On Tuesday, Hewlett Packard Enterprise (NYSE: HPE ) reported its fiscal second-quarter results that beat estimates after its server business got a boost in the form of the availability of AI chips from Nvidia Corporation (NASDAQ: NVDA ). Although revenue fell compared to the comparable quarter last year, server and storage maker HPE lifted its full-year guidance.
Highlights of the second fiscal quarter
For the quarter ended April 30, HPE reported revenue rose 3% to $7.2 billion, beating the FactSet estimate of $6.8 billion, while earnings fell 19% to 42 cents a share.
Server revenue grew 18% year over year to $3.9 billion, while AI systems revenue topped $900 million, driven by growing demand for AI servers. Similarly, Dell Technologies Inc (NYSE: DELL ) recently reported that it sold $1.7 billion of AI systems last quarter. Dell recorded sales of its AI systems multiplied by 2.1 on a sequential basis and up to 10 times on an annualized basis. Like HP, Dell revealed its margins suffered from those AI server sales or rather, Dell also did not benefit significantly from such an increase in revenue. What’s surprising about these numbers is that unlike HPE, Dell hasn’t been selling pre-exascale and exascale GPU-accelerated supercomputers for many years.
Management disclosed AI systems revenue for the first time, and Chief Executive Antonio Neri added that it doubled on a sequential basis driven by the company’s strong order book and better conversion from its supply chain. Neri noted that the company’s deep and broad expertise in designing, manufacturing and operating AI systems at scale drove cumulative AI systems orders to $4.6 billion, of which more than 15% were contributed from enterprise AI orders. The hardware maker also pointed out that it had benefited from Nvidia’s improved supply of H100 chips, which are housed in its Enterprise servers. However, smart edge revenue fell 19% to $1.1 billion.
Guidance for the third fiscal quarter
For the current quarter, HPE guided for sales of between $7.4 billion and $7.8 billion, handily meeting and beating analysts’ consensus estimate of $7.4 billion. HPE expects adjusted earnings to range from 43 cents to 48 cents per share, while analysts forecast 47 cents per share.
An improved full-year outlook
As for 2024, HP Enterprise raised its revenue growth outlook from its previous expectation of flat growth to 2% to a range between 1% and 3% growth. HPE also raised adjusted earnings guidance from a previous range of between $1.82 and $1.92 per share, with the outlook now being between $1.85 and $1.95 per share.
Raymond James analyst Simon Leopold estimated that HPE was more successful in navigating margin headwinds than its peers thanks to cost discipline and a strong connection of services to AI system sales. After reporting that its fiscal first quarter revenue shrank 14%, HP managed to return to revenue growth in its fiscal second quarter. The good news is also that Nvidia needs Dell and HPE, along with other OEMs to spread adoption and GenAI hardware to the masses, further driving their revenue growth. But as Nvidia continues to sprint in an attempt to maintain its lead after just unveiling its new AI chips just months after its latest release, both Dell and HP need to figure out how to make more money from selling AI servers.
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This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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This article AI Momentum drives HPE’s return to revenue growth, but profitability has yet to enter the picture originally appeared on Benzinga.com
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