Hewlett Packard Enterprise HPE reported fourth-quarter fiscal 2024 non-GAAP earnings of 58 cents per share, which surpassed the Zacks Consensus Estimate by 5.5%. The figure rose 11.5% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
HPE’s revenues increased 15.1% year over year to $8.46 billion and surpassed the Zacks Consensus Estimate by 2.81%. The top line grew on the back of Server, Hybrid Cloud and Financial services segments, driven by increased sales in artificial intelligence and GreenLake. HPE’s artificial intelligence (AI) systems division grew 15.4% sequentially.
Following its better-than-expected fiscal fourth-quarter results, HPE initiated strong first-quarter 2025 earnings guidance, which may give a fresh boost to its share price. Shares of HPE have gained 27.5% year to date, outperforming the Zacks Computer - Integrated Systems industry's growth of 17.1%.
HPE's Segment-Wise Performance
Hewlett Packard Enterprise’s server segment sales soared 32% (up 31% at cc) year over year and 10% sequentially to $4.7 billion, mainly driven by strong demand for its AI servers as well as growth in server systems. The division reported an operating profit margin of 11.6%, which increased 150 basis points (bps) from the year-ago quarter and 80 bps from the previous quarter.
Revenues in the Intelligent Edge division plunged 20% (down 20% at cc) year over year and rose 0.3% sequentially to $1.124 billion during the quarter. Hewlett Packard Enterprise stated that demand is recovering in this segment, backlogs have normalized and the segment has healthy inventory levels.
The division’s operating profit margin of 24.4% contracted 270 bps from the year-ago quarter but expanded 260 bps sequentially. Although revenues declined year over year, there was a recovery in the top line sequentially, mainly due to growth in services, WLAN products and software, partially offset by declines in switching and campus solutions. The sequential expansion of the operating profit margin was due to HPE’s efforts to rightsize the cost structure.
In the first quarter of fiscal 2024, HPE restructured its business by introducing the hybrid cloud business, which comprises storage and part of the server business that accounts for HPE GreenLake as well. The hybrid cloud division’s sales increased 18% (up 18% at cc) year over year and 21.7% sequentially to $1.58 billion. The company stated that its Hybrid Cloud revenues grew on the back of Private Cloud and Alletra Storage MP The division reported an operating profit margin of 7.7%, which increased 3,900 bps from the year-ago quarter and expanded 260 bps sequentially. The increase in operating profit margin was mainly due to controlled operating expenses.
The Financial service segment’s revenues of $893 million increased 2% (up 2% in cc) year over year and expanded 1.6% sequentially. The segment’s operating margin of 9.2% expanded 120 bps year over year and 20 bps sequentially. Net portfolio assets of $13.6 billion increased 4% year over year (up 4% in cc). Corporate Investments & Other revenues were $262 million, down 0.4% year over year and flat sequentially.
Operating Results of HPE
The non-GAAP gross profit was $2.61 billion, up 1.8% year over year and 6.8% sequentially. The non-GAAP gross margin contracted 390 bps on a year-over-year basis and 90 bps on a quarter-over-quarter basis to 30.9%. The contraction in the gross margin was primarily due to lower mix of the high-margin Intelligent Edge revenues.
Hewlett Packard Enterprise’s non-GAAP operating profit increased 32.1% year over year and 21.7% sequentially to $938 million. The non-GAAP operating margin expanded 140 bps year over year and expanded 110 bps sequentially to 11.1%. The negative impact of the lower gross margin was partially offset by disciplined operating expense management.
Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise
Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company Quote
HPE’s Balance Sheet and Cash Flow
Hewlett Packard Enterprise ended the fiscal third quarter with $14.84 billion in cash and cash equivalents compared with $3.64 billion at the end of the previous quarter.
In the fiscal fourth quarter, HPE generated operating cash flow and free cash flow of $2.03 billion and $1.5 billion, respectively. In fiscal 2024, it generated operating cash flow and free cash flow of $4.34 billion and $2.3 billion, respectively.
HPE returned $219 million to shareholders in the fourth quarter of fiscal 2024 through dividends and share repurchases.
Guidance for Q1
Hewlett Packard Enterprise initiated guidance for the first quarter of fiscal 2025. The company forecasts to generate year-over-year revenue growth in the mid-teen percentage range. The company estimates GAAP and non-GAAP net earnings per share in the range of 31-36 cents and 47-52 cents (mid-point 49.5 cents), respectively. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues and non-GAAP earnings is pegged at $7.67 billion and 48 cents per share, respectively.
Zacks Rank & Stocks to Consider
Currently, HPE carries a Zacks Rank #3 (Hold).
NVIDIA NVDA, Amphenol APH and Celestica CLS are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. NVDA and APH carry a Zacks Rank #2 (Buy) each, while CLS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for NVIDIA’s 2025 earnings has been revised upward by 9 cents to $2.93 per share over the past seven days, indicating a 111% year-over-year decline. NVDA shares have rallied 176.5% year to date.
The consensus mark for Amphenol’s 2024 earnings has been revised upward by 2 cents to $1.17 per share over the past seven days, indicating a 58% year-over-year increase. The long-term expected earnings growth rate for the stock is 42.60%. APH shares have jumped 43% year to date.
The consensus mark for Celestica’s 2024 earnings has been revised upward by 20 cents to $3.85 per share over the past 30 days, indicating a 58.4% year-over-year increase. CLS shares have skyrocketed 197.1% year to date.
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