HPE Q4 strong as server revenue surges due to AI

HPE reported better-than-expected fourth quarter results as server revenue surged due to AI demand. HPE also said that it expects its acquisition of Juniper Networks to close in early 2025.

The company said it has a backlog for AI systems orders to more than $3.5 billion.

HPE reported fourth quarter earnings of 99 cents a share on revenue of $8.5 billion, up 15% from a year ago. Non-GAAP revenue in the fourth quarter of 58 cents a share.

Wall Street was expecting HPE to report fourth quarter earnings of 56 cents a share on revenue of $8.26 billion.

HPE CEO Antonio Neri said the company's portfolio of hybrid cloud, AI and networking was paying off. HPE is also seeing strong traction in Greenlake adoption. 

• HPE acquires Morpheus Data to round out HPE GreenLake features
• HPE unveils Private Cloud AI, broad Nvidia partnership aimed at genAI workloads
• HPE to acquire Juniper Networks for $14B: What it means
• HPE launches AMD powered AI system and highlights broader strategy
• On-premises AI enterprise workloads? Infrastructure, budgets starting to align

Server revenue in the fourth quarter was $4.7 billion, up 32% from a year ago. Intelligent edge revenue, which includes Aruba gear, was $1.1 billion, down 20% from a year ago. Hybrid cloud revenue was $1.6 billion, up 18% from a year ago.

As for the first quarter outlook, HPE projected non-GAAP earnings of 47 cents a share to 52 cents a share. Revenue is projected to grow at a mid-teens percentage clip.

For the year ended Oct. 31, HPE reported earnings of $1.93 a share on revenue of $30.13 billion.

Constellation Research analyst Holger Mueller said:

"HPE had a very good quarter with servers leading the way fueled by the AI demands of enterprises. Had the networking segment not stalled, it could have been a record quarter for HPE. Costs grew as well, but overall results got bumped by gains on equity sales,  which doubles profits and EPS. The soon to be commencing addition of the Juniper business will give HPE another 4 quarters of favorable YOY comparisons, so things are looking up for HPE." 

Speaking on the earnings conference call, Neri said the following:

• "Our AI systems demand remains strong. We have received new orders bringing AI systems backlog to over $3.5 billion. Our traditional server business also continues to reflect the improved market dynamics. Hybrid cloud revenue grew 18% year-over-year and 21% sequentially, resulting in revenue of $1.6 billion, with increasing revenue for HPE Private Cloud and continued growth in HPE Storage."
• "Customer adoption of our HPE Alletra Storage MP solutions continues to rise at an accelerated pace. Since launch, we have sold approximately 3,000 systems."
• "We see the enterprise AI pipeline continue to grow steadily. There are hundreds of customers on that pipeline. There are some very interesting large-sized deals in the pipeline, and they are doing proof-of-concept. We announced the co-engineered solution with NVIDIA in June, and we made it available September 9. We had 7 weeks to be able to collect orders. We already collected orders in enterprise AI and we already closed deals in enterprise AI."
• "Customers are also asking us to help them simplify their VMware private clouds and optimize their virtualization costs. At HPE Discover Barcelona 2 weeks ago, we launched HPE VM Essentials, which enables customers to manage their virtualization states across HPE VMware and many others."