Key Takeaways From HPE’s Earnings And What To Expect Through FY’18

by Trefis Team
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HP Enterprise (NYSE:HPE) is announced its fiscal second quarter earnings on May 22, reporting a nearly 10% y-o-y increase in net revenues to $7.5 billion. Revenue growth was reported across segments, with core Hybrid IT revenues increasing 7% over the comparable prior year period to $6 billion. This segment includes revenues from servers, storage as well as technology services. Additionally, Intelligent Edge (networking) revenues rose 17% y-o-y to $710 million for the quarter, which was further strengthened by the Cape Networks acquisition. The company’s third key segment, Financial Services, also reported a 5% increase in net revenues to $916 million for the quarter.

HPE has reported growth in its Hybrid IT product portfolio, with solid growth in compute and storage revenues in recent quarters. The company continues to focus on enterprise hardware and customer services in order to continue the growth spree in revenues in the coming quarters. We expect this trend to continue through the end of fiscal 2018 in October. We forecast Hybrid IT revenues to be over $24 billion for the year (revenues for the 6 months ended April stand at $12.3 billion). We further forecast HPE’s financial services revenues to be up 8-9% to $3.8 billion for the year. The company has enhanced its focus on core servers, as well as high-margin networking product lines, which have higher average prices and margins relative to the custom commoditized Tier-1 products. The company also launched Edgeline Converged Systems which should help it to report higher margins in the coming quarters. As a result, we forecast the company’s adjusted operating margin to expand 140 basis points to over 11% for the year. We have created an interactive dashboard that highlights our expectations for the year. You can modify drivers such as segment revenues and margin figures to see how the company’s earnings would be affected for the full year.

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