Hewlett Packard Enterprise said its third quarter was driven by AI systems as revenue was up 10% from a year ago.
The company reported third quarter net income of 38 cents a share on revenue of $7.7 billion, up 10% from a year ago. Non-GAAP earnings in the quarter were 50 cents a share.
Wall Street was expecting HPE to report third quarter earnings of 47 cents a share on revenue of $7.66 billion.
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CEO Antonio Neri said the third quarter was strong with growth due to AI system sales. HPE noted that it was well positioned to gain market share in AI infrastructure.
In a blog post, Neri noted:
"Our AI leadership is built on decades of large-scale infrastructure expertise including technologies like direct liquid cooling that are powering our largest AI systems for model builders, service providers, and supercomputing users. Interest in our HPE AI solutions, particularly from enterprise and sovereign customers, continues to grow. AI systems orders climbed $1.6 billion in the quarter to a cumulative $6.2 billion since Q1 2023 – an increase of approximately $3.5 billion over the last year."
Server revenue in the quarter was $4.3 billion, up 35% from a year ago. Intelligent edge revenue was $1.1 billion, down 23% from a year ago. That business is mostly Aruba.
Hybrid cloud revenue was $1.3 billion, down 7% from a year ago.
As for the outlook, HPE projected fourth-quarter revenue between $8.1 billion and $8.4 billion with non-GAAP earnings of 52 cents a share to 57 cents a share. The non-GAAP figure excludes an after-tax net gain due to H3C income of $2.1 billion due to a partial sale and various adjustments. For fiscal 2024, HPE projected revenue growth of 1% to 3% with non-GAAP earnings of $1.92 a share to $1.87 a share.
Speaking on the earnings call, Neri said:
"We saw sequential and year over year orders growth, but with some geographic variation, demand was strong in North America, Asia Pacific, Japan and India, as Europe and the Middle East lacked. We are aggressively going after the opportunities presented by better market conditions, and are well positioned in a competitive and dynamic environment.
We have accelerated innovation across all pillars of our strategy, networking, hybrid cloud and AI delivered through a unified cloud, native and AI driven experience as a part of our HP Greenlake Cloud Platform. Today, almost 37,000 unique customers use our HP Greenlake cloud to manage their hybrid IT estate."
Neri also addressed AI use cases:
"We continue to pursue profitable deals within our target server margin range, underscoring stability in our operating profit profile. In AI our momentum is very clear. Customer demand for HPE AI systems rolls sequentially, with opportunities increasing in both enterprise and sovereign AI clouds.
Customers are exploring new ways to use AI, adding to our already robust pipeline and creating even more runway for our broad AI offerings. Enterprise interest in generative AI is high, and while adoption is still in the initial stages, it is accelerated. Customers tell us that they see the possibilities in building the business cases."
