the analyzed period. A subsequent decline to 2.17% was observed in 2022, before the margin recovered to 6.72% by 2023.
Divergence Between Reported and Adjusted Earnings: A notable variance exists between reported and adjusted net earnings, suggesting the influence of non-recurring items. In 2019, adjusted net earnings of 2.128 billion US$ were significantly higher than reported earnings of 1.049 billion US$. In 2020, the adjusted loss of 616 million US$ was more severe than the reported loss of 322 million US$. From 2021 to 2023, reported net earnings consistently exceeded adjusted earnings, although the margin of difference decreased in 2023.
Profitability Cycle Analysis: The data reveals a volatile profitability cycle. The transition from 2020 to 2021 represents the most significant swing, with adjusted net earnings moving from a loss of 616 million US$ to a profit of 3.26 billion US$. The recovery observed in 2023, reaching an adjusted net profit margin of 6.72%, indicates a return to profitability levels similar to those seen in 2018 and 2019, suggesting a stabilization of operational efficiency.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net revenue	29,135)	28,496)	27,784)	26,982)	29,135)	30,852)
Total assets	57,153)	57,123)	57,699)	54,015)	51,803)	55,493)
Activity Ratio
Total asset turnover¹	0.51	0.50	0.48	0.50	0.56	0.56
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net revenue	29,135)	28,496)	27,784)	26,982)	29,135)	30,852)
Adjusted total assets	54,889)	54,996)	55,676)	52,237)	50,288)	53,090)
Activity Ratio
Adjusted total asset turnover²	0.53	0.52	0.50	0.52	0.58	0.58

2023 Calculations

¹ Total asset turnover = Net revenue ÷ Total assets
= 29,135 ÷ 57,153 = 0.51

² Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= 29,135 ÷ 54,889 = 0.53

The analysis of asset utilization between October 31, 2018, and October 31, 2023, reveals a period of initial stability followed by a decline and a subsequent gradual recovery in efficiency. Total asset levels remained relatively stable over the six-year period, with a slight overall increase, while the efficiency with which these assets generated revenue experienced a notable dip during the middle of the period.

Asset Base Trends: Reported total assets fluctuated from 55,493 million US dollars in 2018 to a peak of 57,699 million US dollars in 2021, before stabilizing at 57,153 million US dollars by 2023. Adjusted total assets followed a nearly identical trajectory, though they consistently remained lower than reported figures, ending the period at 54,889 million US dollars. This indicates a consistent variance between the reported book value and the adjusted asset base used for performance measurement.
Asset Turnover Performance: The reported total asset turnover ratio remained constant at 0.56 in 2018 and 2019 before declining to a low of 0.48 in 2021. A recovery phase is observed from 2022 onward, with the ratio rising to 0.51 by 2023. The adjusted total asset turnover ratio mirrors this pattern but maintains higher values throughout the period, starting at 0.58 in 2018-2019, dropping to 0.50 in 2021, and recovering to 0.53 by 2023.
Comparative Analysis of Reported vs. Adjusted Ratios: A consistent premium is observed in the adjusted total asset turnover compared to the reported ratio. The adjusted ratio is consistently 0.02 to 0.03 points higher than the reported ratio across all years. This suggest that the adjustments effectively remove non-productive or non-operating assets from the denominator, providing a more optimized view of the company's operational efficiency.
Efficiency Cycle Insights: The data highlights a three-stage cycle: a period of high efficiency (2018-2019), a contraction in asset productivity peaking in 2021, and a moderate recovery in the 2022-2023 window. The fact that turnover ratios began to rise while the total asset base remained flat suggests that the recent improvement in efficiency is driven by increased revenue generation rather than asset divestment.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Total assets	57,153)	57,123)	57,699)	54,015)	51,803)	55,493)
Total HPE stockholders’ equity	21,182)	19,864)	19,971)	16,049)	17,098)	21,239)
Solvency Ratio
Financial leverage¹	2.70	2.88	2.89	3.37	3.03	2.61
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	54,889)	54,996)	55,676)	52,237)	50,288)	53,090)
Adjusted total HPE stockholders’ equity	19,244)	18,057)	18,442)	14,561)	15,894)	19,064)
Solvency Ratio
Adjusted financial leverage²	2.85	3.05	3.02	3.59	3.16	2.78

