HPE Q4 Earnings Surpass Expectations, Revenues Rise Y/Y

Core Insights - Hewlett Packard Enterprise (HPE) stock fell over 8% in pre-market trading despite reporting better-than-expected results for Q4 fiscal 2025, with non-GAAP earnings of 62 cents per share, surpassing the Zacks Consensus Estimate by 5.1% and increasing 6.3% year over year [1] - HPE's revenues grew 14.4% year over year to $9.68 billion but missed the Zacks Consensus Estimate by 2.63%, driven primarily by the networking business [1] Segment Performance - The Server segment generated $4.5 billion in revenues, down 5% year over year due to delays in AI server shipments and reduced U.S. federal spending, with an operating profit margin of 9.8%, down 180 basis points from the previous year [3] - Networking revenues reached $2.8 billion, up 150% year over year, largely due to the addition of Juniper Networks, although the operating profit margin decreased to 23%, down 140 basis points [4] - The Hybrid Cloud division reported $1.4 billion in revenues, down 12% year over year, as HPE focused on higher-margin solutions, resulting in an operating profit margin of 5%, down from 7.8% [5] - The Financial Services segment recorded $889 million in revenues, flat year over year, with an operating margin of 11.5%, up 230 basis points [6] Operating Results - HPE's non-GAAP gross profit for Q4 fiscal 2025 was $3.52 billion, with a non-GAAP gross margin of 36.4%, up 550 basis points year over year [7] - The non-GAAP operating profit was $1.18 billion, with an operating margin of 12.2%, up 110 basis points from the previous year [7] Balance Sheet and Cash Flow - HPE ended Q4 with $5.77 billion in cash and cash equivalents, up from $4.57 billion in the previous quarter [8] - The company generated $2.5 billion in cash from operating activities and produced $1.9 billion in free cash flow, both significantly higher than the prior year [8] Shareholder Returns - HPE returned $271 million to shareholders in Q4 through dividends and share repurchases, totaling $886 million for the full fiscal 2025 [9] Guidance for FY26 and Q1 - For Q1 fiscal 2026, HPE expects revenues between $9 billion and $9.4 billion, with a Zacks Consensus Estimate of 54 cents per share, indicating 10.2% year-over-year growth [12] - For full-year fiscal 2026, HPE forecasts revenue growth of 17-22% and projects non-GAAP diluted EPS of $2.25-$2.45, with a Zacks Consensus Estimate of $2.31 per share, indicating 21.5% year-over-year growth [14]