Hewlett Packard Enterprise CoHPE
Hewlett Packard Enterprise Co Income Taxes Disclosure
Taxes on Earnings
Benefit (provision) for Taxes
The domestic and foreign components of Net (loss) earnings from operations before Benefit (provision) for taxes were as follows:
| For the fiscal years ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| In millions | |||||||||||||||||
| U.S. | $ | (3,561) | $ | 765 | $ | (1,105) | |||||||||||
| Non-U.S. | 3,276 | 2,188 | 3,335 | ||||||||||||||
| $ | (285) | $ | 2,953 | $ | 2,230 | ||||||||||||
The Benefit (provision) for taxes on (Loss) earnings from operations were as follows:
| For the fiscal years ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| In millions | |||||||||||||||||
| U.S. federal taxes: | |||||||||||||||||
| Current | $ | 154 | $ | (8) | $ | — | |||||||||||
| Deferred | 345 | 120 | 88 | ||||||||||||||
| Non-U.S. taxes: | |||||||||||||||||
| Current | (349) | (415) | (256) | ||||||||||||||
| Deferred | 66 | (44) | (23) | ||||||||||||||
| State taxes: | |||||||||||||||||
| Current | (28) | (15) | (16) | ||||||||||||||
| Deferred | 154 | (12) | 2 | ||||||||||||||
| $ | 342 | $ | (374) | $ | (205) | ||||||||||||
The differences between the U.S. federal statutory income tax rate and the Company's effective tax rate were as follows:
| For the fiscal years ended October 31, | |||||||||||||||||
2025(1) | 2024 | 2023 | |||||||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State income taxes, net of federal tax benefit | 24.4 | % | 0.4 | % | 0.9 | % | |||||||||||
| Lower rates in other jurisdictions, net | 66.5 | % | (1.3) | % | (4.4) | % | |||||||||||
| Valuation allowance | (14.7) | % | (1.3) | % | (2.8) | % | |||||||||||
| U.S. permanent differences | (23.5) | % | (4.0) | % | (1.5) | % | |||||||||||
| U.S. R&D credit | 22.7 | % | (1.8) | % | (2.1) | % | |||||||||||
| Uncertain tax positions | 23.6 | % | (0.3) | % | (2.0) | % | |||||||||||
| Goodwill impairment | (115.7) | % | — | % | — | % | |||||||||||
Tax impact of integration transactions | 114.6 | % | — | % | — | % | |||||||||||
| Other, net | 1.1 | % | — | % | 0.1 | % | |||||||||||
| 120.0 | % | 12.7 | % | 9.2 | % | ||||||||||||
(1) Positive percentages represent tax benefits and negative percentages represent tax expense as the Company recorded income tax benefit on a pretax loss.
The jurisdictions with favorable tax rates that had the most significant impact on the Company's effective tax rate in the periods presented include Puerto Rico and Singapore. In the Company’s fiscal 2025 effective tax rate reconciliation, the absolute value of earnings before taxes was smaller than in prior periods, which exaggerated the impact of individual reconciling items. The effective tax rate for fiscal 2025 also included a $330 million tax provision from the non-deductible goodwill impairment.
In fiscal 2025, the Company recorded $693 million of net income tax benefits related to various items discrete to the year. These amounts primarily included $402 million of net income tax benefits related to costs incurred as a result of the Merger, which was inclusive of a $327 million net income tax benefit from the tax impact of integration transactions, $76 million of net income tax benefits related to the release of certain state valuation allowances due to changes in tax law, $61 million of net income tax benefits related to the reduction in uncertain tax positions due to statute of limitations expirations, and $55 million of net income tax benefits related to the cost reduction program.
In fiscal 2024, the Company recorded $43 million of net income tax charges related to various items discrete to the year. These amounts primarily included $104 million of income tax charges resulting from the gain on the partial disposition of H3C Technologies Co., Limited (“H3C”), which included $215 million of U.S. and foreign income tax charges offset by $111 million of income tax benefit for the release of an uncertain tax benefit related to the prior divestiture, partially offset by $54 million of income tax benefits related to transformation costs, and acquisition, disposition and other charges and $11 million of net excess tax benefits related to stock-based compensation.
In fiscal 2023, the Company recorded $131 million of net income tax benefits related to various items discrete to the year. These amounts primarily included $104 million of income tax benefits related to transformation costs, and acquisition, disposition and other charges and $19 million of net excess tax benefits related to stock-based compensation.