2023 Calculations

¹ Financial leverage = Total assets ÷ Total HPE stockholders’ equity
= 57,153 ÷ 21,182 = 2.70

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total HPE stockholders’ equity
= 54,889 ÷ 19,244 = 2.85

The analysis of financial leverage between 2018 and 2023 reveals a period of volatility that peaked in 2020, followed by a gradual stabilization and reduction in leverage ratios.

Total Assets Trends: Reported total assets experienced an initial decline from US$ 55,493 million in 2018 to US$ 51,803 million in 2019, before steadily increasing to reach US$ 57,153 million by 2023. Adjusted total assets followed a near-identical trajectory, remaining consistently lower than reported figures, which indicates a systematic adjustment applied to the asset base throughout the observed period.
Stockholders' Equity Dynamics: A notable contraction in equity was observed between 2018 and 2020, with reported stockholders' equity dropping from US$ 21,239 million to a low of US$ 16,049 million. A recovery trend emerged in 2021, with equity returning to US$ 21,182 million by 2023. Adjusted equity figures mirrored this volatility, emphasizing a period of reduced capital buffers during the 2019-2020 interval.
Financial Leverage Trajectory: Financial leverage reached its peak in 2020, with the reported ratio rising to 3.37 and the adjusted ratio peaking at 3.59. This spike correlates directly with the minimum observed equity levels during that fiscal year. Following 2020, a downward trend in leverage was established, with ratios declining to 2.70 for reported leverage and 2.85 for adjusted leverage by 2023.
Reported versus Adjusted Variance: A consistent variance is observed where adjusted financial leverage remains higher than reported leverage across all six years. This discrepancy indicates that the adjustments made to the total assets and stockholders' equity result in a more aggressive leverage profile, suggesting that the adjusted metrics provide a more conservative view of the company's financial solvency.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings (loss) attributable to HPE	2,025)	868)	3,427)	(322)	1,049)	1,908)
Total HPE stockholders’ equity	21,182)	19,864)	19,971)	16,049)	17,098)	21,239)
Profitability Ratio
ROE¹	9.56%	4.37%	17.16%	-2.01%	6.14%	8.98%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings (loss) attributable to HPE	1,958)	619)	3,260)	(616)	2,128)	1,870)
Adjusted total HPE stockholders’ equity	19,244)	18,057)	18,442)	14,561)	15,894)	19,064)
Profitability Ratio
Adjusted ROE²	10.17%	3.43%	17.68%	-4.23%	13.39%	9.81%

2023 Calculations

¹ ROE = 100 × Net earnings (loss) attributable to HPE ÷ Total HPE stockholders’ equity
= 100 × 2,025 ÷ 21,182 = 9.56%

² Adjusted ROE = 100 × Adjusted net earnings (loss) attributable to HPE ÷ Adjusted total HPE stockholders’ equity
= 100 × 1,958 ÷ 19,244 = 10.17%

The financial performance over the six-year period is characterized by significant volatility in both profitability and shareholder returns. Net earnings and the resulting return on equity exhibited sharp fluctuations, with a notable downturn in 2020 followed by a strong recovery in 2021 and a subsequent period of stabilization through 2023.

