Hewlett Packard Enterprise (HPE) has recently unveiled a new quarterly financial reporting structure, resulting in the integration of specific storage results into a hybrid cloud category. The company’s first fiscal quarter for 2024, ending on January 31, saw reported revenues of $6.8 billion. This figure represents a 14 percent decrease compared to the same period last year, falling below the projected estimate of $6.9 billion to $7.3 billion. Additionally, a profit of $387 million was reported, reflecting a 23 percent decrease from the previous year.
Antonio Neri, HPE’s President and CEO, attributed the decline in overall revenue to the shift to the GreenLake platform. This is due to the fact that subscription revenue is recognized over time, unlike straightforward product sales, which are recognized upon shipment. However, Neri highlighted that HPE exceeded its profitability expectations and achieved significant year-over-year growth in recurring revenue, indicating the continued relevance of the company’s strategy in challenging market conditions.
Furthermore, HPE’s financial results indicate that their annual revenue run rate increased to $1.4 billion, reflecting a 42 percent growth from the previous year. This growth is primarily attributed to the GreenLake portfolio of services.
Under HPE’s new organizational structure, various segments have been consolidated into the following categories: Server; Hybrid Cloud; Intelligent Edge; Financial Services; and Corporate Investments and Other. Notably, the historical Storage segment has been incorporated into the new Hybrid Cloud reporting line, making it challenging to assess the specific performance of its storage portfolio. HPE has opted for this revised reporting format to better align with its operational and performance measurement practices.
Despite lower-than-expected results in Q1, HPE’s Gross margin improved by 2.4 percent year-over-year, reaching 36.4 percent. The company also reported an operating cash flow of $64 million, alongside cash, cash equivalents, and restricted cash of $3.9 billion. However, their free cash flow was -$482 million, and diluted earnings per share stood at $0.29, marking a 24 percent decrease from the prior year.
In terms of segment revenues, the Server segment experienced a 23 percent decrease year-over-year, amounting to $3.4 billion. The Hybrid Cloud category generated $1.3 billion, representing a 10 percent decline. On the other hand, Intelligent Edge reported $1.2 billion, reflecting a 2 percent increase, while Financial Services saw a 2 percent drop at $873 million. Corporate Investments and Other reported $238 million, with a marginal 1 percent increase.
During an earnings call, HPE’s CFO, Marie Myers, attributed the softening of demand in the Intelligent Edge segment to extended customer digestion of product shipments from the previous fiscal year. Myers also highlighted the material easing of campus switching and Wi-Fi products, particularly in Europe and Asia, affecting Q1 revenue.
Looking ahead, Neri expressed confidence in HPE’s future but acknowledged that Q1 revenue performance fell short of expectations. However, he noted that demand for traditional server and storage products has stabilized, with substantial growth in total Alletra subscription revenue, surpassing 100 percent year-over-year, serving as a testament to HPE’s long-term transition towards an as-a-service model across its business lines.
Furthermore, HPE appears poised to capitalise on the increasing demand for AI systems, particularly with the rising orders of GPU-enhanced servers and Accelerator Processing (AP) units. With the anticipation of better GPU availability and the growing pipeline across the entire AI life cycle, HPE expects its server revenues to grow.
Looking ahead, HPE predicts a revenue outlook of $6.8 billion for the next quarter, expecting a 2.5 percent annual decrease at the midpoint. Myers expressed optimism for sequential increases in the Hybrid Cloud segment, as the traditional storage business is anticipated to improve, and momentum for HPE GreenLake is expected to continue throughout the year.
As HPE navigates these changes in financial reporting, they remain optimistic about the future and are poised to capitalise on emerging opportunities in the technology industry.
+ There are no comments
Add yours