Hewlett Packard Enterprise Beats Q2 Estimates, Driven by AI Server Demand

Hewlett Packard beats Q2 revenue estimates on AI demand; records $1.36 billion charge

June 3 (Reuters)impairment charge of $1.36 billion - Hewlett Packard Enterprise (HPE.N), opens new tab beat Wall Street revenue estimates for the second quarter on Tuesday, driven by demand for its artificial-intelligence servers and hybrid cloud segment. Shares of the server-maker, which also recorded an impairment charge of $1.36 billion in the reported quarter, were up 3.2% in extended trading. HPE has benefited from a surge in spending on advanced data center architecture, designed to support the complex processing needs of generative AI. The boom in GenAI has bumped up demand for HPE's AI-optimized servers, which are powered by Nvidia (NVDA.O), opens new tab processors and can run complex applications. "In a very dynamic macro environment, we executed our strategy with discipline," CEO Antonio Neri said. HPE was focusing on achieving efficiencies and streamlining operations across its businesses, said CFO Marie Myers. For the quarter ended April 30, HPE posted revenue of $7.63 billion, ahead of analysts' average estimate of $7.45 billion, according to data compiled by LSEG. Adjusted profit per share came in at 38 cents, beating an estimate of 32 cents per share. It forecast third-quarter revenue between $8.2 billion and $8.5 billion, compared to an estimate of $8.17 billion. Reporting by Juby Babu in Mexico City; Editing by Pooja Desai Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

HPE's stock rises on AI momentum and more clarity into market conditions - SiliconANGLE

HPE's stock rises on AI momentum and more clarity into market conditions Hewlett Packard Enterprise Co. delivered second-quarter earnings and revenue that topped Wall Street's forecasts, but lowered the top end of its full-year guidance, citing better visibility into market conditions and more stable demand. The company reported earnings before certain costs such as stock compensation of 38 cents per share, higher than the Street's target of 33 cents. Revenue for the period was up 6% from a year earlier, rising to $7.63 billion. That was comfortably ahead of the analyst consensus estimate of $7.45 billion. Despite the impressive numbers, HPE posted a net loss of $10.5 billion for the three-month period ended April 30, swinging from a profit of $314 million in the same period one year ago. However, that was primarily due to a $1.36 billion goodwill impairment charge related to a recalculation of discount rates within its hybrid cloud business, officials said. HPE said that revenue from its most critical business of the moment, the server segment, gained 6% from a year earlier to $4.1 billion. The unit has been boosted by rising sales of artificial intelligence servers, and revenue from that part of the business came to $1 billion, the company said. Analysts were pleased to hear that, having forecast AI server sales of just $798 million in the quarter. But HPE notably still trails its rival Dell Technologies Inc., which reported $1.8 billion in sales of AI servers in its most recent earnings call. Analysts are interested in AI because it has fueled a wave of demand for more powerful servers from the likes of HPE, Dell and Super Micro Computer Inc. But these beefed up offerings actually have lower profit margins, because they're powered by expensive AI chips from companies such as Nvidia Corp. and others. Investors will note that the server segment's operating margin fell to 5.9% in the quarter, down from 11% one year earlier, as AI servers increased their share of sales. Elsewhere within the company, intelligent edge revenue jumped 7% from a year ago to $1.2 billion, while hybrid cloud revenue was up 13% to $1.5 billion. Revenue from financial services was down 1% from last year to $856 million. Overall, HPE President and Chief Executive Antonio Neri (pictured) said he was happy with the company's "solid performance", highlighting sequential revenue growth in each product segment. "In a very dynamic macro environment, we executed our strategy with discipline," he said. "We remain focused on bringing breakthrough innovation to our customers while increasing profitability and enhancing shareholder value." Despite Neri's optimism, there are some who believe the company has not been able to seize the moment as well as its peers, and due to this it has come under pressure from the activist investor Elliott Management Corp., which owns a hefty $1.5 billion stake. Elliott made its position in HPE public news in April, but today Neri refused to talk about any conversations he has had with the investment firm, saying they will remain private. With regard to the current business environment, this appears to have settled compared to three months earlier, said HPE Chief Financial Officer Marie Myers on a conference call with analysts. She explained that while some macroeconomic uncertainties and concerns over trade persist, overall sentiment has improved. But the more stable backdrop prompted HPE to lower the top end of its full-year sales outlook. However, it bumped up the floor of its earnings outlook, citing a new tariff exemption. According to Myers, many of HPE's products are in compliance with the U.S.-Mexico-Canada Agreement, which means they can be shipped to U.S. customers without additional tariffs. As a result, HPE now forecasts a 4-cent hit to its full-year earnings, down from a previous estimate of 7 cents. She said the USMCA exemption will also mean the company doesn't have to fall back on planned mitigations, such as increasing prices or restructuring its supply chains. For the full-year, HPE is now looking at earnings of $1.78 to $1.90 per share, improving on its previous forecast of $1.70 to $1.90. In addition, it's calling for revenue growth at a narrower range of 7% to 9%, compared to its earlier guidance of 7% to 11%. The revised guidance is still better-than-expected though, as Wall Street is looking for earnings of $1.80 per share on sales of $32.46 billion, which would represent growth of 7.7% from a year earlier. DIY Value Investing analyst Chris Lau said he was impressed with HPE's results, which "demonstrated customer demand strength" across its key server and intelligent edge business segments. "While shares will not 'fly' the way CoreWeave and Applied Digital did recently, these results suggest that HPE stock bottomed in April and might head higher," Lau told the Wall Street Journal. Looking to the current quarter, HPE is targeting earnings of 40 cents to 45 cents per share on sales of $8.2 billion to $8.5 billion. Wall Street is modeling a profit of 41 cents per share on revenue of $8.22 million. Investors liked what they saw, and HPE's stock gained more than 4% in extended trading, though it's still down 17% in the year to date. The company added that its recent cost-cutting program, which was announced in March and will see around 2,500 jobs, or 5% of its workforce laid off, is starting to bear fruit. According to Myers, it's on track to generate $350 million in savings by fiscal 2027. HPE is also edging closer to an all-important trial that will determine if it's allowed to proceed with its proposed $14 billion acquisition of Juniper Networks Inc. Earlier this year, the U.S. Department of Justice filed a lawsuit against HPE in an effort to block that deal, despite it already being approved by European and U.K. regulators.

