Hewlett Packard Enterprise reports fiscal 2024 first-quarter results

• Exceeds profitability expectations and continues to scale recurring revenue, advancing long-term strategy 

Houston, Texas – Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the first quarter ended January 31, 2024.

"HPE exceeded our profitability expectations and drove near-record year-over-year growth in our recurring revenue in the face of market headwinds, demonstrating the relevance of our strategy,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “Despite a mixed quarter, I remain very confident that our focus on customer-centric innovation and our track record of operational discipline will allow us to capitalize on the significant market opportunities in AI as well as across edge and hybrid cloud and to deliver value to our shareholders.”

“HPE drove momentum in annualized revenue run-rate and gross margins in Q1 despite challenges brought by the softening of the networking market and GPU deal timing,” said Marie Myers, executive vice president and CFO of Hewlett Packard Enterprise. “The fundamentals of our business are strong, we are controlling what we can control, and we are optimistic about delivering strong shareholder returns over the remainder of the fiscal year.”

First Quarter Fiscal 2024 Financial Results 
                              

•        Revenue: $6.8 billion, down 14% from the prior-year period in actual dollars and in constant currency⁽¹⁾   

•        Annualized revenue run-rate (“ARR”)⁽²⁾: $1.4 billion, up 42% from the prior-year period and 41% in constant currency⁽¹⁾

•        Gross margins:

◦         GAAP of 36.4%, up 240 basis points from the prior-year period and up 160 basis points sequentially 

◦         Non-GAAP⁽¹⁾ of 36.2%, up 200 basis points from the prior-year period and up 140 basis points sequentially

•        Diluted net earnings per share (“EPS”):

◦         GAAP of $0.29, down 24% from the prior-year period, and down 41% sequentially, above the midpoint of our guidance range of $0.24 to $0.32

◦         Non-GAAP⁽¹⁾ of $0.48, down 24% from the prior-year period and down 8% sequentially, at the high end of our guidance range of $0.42 to $0.50

•        Cash flow from operations: $64 million, an increase of $893 million from the prior-year period

•        Free cash flow (“FCF”)⁽¹⁾⁽³⁾: $(482) million, an increase of $844 million from the prior-year period

•        Capital returns to shareholders: $172 million in the form of dividends and share repurchases

First Quarter Fiscal 2024 Segment Results
 

•        Server revenue was $3.4 billion, down 23% from the prior-year period in actual dollars and in constant currency⁽¹⁾, with 11.4% operating profit margin, compared to 15.7% from the prior-year period. The Server business segment combines the previously separately reported Compute and HPC & AI business segments, with adjustments for certain product lines that are now reported in Hybrid Cloud. The merged Server segment more accurately reflects HPE’s position in the market as well as recent organizational and leadership changes that were implemented in Q1 FY24.

•        Intelligent Edge revenue was $1.2 billion, up 3% from the prior-year period in actual dollars and 2% in constant currency⁽¹⁾, with 29.4% operating profit margin, compared to 19.4% in the prior-year period.  

•        Hybrid Cloud revenue was $1.2 billion, down 10% from the prior-year period in actual dollars and in constant currency⁽¹⁾, with 3.8% operating profit margin, compared to 5.8% from the prior-year period.

•        Financial Services revenue was $873 million, flat from the prior-year period in actual dollars and down 2% in constant currency⁽¹⁾, with 8.5% operating profit margin, compared to 7.2% from the prior-year period. Net portfolio assets of $13.2 billion, up 0.3% from the prior-year period in actual dollars and up 0.7% in constant currency⁽¹⁾. The business delivered return on equity of 15.4%, down 2.4 points from the prior-year period.

Dividend

The HPE Board of Directors declared a regular cash dividend of $0.13 per share on the company’s common stock, payable on April 12, 2024, to stockholders of record as of the close of business on March 15, 2024.

Fiscal 2024 Second Quarter Outlook

HPE estimates revenue to be in the range of $6.6 billion to $7.0 billion. HPE estimates GAAP diluted net EPS to be in the range of $0.20 to $0.25 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $0.36 to $0.41. Fiscal 2024 second quarter non-GAAP diluted net EPS estimates exclude net after-tax adjustments of approximately $0.16 per diluted share, primarily related to stock-based compensation expense and amortization of intangible assets.

Fiscal 2024 Outlook

HPE estimates fiscal 2024 revenue growth to be flat to 2%, in constant currency⁽¹⁾⁽⁵⁾, and fiscal 2024 GAAP operating profit growth to be in the range of 7% to 11% and non-GAAP operating profit⁽¹⁾⁽⁴⁾ growth to be flat to 2%. HPE estimates GAAP diluted net EPS to be in the range of $1.81 and $1.91 and non-GAAP diluted net EPS⁽¹⁾ to be in the range of $1.82 and $1.92. Fiscal 2024 non-GAAP diluted net EPS estimates exclude net after-tax adjustments of approximately $0.01 per diluted share, primarily related to stock-based compensation expense, amortization of intangible assets, transformation costs, acquisition, disposition and other related charges, structural tax-rate adjustments, H3C income, and adjustments related to the sale of H3C. HPE estimates free cash flow^(1)(3)(5) to be at least $1.9 billion.

Download the Q1 FY24 earnings infographic here.

 ¹ A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”

² Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-Service, software consumption revenue, and other as-a-Service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it.

³ FCF represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E), and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

⁴ FY24 non-GAAP operating profit excludes costs of approximately $1.0 billion primarily related to stock-based compensation expense, amortization of intangible assets, transformation costs, and acquisition, disposition and other related charges.

⁵ Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, Hewlett Packard Enterprise is unable to provide a reconciliation to the most directly comparable GAAP financial measure without unreasonable efforts, as the Company cannot predict some elements that are included in such directly comparable GAAP financial measure. These elements could have a material impact on the Company’s reported GAAP results for the guidance period. Refer to the discussion of non-GAAP financial measures below for more information.