HPE Stock Rises 5% as Q2 Earnings and Revenues Beat Estimates

Core Insights - Hewlett Packard Enterprise (HPE) shares increased by 4.6% after reporting better-than-expected results for Q2 fiscal 2025, with non-GAAP earnings of 38 cents per share, surpassing estimates by 11.76% but down 10% year over year [1][8]. Revenue Performance - HPE's revenues grew by 6% year over year to $7.6 billion, exceeding the Zacks Consensus Estimate by 1.8%, driven by strong performance in the Server, Hybrid Cloud, and Financial services segments, particularly due to increased sales in artificial intelligence and GreenLake [2][8]. - The company has beaten earnings estimates in three of the last four quarters, with an average surprise of 5.98% [2]. Segment-Wise Performance - The server segment reported sales of $4.06 billion, a 6% increase year over year but a 5% decline sequentially, attributed to strong demand for AI servers [3]. - The Intelligent Edge division's revenues rose by 7% year over year to $1.16 billion, with a 23.6% operating profit margin, which contracted from the previous year [4]. - The hybrid cloud division's sales increased by 13% year over year to $1.45 billion, with an operating profit margin of 5.4%, reflecting a year-over-year increase due to controlled operating expenses [5]. - The Financial services segment's revenues were $856 million, down 1% year over year, but the operating margin expanded to 10.4% [6]. Operating Results - HPE's non-GAAP gross profit was $2.24 billion, down 5.83% year over year, with a gross margin of 29.4% [7]. - Non-GAAP operating profit decreased by 10.38% year over year to $613 million, with an operating margin of 8% [7]. Balance Sheet and Cash Flow - HPE ended the fiscal second quarter with $11.67 billion in cash and cash equivalents, down from $13.43 billion in the previous quarter [8]. - The company reported a negative free cash flow of $847 million for the quarter and $1.72 billion for the first half of fiscal 2025 [9]. - HPE returned $221 million to shareholders in Q2 through dividends and share repurchases [9]. Guidance - For Q3 fiscal 2025, HPE projects revenues between $8.2 billion and $8.5 billion, with non-GAAP earnings per share estimated at 40-45 cents [10]. - For the full fiscal 2025, the company anticipates year-over-year revenue growth of 7-9% in constant currency, with non-GAAP earnings per share projected at $1.78-$1.90 [11].