As a result of certain employment actions and capital investments the Company has undertaken, income from manufacturing and services in certain countries is subject to reduced tax rates through 2039. The gross foreign income tax benefits attributable to these actions and investments were $531 million ($0.40 diluted net EPS) in fiscal 2025, $356 million ($0.27 diluted net EPS) in fiscal 2024, and $857 million ($0.65 diluted net EPS) in fiscal 2023. Refer to Note 16, “Net (Loss) Earnings Per Share,” for details on shares used to compute diluted net EPS.
Uncertain Tax Positions
A reconciliation of unrecognized tax benefits is as follows:
| As of October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| In millions | |||||||||||||||||
| Balance at beginning of year | $ | 724 | $ | 672 | $ | 674 | |||||||||||
| Increases: | |||||||||||||||||
| For current year's tax positions | 38 | 60 | 67 | ||||||||||||||
| For prior years' tax positions | 26 | 116 | 20 | ||||||||||||||
For tax positions from the Merger | 111 | — | — | ||||||||||||||
| Decreases: | |||||||||||||||||
| For prior years' tax positions | (20) | (113) | (2) | ||||||||||||||
| Statute of limitations expiration | (50) | (4) | (4) | ||||||||||||||
| Settlements with taxing authorities | (355) | (7) | (83) | ||||||||||||||
| Balance at end of year | $ | 474 | $ | 724 | $ | 672 | |||||||||||
Up to $309 million, $344 million and $354 million of the Company's unrecognized tax benefits at October 31, 2025, 2024 and 2023, respectively, would affect its effective tax rate if realized in their respective periods. During the second quarter of fiscal 2025, the Company effectively settled with the U.S. Internal Revenue Service ("IRS") regarding its audit of the Company’s fiscal 2017 through 2019 U.S. federal income tax returns, resulting in a reduction in the Company's unrecognized tax benefits of approximately $340 million; however, the effective settlement did not result in a material impact to the Company’s Consolidated Statement of Earnings and Consolidated Balance Sheet. The resolution of the audit resulted in the release of tax reserves that were predominantly related either to adjustments to foreign tax credits that carried a full valuation allowance or to the timing of intercompany royalty revenue recognition, neither of which affected the Company’s effective tax rate. Additionally, the Company released $47 million of unrecognized tax benefits upon expiration of the applicable statute of limitations related to tax positions acquired from the Merger.
The Company recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in Benefit (provision) for taxes in the Consolidated Statements of Earnings. The Company recognized $16 million of interest income, $2 million of interest expense and $25 million of interest income in fiscal 2025, 2024, and 2023, respectively. As of October 31, 2025 and 2024, the Company had accrued $42 million and $58 million, respectively, for interest and penalties in the Consolidated Balance Sheets.
The Company is subject to income tax in the U.S. and approximately 75 other countries and is subject to routine corporate income tax audits in many of these jurisdictions.
The Company engages in continuous discussion and negotiation with taxing authorities regarding tax matters in various jurisdictions. The Company is no longer subject to U.S. federal tax audits for years prior to 2020. The IRS is conducting audits of the Company's fiscal 2020 through 2022 U.S. federal income tax returns. Juniper Networks is no longer subject to U.S. federal tax audits for years prior to 2022 and is not currently under examination by the IRS for other tax years. The Company does not expect complete resolution of any IRS audit cycle within the next 12 months. With respect to major state and foreign tax jurisdictions, the Company is no longer subject to tax authority examinations for years prior to 2005. It is reasonably possible that certain foreign tax issues may be concluded in the next 12 months, including issues involving resolution of certain intercompany transactions and other matters. The Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $6 million within the next 12 months.
The Company believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax audits. The Company regularly assesses the likely outcomes of these audits in order to determine the appropriateness of the Company's tax provision. The Company adjusts its uncertain tax positions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular audit. However, income tax audits are inherently unpredictable and there can be no assurance that the Company will accurately predict the outcome of these audits. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Benefit (provision) for taxes and therefore the resolution of one or more of these uncertainties in any particular period could have a material impact on net earnings or cash flows.
The Company has not provided for U.S. federal and state income and foreign withholding taxes on $9.5 billion of undistributed earnings and basis differences from non-U.S. operations as of October 31, 2025 because the Company intends to reinvest such earnings indefinitely outside of the U.S. Determination of the amount of unrecognized deferred tax liability related to these earnings and basis differences is not practicable. The Company will remit non-indefinitely reinvested earnings of its non-U.S. subsidiaries for which deferred U.S. state income and foreign withholding taxes have been provided where excess cash has accumulated and the Company determines that it is advantageous for business operations, tax or cash management reasons.
Deferred Income Taxes
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.
