Why HP Enterprise Stock Earnings Fall After Soaring Estimates

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

In the third quarter of its fiscal year ended July 31, HP Enterprise (ticker: HPE ) reported revenue of $7 billion, up 1% from a year ago, or 3.5% in currency-adjusted terms, according to Street estimates. Shares were down 1.2% at $16.64 in after-hours trading.

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

For the fiscal fourth quarter ending in October, HP Enterprise sees revenue of $7.2 billion to $7.5 billion, with the range below the midpoint of $7.47 billion. HP Enterprise reported quarterly profit of 48 to 52 cents a share, which put the midpoint of the forecast range at 49 cents a penny.

The company again forecast full-year revenue growth of 4% to 6%. HP Enterprise reiterated its forecast of 35% to 45% compound annual growth in annualized recurring revenue through fiscal 2025. ARR grew 48% to $1.3 billion in the quarter.

Advertisement – Scroll to continue

Management now expects full-year profit of $2.11 to $2.15 per share, down from a previous forecast of $2.06 to $2.14. In the middle of the range, an increase of three cents per share.

HP Enterprise said the quarter saw “demand acceleration” for its HPC and AI segment, which exited the quarter with its largest order book. .”

See also  Columbia to Disband Lucy Calkins' Reading and Writing Program

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 $100 million above consensus. The HPC and AI business saw flat revenue in the quarter, while revenue in the company’s compute segment was down 13%, and storage revenue was down 5%.

Advertisement – Scroll to continue

CEO Antonio Neri noted in an interview Baron’s Revenue grew linearly across all business segments. Intelligent Edge now accounts for 20% of total revenue, doubling over the past eight quarters, while that business’s profitability now accounts for 49% of the corporate total.

He said the storage business, down from a year ago, has grown consistently over the past two quarters, while computing revenue is showing signs of stability. July quarter earnings improved compared to April quarter levels.

Neri said demand for AI-related hardware and services has accelerated, giving the company a “huge, huge order book.” He noted that the company’s order book ended the quarter at twice the pre-pandemic level. Neri also noted that the company has begun fulfilling some AI-related orders, from start-ups building large language models, enterprise firms fine-tuning foundational models and other AI-related inferential work.

Eric J. Write to Savitz at [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *