News

HP Enterprise Reports Solid Results in Q3

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4.6

Andrew R. Michaud

• August 29, 2023

HP Enterprise (HPE) has posted strong results in its fiscal third quarter, with revenue reaching $7 billion, a 1% increase from the previous year or 3.5% when adjusted for currency. This performance is in line with Street estimates. The company's networking business and the growing demand for high-performance computing and generative artificial intelligence hardware and services have been key drivers of this growth.

Earnings Exceed Expectations

HPE exceeded expectations in terms of earnings per share. On an adjusted basis, the company earned 49 cents per share, surpassing the guidance range of 44 to 48 cents per share. This is also two pennies higher than the Street consensus of 47 cents. Furthermore, under generally accepted accounting principles, HPE earned 35 cents per share, which is two cents above Street estimates.

Outlook for Fourth Quarter

For the fiscal fourth quarter ending in October, HP Enterprise forecasts revenue in the range of $7.2 billion to $7.5 billion. Although slightly below the Street consensus of $7.47 billion, the midpoint of this range is still projected to be a penny above the consensus earnings per share of 49 cents.

Confident in Long-Term Growth

HPE has reiterated its forecast for full-year revenue growth of 4% to 6%. The company also remains confident in achieving its projection of 35% to 45% compounded annual growth in annualized recurring revenue through fiscal year 2025. During the quarter, ARR amounted to $1.3 billion, reflecting a substantial increase of 48%.

Revised Profits Outlook and Conclusion

HPE's management now expects full-year profits to range between $2.11 and $2.15 per share, compared with the previous forecast of $2.06 to $2.14 per share. This represents a three-cent increase at the midpoint of the ranges. These impressive results and optimistic outlook highlight HP Enterprise's solid position in the market and its commitment to delivering continued growth and value to shareholders.

HP Enterprise: Unprecedented Growth in HPC and AI Sector

HP Enterprise has reported an impressive surge in demand for its High-Performance Computing (HPC) and Artificial Intelligence (AI) segment. The company witnessed a "wave of demand acceleration" in this sector, resulting in its largest-ever order book. Customers have come to recognize HPE's unique capabilities in delivering unprecedented levels of AI performance at scale.

In terms of financials, HP Enterprise recorded a remarkable 50% growth in its intelligent edge segment, which includes its networking business. This growth translates to $1.4 billion or approximately $100 million above consensus, accounting for a 53% growth in constant currency. The HPC and AI business, on the other hand, maintained flat revenue. However, the compute segment experienced a 13% decline in revenue, while storage revenue saw a dip of 5%.

CEO Antonio Neri highlighted the sequential revenue growth across all business segments in an interview. He emphasized that the intelligent edge has now become a significant contributor to the company's total revenue, making up 20% of it. Over the past eight quarters, the intelligent edge's profits have represented 49% of the overall corporate total.

While the storage business showed a decrease compared to the previous year, it has displayed sequential growth in the last two quarters. Similarly, the compute revenue is showing signs of stabilization, with improved performance in the July quarter compared to the April quarter.

Neri also shared that there has been a notable surge in demand for AI-related hardware and services. Consequently, HP Enterprise's order book has reached exceptional levels. The company's order book at the end of the quarter was twice the size of its pre-pandemic level. Neri further revealed that they have commenced fulfilling orders for various AI-related tasks, catering to start-ups focusing on large language models, enterprise companies fine-tuning foundational models, and other entities involved in AI-related inference tasks.

Overall, HP Enterprise's HPC and AI segment has experienced unparalleled growth, showcasing its prowess in meeting the demands of the industry.