HPE beats forecast with solid growth across all major business segments, buys Axis Security
Hewlett Packard Enterprise Co. posted a solid earnings beat and raised its outlook for its fiscal year today, sending its stock higher in extended trading.
The company reported fiscal first-quarter net income of $501 million, up from a $304 million net loss a year ago. Earnings before certain costs such as stock compensation came to 63 cents per share, while revenue rose 12%, to $7.8 billion.
Analysts had been targeting lower earnings of 54 cents per share on likewise lower sales of $7.45 billion. HPE’s stock, which had stayed flat during the regular trading session, rose by 2% after-hours.
Shortly after announcing earnings, HPE said it’s buying cybersecurity startup Axis Security Ltd. for an undisclosed amount. The acquisition is being made through HPE’s Aruba unit and is expected to close by the end of the current quarter.
Axis had raised a total of $100 million, including a $50 million Series C round in 2021. Its Security Service Edge platform will become part of Aruba’s software-defined wide-area network and Secure Access Service Edge offerings. Also, HPE’s GreenLake edge-to-cloud platform will integrate Axis’ SSE platform into its GreenLake’s monthly subscription offering.
As for the earnings, HPE Chief Executive Antonio Neri (pictured) hailed the company’s “exceptional results,” noting that it delivered its highest first-quarter revenue since 2016 and its best-ever profit margin. “Powered by our market-leading hybrid cloud platform HPE GreenLake, we unlocked an impressive run rate of $1 billion in annualized revenue for the first time,” he added.
The company is a provider of information technology hardware such as servers, storage and networking gear, plus associated software services. Its flagship offering these days is GreenLake, a portfolio of hardware and software products that enterprises can buy on a pay-as-you-go basis, rather than purchase everything upfront.
That said, GreenLake’s revenue is split across multiple business segments, so it’s not easy to get a clear picture of how successful it really is. But its growth seems fairly evident, as HPE delivered across the board.
The best performer was its Higher Performance Computing & Artificial Intelligence group, which saw revenue rise 34%, to $1.1 billion in the quarter. Intelligent Edge revenue logged 25% growth from a year ago, to $1.1 billion. The Compute segment delivered the highest revenue at $3.5 billion, up 14%, while Storage revenue increased 5%, to $1.2 billion. HPE also derives revenue from Financial Services, which rose 4%, to $873 million.
Constellation Research Inc. analyst Holger Mueller said HPE did well to swing back to a profit, having recorded a loss in the previous quarter, explaining that it did so through good cost management. “General and administrative expenses were only slightly up, while R&D costs were up 20% year-over-year, but it’s good to see the company investing in product,” he said. “Now though, HPE has to pay more taxes, so its earnings per share were at the same level as a year ago. The company is headed in the right direction, but in the new year it will have to show it can grow its profits as well as revenues.”
With such impressive growth across the board, HPE officials are confident they can continue to deliver, and that was reflected in its guidance for the coming quarter. The company is forecasting earnings of between 44 and 52 cents per share on revenue of $7.1 billion to $7.5 billion, nicely ahead of Wall Street’s forecast of 47 cents a share in earnings and $7.04 billion in sales.
HPE also raised its full-year earnings outlook, saying it now sees a profit of between $2.02 and $2.10 per share, up from its earlier range of $1.96 to $2.04. Wall Street is targeting full-year earnings of $2.02 per share.
Charles King of Pund-IT Inc. said that after delivering solid earnings results for two successive quarters, there’s good reason to believe that HPE is building up solid momentum that will keep the good news coming.
“There’s some evidence for that to be a reasonable assumption, especially the improved results across HPE’s main business units and the decision of officials to raise its outlook for the remained of the year,” King said. “While possible global economic uncertainties may yet derail the company’s optimism, this is the best and most complete performance HPE has delivered in years.”
The company was fairly busy on the acquisition front in the last quarter, announcing in January it had bought an AI startup called Pachyderm Inc. and following up in February with the news that it had agreed to a deal to buy the private cellular network provider Athonet Srl. However, a much bigger potential acquisition is apparently off the table, as officials denied the company was holding talks with Nutanix Inc. about a possible sale.
With reporting from Robert Hof
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