UPDATED 20:43 EDT / JUNE 01 2021

INFRA

HPE posts double-digit revenue growth for the first time since 2015

Hewlett Packard Enterprise Co. has gotten its business back on track, reporting fiscal second-quarter earnings today that beat expectations as it returned to revenue growth for the first time since 2018.

The company reported a profit before certain costs such as stock compensation of 46 cents per share on revenue of $6.7 billion, up 11% from a year ago. That was the first time it showed double-digit revenue growth since its split from what’s now HP Inc. in 2015.

Wall Street analysts had been modeling a profit of 42 cents per share on revenue of just $6.62 billion.

HPE Chief Executive Antonio Neri (pictured) said the firm had demonstrated “disciplined execution” on its strategic priorities during the quarter.

“We are strengthening our core computer and storage businesses, doubling down in our growth Intelligent Edge and HPC businesses and accelerating our pivot to as-a-service,” he said. “[We are] also advancing our cloud-first innovation agenda to become the edge-to-cloud platform as-a-service choice for our customers and partners.”

HPE saw growth across the board in all product categories. Its core Compute business, which includes the enterprise servers it sells, pulled in revenue of just under $3 billion, up 12% from a year ago and a big improvement on the 1% drop it saw in the first quarter. Storage systems revenue topped $1.1 billion, up 5% and reversing a 5% drop in the previous quarter. Within that segment, sales from its All Flash Array products rose 20%, while Nimble Storage systems revenue rose 17%.

Elsewhere, High Performance Computing and Mission Critical Systems revenue rose 13%, to $685 million, reversing a 9% decline in the previous quarter. Intelligent Edge, which sells HPE’s edge computing systems, saw sales of $799 million, up 17%, and Financial Services edged up 1%, to $839 million.

The company also reported that its consumption-based services orders grew by 40% from a year ago, showing how its shift to an as-a-service model is gaining traction with customers. HPE added that its second-quarter annualized revenue run rate jumped 30% from a year ago, to $678 million.

“HPE seems to have turned the corner for good to be on the growth path,” said Constellation Research Inc. analyst Holger Mueller. “All business areas are growing, the transformation to subscriptions is making good progress and the company showed good cost discipline. Now it is all about staying the course.”

Moor Insights & Strategy analyst Steve McDowell was less enthusiastic, saying that although HPE outperformed in most areas, its storage business wasn’t where he hoped it would be. He noted that HPE’s main rival in storage, Dell Technologies Inc., saw growth of 12% over the same period.

Another rival, Pure Storage Inc., also saw 12% revenue growth when it reported earnings last month. He said he expected better than the 3% growth HPE reported today, though he conceded that the overall storage business is still healthy.

“The bright spot for HPE is its all-flash storage, which grew 20% year-over-year, in line with what Dell reported for its midrange all-flash storage,” McDowell said. “HPE has a solid all-flash portfolio and is benefiting from strong demand in the all-flash mid-range market. This is helping to offset some of the weaker aspects of its storage business, and is also helping contribute to what was an impressive boost in operating margin.”

Regarding its outlook, HPE Chief Financial Officer Tarek Robbiati said the company has raised its full-year earnings forecast. The company said it expects third-quarter earnings of 38 to 44 cents per share, topping Wall Street’s forecast of 38 cents per share. For the full year, HPE sees earnings of between $1.82 and $1.94 per share, up from an earlier range of $1.70 to $1.88 per share.

“We are once again raising our full-year guidance to reflect the continued momentum in the demand environment and our strong operational performance to date,” Robbiati said. “This marks the third increase in our outlook since our Securities Analyst Meeting last October.”

During the quarter the company hosted its HPE Accelerating Next: Workload Optimized Solutions With An As-A-Service Experience event. Executives, including Neri, discussed topics such as the barriers to digital transformation in the enterprise and how to overcome them, the company’s approach to digital modernization and the role its as-a-service strategy can play in accelerating customers’ information technology initiatives.

Image: World Economic Forum/Flickr CC

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