Adjusted Return on Equity (ROE) Trends: The Adjusted ROE demonstrates a highly unstable trajectory. From an initial 9.81% in 2018, the ratio increased to 13.39% in 2019 before plummeting to -4.23% in 2020. The most significant growth occurred in 2021, where the Adjusted ROE reached a peak of 17.68%. This was followed by a sharp correction to 3.43% in 2022 and a recovery to 10.17% by the end of 2023.
Comparison of Reported and Adjusted Metrics: A consistent divergence exists between reported and adjusted figures. In 2019, adjusted net earnings (US$ 2,128 million) were substantially higher than reported net earnings (US$ 1,049 million), leading to an Adjusted ROE of 13.39% compared to a reported 6.14%. Conversely, in 2020, the adjusted figures reflected a deeper loss, with Adjusted ROE at -4.23% against a reported -2.01%. This indicates that non-recurring items significantly impacted the reported results during these periods.
Equity Base Dynamics: The total stockholders' equity experienced a contraction phase between 2018 and 2020, falling from US$ 21,239 million to US$ 16,049 million on a reported basis. A reversal of this trend began in 2021, with equity levels climbing back to US$ 21,182 million by 2023. Throughout the entire period, adjusted equity remained consistently lower than reported equity, suggesting a persistent adjustment to the company's book value.
Earnings Volatility and Recovery: Adjusted net earnings shifted from a positive US$ 1,870 million in 2018 to a deficit of US$ 616 million in 2020. The recovery in 2021 was substantial, with adjusted earnings surging to US$ 3,260 million. Although earnings dipped again in 2022 to US$ 619 million, the return to US$ 1,958 million in 2023 suggests a stabilization of the earnings base relative to the 2018 baseline.

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Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings (loss) attributable to HPE	2,025)	868)	3,427)	(322)	1,049)	1,908)
Total assets	57,153)	57,123)	57,699)	54,015)	51,803)	55,493)
Profitability Ratio
ROA¹	3.54%	1.52%	5.94%	-0.60%	2.02%	3.44%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings (loss) attributable to HPE	1,958)	619)	3,260)	(616)	2,128)	1,870)
Adjusted total assets	54,889)	54,996)	55,676)	52,237)	50,288)	53,090)
Profitability Ratio
Adjusted ROA²	3.57%	1.13%	5.86%	-1.18%	4.23%	3.52%

2023 Calculations

¹ ROA = 100 × Net earnings (loss) attributable to HPE ÷ Total assets
= 100 × 2,025 ÷ 57,153 = 3.54%

² Adjusted ROA = 100 × Adjusted net earnings (loss) attributable to HPE ÷ Adjusted total assets
= 100 × 1,958 ÷ 54,889 = 3.57%

The Adjusted Return on Assets (ROA) exhibits significant volatility between 2018 and 2023, reflecting fluctuations in adjusted net earnings while the asset base remained relatively stable. The metric experienced a notable decline to its lowest point in 2020 before reaching a peak in 2021, followed by a subsequent correction and a recovery in 2023.

Net Earnings and ROA Correlation: A strong correlation exists between adjusted net earnings and the resulting Adjusted ROA. The negative Adjusted ROA of -1.18% in 2020 corresponds directly with an adjusted net loss of 616 million USD. Conversely, the peak Adjusted ROA of 5.86% in 2021 was driven by a significant increase in adjusted net earnings to 3.26 billion USD. By 2023, the Adjusted ROA stabilized at 3.57%, supported by adjusted earnings of 1.958 billion USD.
Asset Base Stability: Total assets remained remarkably consistent throughout the analyzed period, with reported assets fluctuating within a narrow range between 51.8 billion USD and 57.7 billion USD. Because the asset base did not undergo drastic expansion or contraction, the variance in both Reported and Adjusted ROA is primarily attributable to shifts in profitability rather than changes in the company's capital structure or asset utilization.
Reported versus Adjusted Performance Gap: Significant divergences between reported and adjusted ROA are observed in specific years, most notably in 2019, where the Adjusted ROA of 4.23% substantially exceeded the Reported ROA of 2.02%. This suggests that non-recurring items or specific tax adjustments negatively impacted the reported net earnings relative to the adjusted figures. In contrast, for the 2023 period, the reported and adjusted ROA converged closely at 3.54% and 3.57% respectively, indicating a period of higher alignment between GAAP and non-GAAP financial results.

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