HPE posts strong revenue growth, sees reduced tariff impact

[NEW YORK] Hewlett Packard Enterprise (HPE) reported quarterly revenue that topped estimates and said it expects a reduced impact from tariffs on its business this year.

Sales increased 6 per cent to US$7.63 billion in the fiscal second quarter, the Texas-based company said on Tuesday (Jun 3). Profit, excluding some items, was 38 US cents per share. Analysts, on average, estimated earnings of 33 US cents per share on revenue of US$7.46 billion of revenue.

Tariffs are now expected to provide a more mild impact to HPE’s profits, chief executive officer Antonio Neri said. The import taxes are expected to negatively affect adjusted profit by 4 US cents per share this year, down from the previous expectation of 7 US cents a share, he said.

The company projected a full-year profit of US$1.78 to US$1.90 a share, raising the lower end of the range 8 US cents. That compares with an average estimate of US$1.80 a share.

Artificial intelligence (AI) has fuelled a wave of demand for powerful servers and other hardware from vendors such as HPE, Dell Technologies and Super Micro Computer. Still, this business line generates lower margins because of the need to fill those servers with expensive AI chips from Nvidia and others..

AI systems revenue was US$1.0 billion in the quarter ended Apr 30, HPE said in a presentation to accompany its earnings statement. Analysts, on average, projected US$798 million. Rival Dell reported US$1.8 billion in AI server revenue in its most recent quarter.

HPE has not been able to seize the moment as much as some peers. The technology vendor is under scrutiny from activist investor Elliott Investment Management, which has built a position in the company worth US$1.5 billion that became public in April. Neri said conversations with investors are private, and declined to comment on any interactions with Elliott.

For the full fiscal year ending in October, revenue will increase 7 to 9 per cent after adjusting for currency fluctuations, HPE said. That’s a reduction from a previous range of 7 to 11 per cent.

The shares gained about 3 per cent in extended trading after closing at US$17.69 in New York. The stock has dropped 17 per cent this year. BLOOMBERG