Hewlett Packard Enterprise (HPE) has issued a second-quarter revenue forecast that surpassed analyst expectations, indicating the company is benefiting from robust demand for hardware that helps customers run artificial intelligence workloads. In a statement released on Monday, the company projected sales between $9.6 billion and $10 billion for the quarter ending in April. This compares to the average analyst estimate of $9.57 billion.
HPE stated that adjusted earnings per share are expected to be in the range of 51 to 55 cents, aligning with the average analyst projection of 53 cents. The company reaffirmed its full-year revenue growth outlook while raising its annual profit forecast to between $2.30 and $2.50 per share. Analysts had, on average, anticipated $2.35.
Demand for HPE's networking products remains strong, driven by the need for faster data routing to support AI tasks. The Texas-based company, which acquired Juniper Networks last year for approximately $13 billion, views its networking business as a key component of its future expansion.
In the most recent quarter, HPE expanded its margins by implementing price increases and selectively choosing to forgo supplying certain customers, as the industry grapples with significant price increases and a shortage of memory chips. "In a dynamic environment driven by supply chain shortages and cost inflation, we executed with very, very strong discipline," CEO Antonio Neri said in an interview.
For the first fiscal quarter, the company's sales increased by 18% to $9.3 billion, with adjusted earnings per share reaching 65 cents. Analysts had previously expected sales of $9.37 billion and a profit of 58 cents. Revenue from the cloud and AI business segment, which includes servers and storage, declined by 2.7% to $6.3 billion, although margins within that division widened. Neri noted that the company's backlog of AI server orders has reached a value of $5 billion.
Following a closing price of $21.81 in New York's regular trading session, the stock was largely unchanged in after-hours trading. The stock has declined 9.2% year-to-date.
HPE anticipates that the memory chip shortage will persist into next year. The company is raising prices, and in some instances, implementing increases between the time a quote is given and the product is shipped. HPE has also ceased supplying certain equipment to mobile service providers to concentrate on more profitable customers, such as corporate clients and sovereign deals.
"We are not done with price increases," Neri stated. However, he emphasized that HPE has not meaningfully lost market share. "In some markets, segments, and products you might gain share, and in others you might lose share, depending on where the opportunity is. But on average, we are in the same place," he explained.
Neri also mentioned that the company is pursuing more contracts with nations building their own AI clouds. However, these deals take longer to finalize and require U.S. export control approvals, meaning the associated revenue is more likely to materialize in the second half of the year.