HP Enterprise’s Earnings Match Forecasts. The CEO Sees ‘Enduring Demand.’

Text size

Showing resilience in the face of a difficult economic environment and growing signs that business spending on IT is weakening,

Hewlett Packard Enterprise

posted financial results that were broadly in line with both its own forecasts and Wall Street estimates.

For its fiscal third quarter, ended July 31, HP Enterprise (ticker: HPE), reported revenue of $7 billion, up 1% from a year ago, or 4% adjusted for currency, and in line with the Street consensus. The company reported an adjusted profit of 48 cents a share, in line with the consensus call, and in the middle of the range of 44 to 54 cents a share it had predicted. Under generally accepted accounting principles, HP Enterprise earned 31 cents a share.

For the current quarter, the company sees non-GAAP profits of 52 to 60 cents a share, a range whose midpoint is a little below the consensus call of 58 cents. HP Enterprise expects a GAAP profits for the quarter of 32 to 40 cents a share.

For the full year, the company now sees adjusted profits of $1.96 to $2.04 a share, down from a previous range of $1.96 to $2.10 a share, with GAAP profits of $1.20 to $1.28 a share.

HP Enterprise provides servers, storage, and networking hardware and associated services. Results from other enterprise technology players have been mixed: Disappointing results last week from

Dell Technologies

(

DELL

) and

Salesforce.com

(CRM) were offset by stronger recent performance at

Cisco Systems

(

CSCO

),

Snowflake

(SNOW), and Workday (WDAY).

CEO Antonio Neri said in an interview that he was “very pleased with our performance this quarter,” with improving gross margins and modest revenue growth despite continuing parts shortages and a worse-than-expected foreign exchange environment. He said that as the year began, the company had expected currency effects to cut into the rate of revenue growth by about 0.5 percentage points, but that the actual impact will be about 2.5 points.

Neri added that the company is seeing “enduring demand,” exiting the quarter with a higher backlog of orders than at the end of the previous quarter. The availability of some components, such as power supplies, is still tight, but the company could benefit if fading demand for consumer products makes more components available, he said, noting signs of weaker demand from auto manufacturers and other industrial users as well.

Neri said the tighter range of forecasts for full year profits and the reduced outlook for free cash flow reflect the company’s exit from Russia and Belarus, as well as foreign-exchange headwinds, rather than any change in demand.

While Neri declined to provide detailed guidance for the October 2023 fiscal year, he did say that the combination of “enduring demand” and high backlog “gives us very strong confidence” about the outlook.

In the quarter, the company had $941 million in revenue from its Intelligent Edge segment, up 8%, and above the consensus call for $912 million. High Performance Computing and AI revenue was $830 million, up 12%, and above the Street’s forecast of $788 million. The company’s Compute segment had revenue of $3 billion, down 3%, and a little below the consensus of $3.1 billion. Storage revenue was $1.2 billion, down 2%, and just above the Street forecast of $1.1 billion. Financial services revenue was $817 million, down 3%, and a little below consensus at $817 million.

Late in Tuesday’s regular session, HP Enterprise shares were down about 0.6%. The stock is off 14% so far this year.

Write to Eric J. Savitz at [email protected]