Hewlett Packard Enterprise Reports Fiscal 2024 Second Quarter

Hewlett Packard Enterprise Reports Fiscal 2024 Second Quarter Results

AI systems revenue doubled sequentially, beating Q2 revenue guidance

HOUSTON — (BUSINESS WIRE) — June 4, 2024 — Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the second quarter ended April 30, 2024.

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"HPE delivered very solid results in Q2, exceeding revenue and non-GAAP EPS guidance. AI systems revenue more than doubled from the prior quarter, driven by our strong order book and better conversion from our supply chain,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “Our deep expertise in designing, manufacturing, and running AI systems at scale fueled growth of cumulative AI systems orders to $4.6 billion, with enterprise AI orders representing more than 15%. HPE’s AI advantage, increased HPE GreenLake adoption, and leading infrastructure portfolio, as well as an improved supply chain environment, set us up very well to deliver a strong second half.”

“Stronger AI systems order conversion, prudent cost discipline, and higher-than-expected free cash flow drove a very solid performance in Q2. Because of our robust AI systems order momentum and disciplined execution across our entire portfolio, we are raising our revenue and non-GAAP EPS guidance for the full year,” said Marie Myers, executive vice president and CFO of Hewlett Packard Enterprise. “We are driving profitable growth as we convert customer demand to revenue, particularly for HPE’s AI systems. The long-term trends across hybrid cloud and networking also position us well for the future.”

Second Quarter Fiscal 2024 Financial Results

Revenue: $7.2 billion, up 3% from the prior-year period in actual dollars and 4% in constant currency⁽¹⁾
Annualized revenue run-rate (“ARR”)⁽²⁾: $1.5 billion, up 37% from the prior-year period and 39% in constant currency⁽¹⁾
Gross margins:
- GAAP of 33.0%, down 300 basis points from the prior-year period and down 340 basis points sequentially
- Non-GAAP⁽¹⁾ of 33.1%, down 310 basis points from the prior-year period and sequentially
Diluted net earnings per share (“EPS”):
- GAAP of $0.24, down 25% from the prior-year period and down 17% sequentially, within our guidance range of $0.20 to $0.25
- Non-GAAP⁽¹⁾ of $0.42, down 19% from the prior-year period and down 13% sequentially, above our guidance range of $0.36 to $0.41
Cash flow from operations: $1,093 million, an increase of $204 million from the prior-year period
Free cash flow (“FCF”)⁽¹⁾⁽³⁾: $610 million, an increase of $322 million from the prior-year period
Capital returns to shareholders: $214 million in the form of dividends and share repurchases

Second Quarter Fiscal 2024 Segment Results

Server revenue was $3.9 billion, up 18% from the prior-year period in actual dollars and in constant currency⁽¹⁾, with 11.0% operating profit margin, compared to 14.4% from the prior-year period.
Intelligent Edge revenue was $1.1 billion, down 19% from the prior-year period in actual dollars and in constant currency⁽¹⁾, with 21.8% operating profit margin, compared to 24.7% in the prior-year period.
Hybrid Cloud revenue was $1.3 billion, down 8% from the prior-year period in actual dollars and 9% in constant currency⁽¹⁾, with 0.8% operating profit margin, compared to 1.9% from the prior-year period.
Financial Services revenue was $867 million, up 1% from the prior-year period in actual dollars and in constant currency⁽¹⁾, with 9.3% operating profit margin, compared to 8.9% from the prior-year period. Net portfolio assets of $13.2 billion, down 1.1% from the prior-year period in actual dollars and up 0.3% in constant currency⁽¹⁾. The business delivered return on equity of 18.0%, up 3.0 points from the prior-year period.

Dividend

The HPE Board of Directors declared a regular cash dividend of $0.13 per share on the company’s common stock, payable on July 18, 2024, to stockholders of record as of the close of business on June 19, 2024.

Fiscal 2024 Third Quarter Outlook

HPE estimates revenue to be in the range of $7.4 billion to $7.8 billion. HPE estimates GAAP diluted net EPS to be in the range of $0.29 to $0.34 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $0.43 to $0.48. Fiscal 2024 third quarter non-GAAP diluted net EPS excludes net after-tax costs of approximately $0.14 per diluted share primarily related to stock-based compensation expense, amortization of intangible assets and acquisition, disposition and other related charges.

Fiscal 2024 Outlook

HPE estimates fiscal 2024 revenue growth to grow 1 to 3%, in constant currency⁽¹⁾⁽⁵⁾, and fiscal 2024 GAAP operating profit growth to be in the range of 2% to 6% and non-GAAP operating profit⁽¹⁾⁽⁴⁾ growth to be flat to 2%. HPE estimates GAAP diluted net EPS to be in the range of $1.61 and $1.71 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $1.85 and $1.95. Fiscal 2024 non-GAAP diluted net EPS estimates exclude net after-tax adjustments of approximately $0.24 per diluted share, primarily related to stock-based compensation expense, acquisition, disposition and other related charges, amortization of intangible assets, structural tax-rate adjustments, adjustments related to the sale of H3C and a portion of the H3C income. HPE estimates free cash flow^(1)(3)(5) to be at least $1.9 billion.

¹A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”

² Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-Service, software consumption revenue, and other as-a-Service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it.

³ Free cash flow represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

⁴FY24 non-GAAP operating profit excludes costs of approximately $1.0B primarily related to stock-based compensation expense, acquisition, disposition and other related charges, amortization of intangible assets, and transformation costs.

⁵Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, Hewlett Packard Enterprise is unable to provide a reconciliation to the most directly comparable GAAP financial measure without unreasonable efforts, as the Company cannot predict some elements that are included in such directly comparable GAAP financial measure. These elements could have a material impact on the Company’s reported GAAP results for the guidance period. Refer to the discussion of non-GAAP financial measures below for more information.

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