Source: Wall Street News Author: Chang Jiashuai
Hewlett Packard Enterprise's AI server business has performed remarkably, surpassing Wall Street's expectations for both revenue and guidance. The stock's current increase is far behind competitors such as Dell. The CEO said that after this quarter's performance disclosure, the market will discover the value of Hewlett Packard Enterprise.
Driven by a strong AI server business,$Hewlett Packard Enterprise (HPE.US)$reported revenue and performance guidance that exceeded expectations last quarter, leading to a surge of over 16% in the company's stock price during after-hours trading on the US stock market.
Yesterday, according to the financial report released by Hewlett Packard Enterprise, the company's second fiscal quarter revenue increased by 3.3% to $7.2 billion, exceeding the consensus estimate of $6.82 billion, which was expected to decrease by 2% year-on-year. The EPS for the previous quarter also reached 42 cents, surpassing the consensus estimate of 39 cents.
The unexpected result mainly came from Hewlett Packard Enterprise's server business. The department generated $3.87 billion in revenue last quarter, exceeding analysts' expectations of $3.45 billion. The company stated that sales of systems for artificial intelligence more than doubled from the first quarter to over $900 million. CEO Antonio Neri said in an interview that the increase in customer demand and the stable supply of high-performance semiconductors contributed to the sales growth of artificial intelligence systems.
Looking to the future, management expects revenue growth for the 2024 fiscal year to be between 1% and 3%, with EPS reaching $1.85 to $1.95. As a reference, analysts' expectations are for revenue growth of 0.1% and adjusted EPS of $1.89.
Hewlett Packard Enterprise was formerly the enterprise product division of HP. It was spun off in November 2015 and its main product lines include compute servers, storage arrays, network equipment, and high-performance computing business.
Compared to other technology companies that operate server businesses, Hewlett Packard Enterprise's stock price performance this year has been rather flat with a rise of only 3.7%. In contrast, Dell and Super Micro Computer have risen by 77% and 171% respectively during the same period.
Hewlett Packard Enterprise CFO Marie Myers stated on a conference call after the performance announcement that the backlog of AI server orders is $3.1 billion, slightly lower than Dell's announcement last week of $3.8 billion.
CEO Antonio Neri believes that after this quarter's performance disclosure, the market will discover Hewlett Packard Enterprise's value.
Bloomberg Intelligence analyst Woo Jin Ho pointed out that although Hewlett Packard Enterprise has shown impressive performance in the AI server business, other business lines such as networking are still dragging down its performance. The Intelligent Edge, which includes the networking business, reported $1.09 billion in revenue, lower than analysts' expectations of $1.25 billion. In January of this year, Hewlett Packard Enterprise agreed to acquire Juniper Networks for $14 billion to strengthen its network services. Neri expects that customer demand will improve over time.
From the activities of insiders, it can be seen that company executives do not have high confidence in Hewlett Packard Enterprise. In the past three months, insiders at Hewlett Packard Enterprise have sold $1.9 million worth of stocks. The confidence signal from insiders is very negative, and is lower than the industry average level.
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Editor/Lambor