Hewlett Packard Enterprise Co. and HP Inc. delivered mixed second-quarter financial results today as they both continue to navigate a tough economy that has soured demand for the servers, personal computer, storage and printer products they make.

In the case of HPE, today it reported net income of $418 million in the quarter, up from a profit of just $250 million one year earlier. Earnings before certain costs such as stock compensation came to 52 cents per share, with revenue creeping up 4% to $6.97 billion. Wall Street analysts had forecast lower earnings of 49 cents per share on higher revenue of $7.3 billion.

In a prepared statement, HPE Chief Executive Antonio Neri (pictured above) said the company had built on a great start to the year by growing its revenue and increasing the contribution of recurring sales from its HPE GreenLake platform. “Our shift to a higher-margin portfolio mix led by the Intelligent Edge segment, and the strong demand for our AI offering, further strengthen the investment opportunity for our shareholders,” he said.

HPE sells information technology hardware such as servers, storage and networking gear, plus associated software services. Its flagship offering these days is HPE GreenLake, a portfolio of hardware and software products that enterprises can buy on a pay-as-you-go basis, instead of purchasing everything upfront. However, revenue derived from Greenlake is split across multiple business segments, making it hard to get a clear picture of how successful it really is.

The company’s Intelligent Edge business made solid progress, with revenue rising 50% from a year earlier, to $1.3 billion. The High Performance Computing & Artificial Intelligence group also put in a good shift, with revenue up 18% to $840 million. Financial Services added $858 million, up 4% from a year ago. However, HPE’s more traditional business segments Compute and Storage both declined, with revenue of $2.8 billion and $1 billion, respectively, down by 8% and 3% from the previous year.

In an interview with MarketWatch, HPE’s finance chief Tarek Robbiati insisted the company is making progress. “It was a solid quarter as we are shifting to higher-margin revenue streams in AI and the Intelligent Edge segment,” he said.

That may be so, but investors will be wary of the decline in HPE’s traditional business segments, which seems unlikely to improve any time soon. For the current quarter, HPE forecast earnings of between 44 and 48 cents, in line with Wall Street’s forecast of 46 cents. HPE also guided for revenue of $6.7 billion to $7.2 billion, the midpoint lower than Wall Street’s target of $7.2 billion.

Constellation Research Inc. analyst Holger Mueller said HPE did well to grow its revenue slightly, given the underlying economic conditions it faces, though he noted that executives will be wary that sales slowed down by 11% from the previous quarter. “The double-digit drop in compute revenue and the small decline in storage did not help Antonio Neri and team,” Mueller said. “However, HPE showed good cost management, reducing its cost of sales to deliver a better earnings per share than it did one year ago. All eyes are on the next quarter to see where it goes from here.”

HPE’s stock fell more than 7% in the extended trading session.

PC sales nosedive, sending HP’s stock down

It was a similar story for HP, with the personal computer and printer giant reporting a net profit of $1.07 billion, up from an income of $1 billion a year earlier. The company delivered earnings of $1.07 per share on revenue of $12.9 billion, down 22% from a year earlier.

Wall Street had forecast earnings of just 76 cents per share on higher revenue of $13.07 billion.

HP said it’s looking for earnings of between 81 and 91 cents per share, the midpoint of which is just above Wall Street’s target of 85 cents per share.

HP Chief Executive Enrique Lores (pictured adjacent) said the company’s disciplined execution and strong innovation helped it to deliver on its own earnings guidance. “We are well-positioned to win in our markets and drive long-term sustainable growth as we make continued progress against our Future Ready plan,” he said.

The CEO added that he has high hopes for an AI-led recovery in the PC market later this year. He told MarketWatch that he believes AI will redefine what PCs can do and therefore presents a “tremendous refresh opportunity.”

Whether or not that opportunity will be enough to halt the company’s declining sales remains to be seen. HP’s personal systems segment, which includes PCs and laptops, saw revenue fall 29% to $8.2 billion in the quarter. Meanwhile, printing revenue fell 5%, to $4.7 billion.

Mueller said HP’s problem is that it’s caught in the post-pandemic hangover that has battered all PC vendors, as illustrated by the 29% drop in personal systems revenue. “The decline in printer revenue did not help things, but at least its management managed to reduce its cost base, with total costs and expenses down both year-over-year and quarter-over-quarter,” he continued. “It means HP’s earnings per share increased by more than double from the previous quarter, which is a good sign. Investor will be looking for more of the same in the next quarter.”

Despite Mueller’s optimism, HP’s shareholders seemed skeptical about the company’s prospects, with a selloff in extended trading sending its stock down more than 4%.

Photos: SiliconANGLE and HP