HPE Earnings: Growth In Networking And Storage Revenues Boost Top Line

Hewlett Packard Enterprise (NYSE:HPE) announced its fiscal Q3 results on Tuesday, September 5. The results were better than expected as the company posted growth in networking and storage revenues. As a result, the stock price rose in aftermarket trading. This was the last quarter for which the company will report revenues for the software vertical, as the transaction to divest this vertical closed last week. Key takeaways from the results are as follows:

• The revenues (including the recently divested software vertical) grew by 3% to $8.2 billion. If the software and other divested businesses are excluded, the revenues for the company grew by 6% y-o-y to $7.5 billion.
• The Enterprise Group (EG), which is comprised of Server, Storage, Networking and Technology Services, reported 3% y-o-y growth in revenues to $6.8 billion.
• Within the EG division, the server revenues declined by 1% to $3.3 billion as sales for Tier 1 server fell. However, the company did report growth in sales for core servers as revenue grew by 13%, driven by improvement in average sales price. The company also expects its share in the server market to improve.
• The company reported that its storage revenues grew by 11% y-o-y to $844 million, driven by 30% growth in all flash storage as its acquisition of Nimble bore fruit. However, 3PAR storage solutions, which deals with SME customers, reported a 9% decline in revenues due to competitive pricing in the U.S. Nevertheless, the company continues to expect constraints in NAND supply to drive prices for flash storage up in the remainder of 2017.
• Networking revenues grew by 16% to $702 million driven by Aruba wireless solutions, which reported 30% growth in revenues.
• The Technology Services division, which includes virtualization, cloud deployment, and security services, reported 1% growth in revenues to $1.95 billion. Orders also grew year-over-year for the fifth consecutive quarter for TS, which should help the division post growth throughout 2017.
• Software revenue declined by 13% to $718 million. Within this segment, license revenue grew by 2%, support revenue declined by 2%, professional services revenue declined by 23% and software-as-a-service (SaaS) revenue grew by 7%.

Outlook For Q4 And 2017

For the fourth quarter of fiscal 2017, HPE estimates that its GAAP diluted net EPS will be in the range of $0.00 to $0.04 and non-GAAP diluted net EPS to be in the range of $0.26 to $0.30. Fourth quarter fiscal 2017 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.26 per share, related primarily to separation costs, restructuring charges and amortization of intangible assets.

For precise figures, please refer to our full analysis for Hewlett Packard Enterprise

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