Hewlett Packard Enterprise (HPE -15.84%) stock collapsed in a 15.2% rout (through 9:50 a.m. ET) this morning after reporting mixed earnings last night, and forecasting a significantly worse 2025 than most Wall Street analysts had been expecting.

For Q1 2025, estimates had HP Enterprise (as I'll call it here, to distinguish this enterprise IT specialist from its better-known brother, HP (HPQ 0.90%), which specializes in personal computers) earning $0.50 per share on just over $7.8 billion in revenue. Turns out, HP Enterprise beat the revenue forecast, with $7.85 billion. But its earnings fell a penny short of the consensus at only $0.49.

HP Enterprise Q1 earnings

The news wasn't all bad. HP Enterprise grew its revenue 17% year over year. It showed especial strength in artificial intelligence (AI), with "1.6 billion in net orders for AI systems" and "enterprise AI orders [up] 40%" year over year. And yet, the news that was bad was pretty darn bad.

Gross margins, for example, plunged 720 basis points to just 29.2%. And although earnings as calculated according to generally accepted accounting principles (GAAP) rose 52%, the company's GAAP profit was a whole nickel below the $0.49 non-GAAP profit noted: $0.44.

Arguably worst of all, HP Enterprise burned through $877 million in negative free cash flow, calling into serious question the quality of its earnings.

Is HP Enterprise stock a sell?

Turning to guidance, management said Q2 sales will range from $7.2 billion to $7.6 billion (versus the $7.9 billion Wall Street was expecting). Non-GAAP profit will be no more than $0.34 per share (versus analyst predictions of $0.50).

Nor will the full year be much better. On the one hand, management says 2025 revenue may grow 7% to 11% over 2024 levels -- $32.2 billion to $33.4 billion. That's probably going to beat the Street's $32.5 billion forecast. Non-GAAP earnings, however, won't exceed $1.90 per share -- and the Street wants to see $2.13.

That's a big miss, folks. And it may make HP Enterprise stock a sell.