Why HP Enterprise Stock Is Down After Earnings Top Estimates

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HP Enterprise’s headquarters in Spring, Texas.

Mark Felix/Bloomberg

HP Enterprise posted solid results, driven by strong growth in the company’s networking business and increasing demand for high-performance computing and generative artificial intelligence hardware and services.

For its fiscal third quarter, ended July 31, HP Enterprise (ticker:


) reported revenue of $7 billion, up 1% from a year ago, or 3.5% adjusted for currency, in line with Street estimates. The stock was down 1.2% at $16.64 in after-hours trading.

On an adjusted basis, HPE earned 49 cents a share, ahead of the company’s guidance range of 44 to 48 cents a share, and two pennies better than the Street consensus of 47 cents. Under generally accepted accounting principles, the company earned 35 cents a share, likewise two cents above Street estimates.

For the fiscal fourth quarter ending in October, HP Enterprise sees revenue of $7.2 billion to $7.5 billion, a range whose midpoint is a tad below the Street consensus of $7.47 billion. HP Enterprise projects profits for the quarter of 48 to 52 cents a share, putting the midpoint of the forecast range a penny above the consensus of 49 cents.

The company reiterated a forecast for that full-year revenue growth will be 4% to 6%. HP Enterprise also repeated its projection for 35% to 45% compounded annual growth in annualized recurring revenue through fiscal 2025. ARR in the quarter was $1.3 billion, up 48%

Management now expects full-year profits of $2.11 to $2.15 a share, compared with a previous forecast of $2.06 to $2.14 a share. At the midpoint of the ranges, that is an increase of three cents a share.

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HP Enterprise said it experienced a “wave of demand acceleration” in the quarter for the HPC and AI segment, which exited the quarter with its largest-ever order book “as customers discover HPE’s unique capabilities to power unprecedented levels of performance for AI at scale.”

The company reported 50% growth in its intelligent edge segment, which includes the company’s networking business, or 53% growth in constant currency, to $1.4 billion, or about $100 million above consensus. The HPC and AI business had flat revenue in the quarter, while revenue was off 13% for the company’s compute segment, and storage revenue was down 5%. 

CEO Antonio Neri noted in an interview with Barron’s that revenue grew sequentially in all business segments. He also pointed out that intelligent edge is now 20% of total revenue, doubling over the last eight quarters, while profits from that business now account for 49% of the corporate total.

He also said that the storage business, while down from a year ago, has increased sequentially for the last two quarters, while compute revenue is showing signs of stabilization. July quarter revenue improved relative to the April quarter levels.

Neri also said that there has been an acceleration of demand for AI-related hardware and services, giving the company a “big, big order book.” He noted that the company’s order book ended the quarter at twice the prepandemic level. Neri also noted that the company has started fulfilling some AI-related orders, from start-ups developing large language models, enterprise companies fine-tuning foundational models, and others doing AI-related inference tasks. 

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Write to Eric J. Savitz at [email protected]

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