Hewlett Packard Enterprise (NYSE: $HPQ) released its third quarter fiscal 2024 results after Wednesday’s closing bell. Here are the details of its latest earnings results.
Hewlett Packard Q3 Results
In the third quarter, the company reported that revenue was up 10% from last year to $7.71 billion and above estimates of $7.66 billion. Meanwhile, EPS came in at $0.50, beating estimates of $0.47,
Server revenue was up 35% year over year to $4.3 billion, with a 10.8% operating margin compared to 10.1% the previous years.
Revenue from the intelligent Edge division was down 23% year over year to $1.1 billion, with a 22.4% operating profit margin, a dip from the 27.6% reported the previous year.
Its Hybrid Cloud division also saw a 7% year over year decline in revenue to $1.3 billion, with a 5.1% operating margin, a dip from the 5.4% reported the previous year.
Revenue from the Financial Services division rose by 1% year over year to $879 million, with a 9% operating margin, an increase from the 8.2% reported the previous year.
It ended the quarter with net portfolio assets worth $13.2 billion, a 0.6% decline year over year on a constant currency basis. HP’s return on equity was up 1.7 points from last year to 17.4%.
Chinese Joint Venture Sale Completed
In the earnings release, the company reported that it had completed the sale of a Chinese joint venture. It stated that it had received “approximately $2.1 billion from the partial sale of its equity position in H3C Technologies, representing 30% of all H3C shares from Chinese IT company Unisplendour International Technology.” The sale’s impact will be reflected in the company’s fourth-quarter results.
HPE Benefits From Surge In AI Demand
The 35% rise in server revenue can be attributed to its close ties to Nvidia. Hewlett Packard has been creating servers designed for machine learning and generative AI in collaboration with Nvidia. Commenting on the results, CEO Antonio Neri said “customer interest in HPE AI systems growing, with opportunities increasing in both enterprise and sovereign AI clouds, as customers explore more use cases.”
Optimistic Outlook
HPE expects an adjusted EPS of $0.76 to $0.81 in the fourth quarter, beating forecasts of $0.55. Revenue is forecast to be at $8.1 billion to $8.4 billion, just above estimates of $8.15 billion.
The company expects a a full-year adjusted EPS of $1.92 to $1.97, an increase from the prior guidance of $1.82 to $1.95. It expects revenue to rise 1% to 3% for the whole year.
Upcoming Purchase
At the start of 2024, it was revealed that HPE plans to purchase Juniper Networks (JNPR) for $14 billion, cash. The company expects the deal to positively impact free cash flow and earnings. It is forecast to be concluded by late 2024 or early 2025.
HPQ Stock Performance
Following the earnings results, HPQ was down 2.24% from the previous day to $34.54 as of 11:48AM EDT. The muted response from investors was likely driven by an unchanged guidance for full-year revenue. Since the start of 2024, the stock is up 18.44%, and in the past 12 months, it is up 7.22%.
Analysts are cautiously optimistic about the stock’s future, giving it a moderate buy rating. They forecast a wide range for the stock, with a high of $44.00 and a low of $30.00. Their average forecast of $36.27 is a 2.66% upside from the last closing price of $35.33.
Should You Add Hewlett Packard (HPQ) To Your Portfolio?
PC pricing has not improved as hoped, and the printing business is not doing well. However, Hewlett Packard hopes that AI PCs will turn things around and create momentum for the company.
Today, they represent only a fraction of their total business. Coupled with the stellar performance of its AI servers, HP’s long-term outlook is promising. Consequently, investing in HPQ could potentially yield long-term growth for your portfolio.
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