The significant components of deferred tax assets and deferred tax liabilities were as follows:
| As of October 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| In millions | |||||||||||
| Deferred tax assets: | |||||||||||
Loss and credit carryforwards | $ | 7,225 | $ | 5,692 | |||||||
| Inventory valuation | 185 | 78 | |||||||||
| Intercompany prepayments | — | 192 | |||||||||
| Warranty | 39 | 45 | |||||||||
| Employee and retiree benefits | 73 | 162 | |||||||||
| Restructuring | 13 | 27 | |||||||||
| Deferred revenue | 1,115 | 799 | |||||||||
| Intangible assets | — | 251 | |||||||||
| Capitalized R&D | 390 | 81 | |||||||||
| Lease liabilities | 273 | 253 | |||||||||
| Other | 245 | 262 | |||||||||
| Total deferred tax assets | 9,558 | 7,842 | |||||||||
Valuation allowance | (6,202) | (5,204) | |||||||||
| Total deferred tax assets net of valuation allowance | 3,356 | 2,638 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Unremitted earnings of foreign subsidiaries | (253) | (229) | |||||||||
| ROU assets | (259) | (236) | |||||||||
Intangibles | (235) | — | |||||||||
| Fixed assets | (130) | (150) | |||||||||
| Total deferred tax liabilities | (877) | (615) | |||||||||
| Net deferred tax assets and liabilities | $ | 2,479 | $ | 2,023 | |||||||
Deferred tax assets and liabilities included in the Consolidated Balance Sheets are as follows:
| As of October 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| In millions | |||||||||||
| Deferred tax assets | $ | 2,952 | $ | 2,396 | |||||||
| Deferred tax liabilities | (473) | (373) | |||||||||
| Deferred tax assets net of deferred tax liabilities | $ | 2,479 | $ | 2,023 | |||||||
Net deferred tax assets increased by $456 million as a result of discrete tax benefits from the release of valuation allowances of $678 million related to certain U.S. foreign tax credits and certain state and non-U.S. attributes, partially offset by discrete tax charges of $117 million related to changes in tax law and a decrease of $107 million as a result of acquired net deferred tax liabilities due to the Merger.
As of October 31, 2025, the Company had $265 million, $2.9 billion and $20.5 billion of federal, state and foreign net operating loss carryforwards, respectively. Amounts included in state and foreign net operating loss carryforwards will begin to expire in 2026; federal net operating losses can carry forward indefinitely. The Company has provided a valuation allowance of $115 million and $3.6 billion for deferred tax assets related to state and foreign net operating losses carryforwards, respectively. As of October 31, 2025, the Company also had $153 million, $115 million, and $6.0 billion of federal, state, and foreign capital loss carryforwards, respectively. Amounts included in federal and state capital loss carryforwards will begin to expire in 2028; foreign capital losses can carry forward indefinitely. The Company has provided a valuation allowance of $28 million, $9 million, and $1.2 billion for deferred tax assets related to federal, state and foreign capital loss carryforwards, respectively.
As of October 31, 2025, the Company had recorded deferred tax assets for various tax credit carryforwards as follows:
| Carryforward | Valuation Allowance | Initial Year of Expiration | |||||||||||||||
| In millions | |||||||||||||||||
| U.S. foreign tax credits | $ | 805 | $ | (701) | 2027 | ||||||||||||
| U.S. research and development and other credits | 273 | — | 2029 | ||||||||||||||
| Tax credits in state and foreign jurisdictions | 544 | (487) | 2028 | ||||||||||||||
| Balance at end of year | $ | 1,622 | $ | (1,188) | |||||||||||||
Total valuation allowances increased by $998 million in fiscal 2025, primarily as a result of certain non-U.S. capital loss generation as a result of intercompany transactions, attributes acquired due to the Merger, and changes in U.S. foreign tax credits due to tax return filings, partially offset by the $678 million release of valuation allowances related to certain U.S. foreign tax credits and certain state and non-U.S. attributes.
Tax Matters Agreement and Other Income Tax Matters
In connection with the completed separations and mergers of the former Enterprise Services business with DXC Technology Company (“DXC”) (the “Everett Transaction” or “Everett”) and the Software Segment with Micro Focus International plc (“Micro Focus”) (the “Seattle Transaction” or “Seattle”), the Company entered into a DXC Tax Matters Agreement with DXC and a Micro Focus Tax Matters Agreement with Micro Focus, respectively. See Note 18, “Guarantees and Indemnifications,” for a description of the DXC Tax Matters Agreement and Micro Focus Tax Matters Agreement.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 18, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Dec 22, 2023 | |
| 2022 | Dec 8, 2022 | |
| 2021 | Dec 10, 2021 | |
| 2020 | Dec 10, 2020 | |
| 2019 | Dec 13, 2019 | |
| 2018 | Dec 12, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.