HPE Q2 Revenue Rises on AI and Cloud | The Motley Fool

Hewlett Packard Enterprise Company (NYSE:HPE) released its Q2 FY2025 earnings on June 3, reporting revenue of $7.6 billion, a 7% year-over-year increase, and non-GAAP EPS of $0.38, exceeding the high end of guidance. Management raised the lower end of its full-year non-GAAP EPS range and reaffirmed progress on operational remediation, while navigating sector volatility and implementing strategic cost initiatives. After encountering execution challenges in the server segment, the company enacted corrective pricing, inventory, and discount controls and a $481 million reduction in inventory. The broader IT sector is currently contending with tariff uncertainty, evolving AI-related policies, and dynamic demand patterns that impact short-cycle order visibility. "Through focused and disciplined execution, we have addressed the operational challenges we experienced in our service segment last quarter. We expect these actions will contribute to margin improvement through fiscal year-end." -- Antonio Neri, President and Chief Executive Officer Successfully engineering tangible operational improvements reinforces management's ability to adapt to challenging external environments, supporting credible margin recovery and bolstering long-term profitability targets. HPE's AI systems recorded $1.1 billion in new net orders and more than $1 billion in revenue, while HPE GreenLake's subscription annualized revenue run rate (ARR) exceeded $2.2 billion, up 47% year over year. Orders for the Alletra MP storage platform grew above 75% year over year for four consecutive quarters, underlining rapid adoption of next-generation hybrid cloud solutions. "Software and services continue to be more than 70% of our AIR demonstrating a portfolio shift to higher growth and higher margin areas of the stack." -- Antonio Neri, President and Chief Executive Officer Aligning the company with secular IT industry trends favors as-a-service consumption models over transactional hardware sales. Headcount dropped to just under 59,000 - the lowest since HPE became an independent entity - with Catalyst initiatives rolling out to further streamline operations via automation, flattened hierarchies, and workflow digitization. Savings from these programs, including a 5% workforce reduction, are incorporated in FY2025 guidance and supported by $350 million in anticipated charges. "We are focused on rethinking the business not just reducing our costs, but transforming the way we operate, we'll keep you regularly updated on our progress." -- Marie Myers, Chief Financial Officer Embedding structural cost control and agile practices enhances HPE's capacity to scale profitably, strengthening competitive positioning. Management tightened full-year constant currency revenue growth expectations to +7% to +9% year over year, with non-GAAP diluted net EPS raised to a range of $1.78 to $1.90. Operating margin (non-GAAP) is expected to end the year above 9%, with the server segment specifically forecasted to reach approximately 10% operating margin exiting the fourth quarter. The Juniper Networks transaction remains on track to close before FY2025-end, expected to deliver at least $450 million in annual run-rate synergies within thirty-six months of closing.

Hewlett Packard beats Q2 results estimates on AI demand; records $1.36 billion charge

(Reuters) -Hewlett Packard Enterprise beat Wall Street's second-quarter revenue and profit estimates on Tuesday, driven by demand for its artificial-intelligence servers and hybrid cloud segment. Shares of the server-maker, which also recorded an impairment charge of $1.36 billion in the reported quarter, rose 3.2% in extended trading. The company has benefited from a surge in spending on advanced data center architecture, designed to support the complex processing needs of generative AI. The GenAI boom has bumped up demand for Hewlett Packard's AI-optimized servers, which are powered by Nvidia processors and can run complex applications. For the quarter ended April 30, the company reported revenue of $7.63 billion, ahead of analysts' average estimate of $7.45 billion, according to data compiled by LSEG. In the quarter, Hewlett Packard addressed the execution challenges that it experienced in the prior quarter, which enabled it to drive improved margin performance in the server business, CFO Marie Myers said during a post-earnings call. The company did not see a significant benefit from tariff-related demand pull-forward, she said. Adjusted profit per share for the second quarter was 38 cents, beating an estimate of 32 cents per share. Server revenue was up 5.7% to $4.06 billion and revenue for the hybrid cloud segment grew 13% to $1.45 billion. Hewlett Packard tightened its annual revenue forecast growth to be up 7% to 9%, compared to its prior forecast of 7% to 11% growth. "We continue to navigate a complex macroeconomic and geopolitical landscape and remain prepared to take additional action in the back half of the year to deliver against our fiscal 2025 outlook," Myers said. The company forecast third-quarter revenue between $8.2 billion and $8.5 billion, compared to an estimate of $8.17 billion. (Reporting by Juby Babu in Mexico City; Editing by Pooja Desai)