HPE gave Oracle (ORCL) a warrant for 4.16 million shares at a penny each. Two months later, it announced the deal.
Key points
- HPE's 10-Q: warrant on 4,156,466 shares at $0.01, issued to Oracle on July 2
- Vests in tranches as Oracle buys HPE products and support; expires June 25, 2029
- Underlying shares worth about $216 million at Friday's close, subject to vesting
- The deal was announced September 2, two months after the warrant was signed
Hewlett Packard Enterprise (HPE) issued Oracle (ORCL) a warrant to buy up to 4,156,466 HPE shares for a penny each, with vesting tied to purchases of HPE products and support. HPE disclosed the terms in its quarterly report filed Thursday, September 3, and the warrant is exercisable through June 25, 2029.
The warrant is dated July 2, 2026, two months before the two companies announced the networking partnership. On Wednesday, September 2, alongside its third-quarter results, HPE said Oracle would deploy its Juniper routers and switches across Oracle's AI data centers worldwide over several years, and added one sentence about the stock: "As part of the agreement, HPE has issued Oracle warrants to purchase shares of HPE common stock." The press release gave no numbers. The 10-Q did.
At Friday's close of $52.00, 4,156,466 shares are worth about $216 million, by our arithmetic. Exercising the warrant in full would cost Oracle about $41,565, assuming all purchase milestones are met. On July 2, the day the warrant was issued, HPE closed at $41.23, so the same shares were worth about $171 million at the time. HPE had 1,327,464,779 shares outstanding as of August 27, according to the 10-Q cover page, so a full exercise would add about 0.3 percent to the share count.
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What Oracle must buy remains undisclosed
The disclosure does not specify how much, if any, had vested. "The Warrant will vest and become exercisable in tranches, upon the achievement of specific milestones relating to purchases by the Holder and its affiliates of products and support from us," the filing says. HPE describes the milestones only as "purchases by the Holder and its affiliates of products and support," without dollar thresholds, and it did not attach the warrant agreement as an exhibit. HPE said it issued the warrant under the private-placement exemption in Section 4(a)(2) of the Securities Act, and that "appropriate legends were placed upon the Warrant."
HPE's announcement lists the products: Juniper PTX and MX routing platforms, QFX and EX switches, and multi-year support services, plus financing. On the earnings call, chief executive Antonio Neri said Oracle would deploy the equipment "across one of the largest AI cloud infrastructure build-outs" and called the scope "multi-gigawatt on a multi-year basis." He said the QFX switches run on Broadcom's Tomahawk 6 chip and the PTX routers on HPE's own Express 5 silicon.
Chief financial officer Marie Myers said "the beginning of the Oracle deal is in the 14 to 17 that we guided for the networking growth," a reference to HPE's guidance for networking revenue to grow 14 to 17 percent in fiscal 2027, which begins in November, and no analyst on the call asked about the warrant.
The quarter itself was strong. HPE reported record revenue of $12.2 billion, up 34 percent from a year earlier, with networking revenue of $2.9 billion, up 74.9 percent, according to the results release. HPE closed at $54.44 on September 3, up 5.0 percent on the day of the results, then gave back 4.5 percent on Friday to close at $52.00, according to Robinhood market data, while Oracle closed Friday at $158.77, up 3.1 percent.
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How HPE compares with AMD and Marvell
Customer warrants have appeared in several large AI hardware deals this year, and the HPE one is small by that standard. AMD gave Meta and OpenAI warrants on 160 million shares each at $0.01, vesting on up to 6 gigawatts of GPU purchases per customer and on AMD's share price reaching hurdles up to $600. Marvell gave Google a warrant on 58.97 million shares at $206.58, with a tranche vesting for every $500 million of custom-chip revenue through fiscal 2033.
The HPE warrant shares the penny strike with AMD's and the purchase-milestone structure with Marvell's. Relative to existing shares outstanding, the AMD warrants represent about 20 percent, Marvell's about 7 percent and HPE's about 0.3 percent, by our arithmetic from Robinhood share-count data. AMD and Marvell published their vesting thresholds. HPE has so far described them only in general terms.
The warrant could add about 0.3 percent to HPE's share count. What investors still cannot calculate is how much Oracle must spend to earn it: HPE has not disclosed the purchase thresholds.
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