Loading...
01/11 15:49
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings report shows mixed signals: positive revenue growth and strong AI server traction, but challenges with inventory and operating margins. The Q&A reveals optimism in AI and Hybrid Cloud but uncertainty around the Juniper deal and education spending. Financial performance was strong, but free cash flow was negative, and guidance was not raised. Given these factors, alongside the lack of market cap data, a neutral stock price movement is expected over the next two weeks.
Revenue $7.6 billion, up 7% year-over-year; driven by higher AI system revenue conversion in Server, solid performance in Intelligent Edge, and stronger-than-expected performance in Hybrid Cloud.
Non-GAAP diluted net earnings per share $0.38, above the high end of guidance; benefited from lower-than-anticipated tariff impact and favorable OI&E.
Operating profit margin 8%, down 150 basis points year-over-year; impacted by lower gross margins, partially offset by cost management.
Non-GAAP gross margin 29.4%, down 370 basis points year-over-year; impacted by an unfavorable mix within Server.
Free cash flow Negative $847 million; slightly better than expected due to conversion of some AI backlog.
Server revenue $4.1 billion, up 7% year-over-year; impacted by lower traditional compute volumes due to pricing actions.
Intelligent Edge revenue $1.2 billion, up 8% year-over-year; first year-over-year growth in 5 quarters due to network market recovery.
Hybrid Cloud revenue $1.5 billion, up 15% year-over-year; driven by strong performance across all areas of the business.
Financial Services revenue $856 million, up 1% year-over-year; financing volumes decreased 20% year-over-year.
Operating margin in Financial Services 10.4%, up 110 basis points year-over-year; primarily due to strong cost management.
Cash conversion cycle Positive 26 days, up 21 days from last quarter; driven by a decrease in days payable and an increase in days receivable.
New Product Launches: Launched the industry's most advanced private cloud portfolio, integrating Morpheus and HPE virtualization software to lower virtualization costs by up to 90%.
AI Systems Revenue: Signed $1.1 billion in net new orders for AI systems, converting over $1 billion into revenue, up from $900 million last quarter.
HPE Alletra Storage MP X10000 SDK: Launched a solution for the NVIDIA AI data platform, enhancing enterprise data management.
VM Essentials: Strong customer interest, with Danfoss planning to replace 75% of its virtual estate with VM Essentials.
HPE Aruba Networking Central: Introduced new capabilities for Zero Trust network access solutions, now managing over 5 million devices.
Market Expansion in AI: AI systems revenue increased by over 10% sequentially, with a backlog of $3.2 billion.
Hybrid Cloud Growth: Hybrid Cloud revenue was $1.5 billion, up 15% year-over-year, with strong performance across all areas.
Intelligent Edge Recovery: Intelligent Edge revenue returned to growth at $1.2 billion, up 8% year-over-year.
Operational Efficiencies: Implemented new pricing analytics and inventory management to improve profitability in the Server segment.
Cost Reduction Program: Announced a 5% workforce reduction to streamline operations and reduce costs.
Cash Flow Management: Free cash flow was negative $847 million, but expected to improve in the second half of the year.
Strategic Shift with Juniper Networks: Expected to deliver at least $450 million in annual run rate synergies within 36 months of closing the transaction.
AI Innovation Strategy: Continued partnership with NVIDIA to enhance AI capabilities and product offerings.
Macroeconomic and Trade Policy Environment: The IT industry is facing significant uncertainty due to tariffs, AI diffusion policy withdrawal, and broad macroeconomic concerns, leading to uneven demand.
Tariff Impact: The company has experienced a lower-than-anticipated tariff impact, but there is still a risk of increased costs as the 90-day pause on tariffs expires.
Goodwill Impairment Charge: A noncash goodwill impairment charge of approximately $1.4 billion was recorded due to macroeconomic uncertainty, impacting GAAP earnings.
Server Segment Challenges: The Server segment is experiencing operational challenges, with a focus on improving profitability and margins, which are expected to recover gradually.
Cost Management and Workforce Reduction: The company is undergoing a cost reduction program, including a 5% workforce reduction, to streamline operations and improve profitability.
Economic Factors: The company is navigating a complex macroeconomic and geopolitical landscape, which may require additional actions to meet fiscal outlook.
Inventory Management: The company is prioritizing inventory reduction, which remains a key challenge, with a goal to normalize inventory levels.
AI Revenue Conversion: There is uncertainty regarding the timing of AI revenue conversion, which could impact future revenue growth.
AI Revenue Conversion: HPE has improved visibility into the timing of AI revenue conversion, tightening revenue outlook to be up 7% to 9% year-over-year.
Juniper Networks Transaction: HPE expects the proposed transaction with Juniper Networks to deliver at least $450 million in annual run rate synergies within 36 months of closing.
Cost Reduction Program: HPE announced a cost reduction program aimed at streamlining workforce and reducing cost structure, including a 5% workforce reduction expected to complete by year-end.
Catalyst Initiatives: HPE is undertaking Catalyst, a series of initiatives to accelerate revenue growth and drive structural cost savings, including operational efficiency and AI utilization.
Product Launches: Recent product launches include advanced private cloud portfolio and new capabilities in networking, enhancing HPE's competitive position.
Revenue Outlook: HPE expects constant currency revenue growth of 7% to 9% for fiscal 2025.
Non-GAAP EPS Guidance: HPE narrows non-GAAP diluted net earnings per share outlook to $1.78 to $1.90.
Free Cash Flow: HPE maintains free cash flow outlook of approximately $1 billion.
Q3 Revenue Guidance: HPE expects Q3 revenue between $8.2 billion and $8.5 billion.
Operating Margin Expectations: HPE expects full year non-GAAP operating margin above 9% and Server operating margin to improve sequentially, exiting the year around 10%.
Dividends Returned: $171 million returned through dividends to common shareholders.
Share Repurchases: $50 million returned via share repurchases to common shareholders.
The earnings call indicates strong financial performance, with record high operating margins, exceeded EPS guidance, and robust free cash flow. The Q&A reveals proactive management of challenges like memory headwinds and DRAM costs, with raised guidance for fiscal '26 EPS and free cash flow. Despite some concerns about networking growth deceleration and unclear responses, the overall sentiment is positive due to the strong demand environment, strategic acquisitions, and growth in key segments like networking and AI systems.
The earnings report shows strong year-over-year growth in several key areas, including a 54% increase in networking revenue and a 16% rise in server revenue. The successful integration of Juniper and record AI backlog are positive indicators. Despite some concerns about server margins and lack of specifics on Juniper's long-term cash flow impact, the overall financial performance and optimistic guidance suggest a positive stock price movement.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
