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

Hewlett Packard Enterprise HPE shares rose 4.6% during Tuesday’s extended trading session after the company reported better-than-expected results for second-quarter fiscal 2025. The company’s non-GAAP earnings of 38 cents per share surpassed the Zacks Consensus Estimate by 11.76% but declined 10% year over year.

HPE’s revenues increased 6% year over year to $7.6 billion and surpassed the Zacks Consensus Estimate by 1.8%. The top line grew on the back of Server, Hybrid Cloud and Financial services segments, driven by increased sales in artificial intelligence and GreenLake.

HPE’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 5.98%.

HPE's Segment-Wise Performance

Hewlett Packard Enterprise’s server segment sales increased 6% (up 7% at cc) year over year but declined 5% sequentially to $4.06 billion, mainly due to strong demand for its AI servers as well as growth in server systems. The division reported an operating profit margin of 5.9%, which decreased 510 basis points (bps) from the year-ago quarter and 220 bps from the previous quarter.

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company Quote

Revenues in the Intelligent Edge division increased 7% (up 8% at cc) year over year and rose 1% sequentially to $1.16 billion during the quarter. The division’s operating profit margin of 23.6% contracted 180 bps from the year-ago quarter and contracted 380 bps sequentially.

The hybrid cloud division’s sales increased 13% (up 15% at cc) year over year and rose 3% sequentially to $1.45 billion. The company stated that its Hybrid Cloud revenues grew on the back of Private Cloud and Alletra Storage MP. The division reported an operating profit margin of 5.4%, which increased 440 bps from the year-ago quarter but contracted 160 bps sequentially. The year-over-year increase in operating profit margin was mainly due to controlled operating expenses.

The Financial service segment’s revenues of $856 million declined 1% (up 1% in cc) year over year and 2% sequentially. The segment’s operating margin of 10.4% expanded 110 bps year over year and 100 bps sequentially. Net portfolio assets of $13.3 billion increased 0.9% year over year (flat in cc). Corporate Investments & Other revenues were $194 million, down 23.02% year over year and 1.52% sequentially.

Operating Results of HPE

The non-GAAP gross profit was $2.24 billion, down 5.83% year over year and 2.86% sequentially. The non-GAAP gross margin contracted 370 bps on a year-over-year basis and remained flat on a quarter-over-quarter basis to 29.4%.

Hewlett Packard Enterprise’s non-GAAP operating profit decreased 10.38% year over year and contracted 21.41% sequentially to $613 million. The non-GAAP operating margin contracted 150 bps year over year and 190 bps sequentially to 8%.

HPE’s Balance Sheet and Cash Flow

Hewlett Packard Enterprise ended the fiscal second quarter with $11.67 billion in cash and cash equivalents compared with $13.43 billion at the end of the previous quarter.

In the fiscal second quarter, HPE used cash worth $461 million for operational activities and had a negative free cash flow of $847 million. In the first half of fiscal 2025, it used cash worth $851 million for operational activities and had a negative free cash flow of $1.72 billion.

HPE returned $221 million to shareholders in the second quarter of fiscal 2025 through dividends and share repurchases. In the first half of fiscal 2025, it returned $444 million to shareholders through share buybacks and dividend payments.

Guidance for FY25 and Q3

Hewlett Packard Enterprise initiated guidance for the third quarter and fiscal 2025. For the third quarter of fiscal 2025, the company forecasts to generate revenues in the range of $8.2-$8.5 billion. The company estimates GAAP and non-GAAP net earnings per share in the range of 24-29 cents and 40-45 cents, respectively. The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues and non-GAAP earnings is pegged at $8.23 billion and 42 cents per share, respectively.

For fiscal 2025, HPE forecasts to generate year-over-year revenue growth of 7-9% in constant currency. The company estimates GAAP and non-GAAP net earnings per share of 30-42 cents and $1.78-$1.90, respectively. The Zacks Consensus Estimate for fiscal 2025 revenues and non-GAAP earnings is pegged at $32.64 billion and $1.81 per share, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank and Stocks to Consider

Currently, HPE carries a Zacks Rank #3 (Hold).

Paylocity Holding PCTY, StoneCo STNE and Trivago TRVG are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

PCTY, STNE and TRVG sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTY shares have declined 4.3% year to date. The Zacks Consensus Estimate for PCTY’s full-year 2025 earnings is pegged at $7.01 per share, up by 5.4% over the past 30 days, indicating an increase of 6.7% from the year-ago quarter’s reported figure.

STNE shares have surged 77.7% year to date. The Zacks Consensus Estimate for STNE’s full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating an increase of 5.93% from the year-ago quarter’s reported figure.

TRVG shares have surged 91.8% year to date. The Zacks Consensus Estimate for TRVG’s full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a rise of 11.11% from the year-ago quarter’s reported figure.

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This article originally published on Zacks Investment Research (zacks.com).

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