On June 4, 2024, Hewlett Packard Enterprise Co (HPE, Financial) released its 8-K filing for the second quarter of fiscal 2024, showcasing a robust performance that surpassed analyst expectations. Hewlett Packard Enterprise is an information technology vendor that provides hardware and software to enterprises, with primary product lines including compute servers, storage arrays, and networking equipment. The company aims to be a complete edge-to-cloud provider, enabling hybrid clouds and hyperconverged infrastructure.
Financial Performance and Key Metrics
Hewlett Packard Enterprise Co (HPE, Financial) reported revenue of $7.2 billion for Q2 2024, a 3% increase from the prior-year period in actual dollars and 4% in constant currency. This figure exceeded the analyst estimate of $6.82 billion. The company's annualized revenue run-rate (ARR) reached $1.5 billion, marking a 37% year-over-year increase.
Despite the revenue growth, HPE's gross margins faced pressure. The GAAP gross margin was 33.0%, down 300 basis points from the prior-year period, while the non-GAAP gross margin was 33.1%, down 310 basis points. Diluted net earnings per share (EPS) on a GAAP basis were $0.24, a 25% decline from the prior-year period, but within the guidance range of $0.20 to $0.25. Non-GAAP diluted net EPS was $0.42, surpassing the guidance range of $0.36 to $0.41.
Segment Performance
The Server segment reported revenue of $3.9 billion, an 18% increase from the prior-year period, with an operating profit margin of 11.0%. The Intelligent Edge segment saw a revenue decline of 19% to $1.1 billion, with a 21.8% operating profit margin. Hybrid Cloud revenue was $1.3 billion, down 8%, with a 0.8% operating profit margin. Financial Services revenue increased by 1% to $867 million, with a 9.3% operating profit margin.
Cash Flow and Shareholder Returns
HPE generated $1,093 million in cash flow from operations, a $204 million increase from the prior-year period. Free cash flow (FCF) was $610 million, up $322 million year-over-year. The company returned $214 million to shareholders through dividends and share repurchases.
Commentary and Outlook
“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.
“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.
Income Statement Summary
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Net Revenue | $7,204 million | $6,755 million | $6,973 million |
| Cost of Sales | $4,828 million | $4,298 million | $4,461 million |
| Net Earnings | $314 million | $387 million | $418 million |
| Diluted EPS | $0.24 | $0.29 | $0.32 |
Analysis
Hewlett Packard Enterprise Co (HPE, Financial) demonstrated strong revenue growth and effective cost management, particularly in its AI systems segment, which saw revenue more than double sequentially. The company's ability to convert AI system orders into revenue and its disciplined execution across its portfolio were key drivers of its solid performance. However, the decline in gross margins and net earnings per share indicates ongoing challenges in managing costs and maintaining profitability.
Overall, HPE's performance in Q2 2024 highlights its strategic focus on AI systems and hybrid cloud solutions, positioning the company well for future growth. The raised revenue and EPS guidance for the full year reflect management's confidence in sustaining this momentum.
Explore the complete 8-K earnings release (here) from Hewlett Packard Enterprise Co for further details.
