HPE Q2 Results: Seven Signs Of Innovation-Fueled Sales Acceleration
Hewlett Packard Enterprise reported sales growth in every product segment for its second fiscal quarter ended April 30. Here are seven examples of HPE’s innovation-fueled acceleration.
Hewlett Packard Enterprise CEO Antonio Neri singled out the company’s “amazing portfolio and amazing innovation” for the sales growth the company delivered in every product segment for its second fiscal quarter ended April 30.
“We had a solid quarter,” said Neri in an interview with CRN. “This is the fifth consecutive quarter of year-over-year revenue growth. That’s very telling. Our innovation is strong. Every product segment grew revenues on a year-over-year basis.”
Overall, HPE reported non-GAAP diluted earnings per share of 38 cents on a six percent increase in sales to $7.6 billion. That was well above the Zacks consensus estimate of 34 cents per share on sales of $7.47 billion.
The strong results prompted HPE to raise the low end of fiscal year 2025 non-GAAP diluted net earnings per share guidance by eight cents per share with sales growth of seven to nine percent.
“We continue to capitalize on the mega trends reshaping the IT industry across networking, AI and hybrid cloud,” said Neri.
Pat O’Dell, managing partner at Clinton, N.J.-based CPP Associates, one of HPE’s top enterprise partners, said Neri has provided the vision and innovation that is putting more distance this year between HPE and its competitors with the deepest compute, storage, networking, hybrid cloud consumption and AI portfolio in the business.
“HPE has the best portfolio in the industry with great solutions that are just getting better as time goes on,” he said. “In my view they are putting more distance between themselves and their competitors this year than last year.”
Here are seven examples of HPE’s innovation-fueled acceleration.
Enterprise AI Acceleration With HPE Private Cloud AI
HPE’s Private Cloud AI – a turnkey private cloud service developed in conjunction with Nvidia – is fueling enterprise AI sales.
The highly regarded HPE Private Cloud AI offering – which is designed to be up and running in just three clicks – is being embraced by enterprise customers looking for a quick and cost-effective way to build AI solutions without breaking the bank.
Overall HPE reported $1.1 billion in net new AI system orders in the quarter with enterprise AI accounting for one-third of those orders.
“Enterprises are now moving forward with AI,” said Neri. “Nobody wants to be left behind and they need the expertise, which comes from a combination of what HPE and our partner ecosystem can deliver. We believe this is a significant opportunity. I would ask all our partners to continue to bring (HPE) Private Cloud AI into their labs so customers can test and validate AI solutions.”
HPE, for its part, is currently conducting 250 proof of concepts with HPE Private Cloud AI with more than 40 of those in production, said Neri. “This is happening everywhere in every vertical of the market, some faster and some slower,” he said.
HPE reported $1 billion in AI sales converted during the quarter, up from $900 million in the year ago quarter.
HPE AI systems revenue was up 10 percent sequentially, a big improvement since HPE had anticipated a modest sequential decline in AI systems revenue in the quarter.
The enterprise AI momentum is also being driven by HPE’s mainstay ProLiant servers and Cray supercomputers.
HPE is also seeing momentum in sovereign cloud opportunities and with traditional large language model deployments, said Neri. HPE is set to close a deal this quarter that will be one of the largest Nvidia H200 Hopper GPU deployments in the world, said Neri.
HPE continues to see “very strong momentum” in AI systems with a $3.2 billion AI backlog, up $100 million quarter over quarter, said Neri. “Our pipeline remains multiples of our backlog,” he said.
HPE VM Essentials Is Taking Off With A ‘Very Strong’ Sales Pipeline
With steep Broadcom VMware price increases hitting customers hard, HPE is seeing a “very strong” sales pipeline for its Private Cloud Business Edition With Morpheus VM Essentials.
In fact, Neri said, HPE already has 1,000 customers in the sales pipeline with customers looking for an alternative to Broadcom VMware.
The HPE private cloud offering competes directly against Broadcom VMware’s Private Cloud Foundation.
One example of the HPE VM Essentials momentum: Danfoss, a Denmark energy efficiency company, has committed to transition 75 percent of its IT estate to HPE VM Essentials. “We see tremendous opportunities ahead,” said Neri.
HPE’s private cloud portfolio, including Private Cloud Business Edition With Morpheus VM Essentials, grew at a double-digit rate in the quarter.
“Obviously in virtualization there is huge interest to offer an alternative to VMware,” said Neri.
HPE partners have told CRN that HPE’s new Private Cloud Business Edition With Morpheus VM Essentials provides customers facing steep Broadcom VMware software licensing price increases with cost savings of as much as ten times less than Broadcom VMware Private Cloud Foundation.
CPP Associates’ O’Dell said there is “no greater pain” for customers than what they are going to do with virtualization in the wake of steep Broadcom VMware price increases. “As VM Essentials matures and it matures everyday it could be the biggest potential upside for HPE,” he said. “When you are talking about reducing VMware costs by 70, 80 and 90 percent compared to VMware that is massive upside,” he said.
Intelligent Edge Networking Returns To Growth
HPE’s intelligent edge networking business returned to growth in the quarter with a seven percent increase in sales to $1.2 billion with a 23.6 percent operating margin compared with 21.8 percent profit operating margin in the year ago quarter.
The networking results came in the midst of a number of recent innovations including expanded universal zero trust network access solutions to HPE Aruba Networking Central.
HPE Aruba Networking Central, which now manages over five million devices, also delivered a double-digit increase in higher margin annualized revenue run rate subscription services growth in the quarter.
HPE Aruba Networking Central is also now available to deploy as an on-premises option, said Neri. “This is particularly helpful for customers prioritizing data sovereignty,” he said.
Last but not least, HPE recently introduced the new HPE Aruba Networking CX 10040 smart switch which includes integration with Morpheus VM Essentials, which is a big boost for partners selling HPE VM Essentials virtualization.
That integration is critical since it will let businesses unify the orchestration of virtualized and physical network and security services, such as distributed firewall and microsegmentation across VMware ESXi, KVM and bare metal hosts, creating an open virtualization model, HPE said.
High Double-Digit Sales Growth For Alletra MP
HPE’s Alletra MP, a modular file and block storage system that provides a single, unified cloud platform that can scale both performance and capacity on a single disaggregated architecture, delivered “high double digit” sales growth year over year, said Neri.
HPE reported that Alletra MP orders were up more than 75 percent for the fourth consecutive quarter, contributing to the company’s growing software deferred balance.
“This demonstrates the value of our disaggregated architecture with multi-protocol support and the flexibility of our offering,” said Neri.
Alletra MP delivers critical high margin subscription services in the midst of an HPE drive to higher margin software and services.
CPP Associates’ O’Dell said his sales team is having more success with HPE Alletra MP storage line displacing competitors. “HPE is really focusing on breaking glass and make stuff happen,” he said. “HPE is firing on all cylinders with Alletra MP.”
Overall, HPE’s storage sales in the quarter were up double-digits in the quarter.
HPE GreenLake Delivers 47 Percent ARR Growth, Adds 1,000 New Customers
Hewlett Packard Enterprise’s GreenLake pay-per-use cloud services added another 1,000 customers and continued its strong performance, delivering 47 percent growth in annualized revenue run rate to $2.2 billion for the quarter
“GreenLake continues to deliver strong results,” said Neri. “We are growing customer count which now totals approximately 42,000 (customers), generating over $2.2 billion of annualized revenue run rate (ARR).”
Software and services continue to be more than 70 percent of HPE’s ARR demonstrating a “shift to higher growth and higher margin areas of the stack,” said Neri.
HPE has implemented a new simplified tiered pricing model for HPE GreenLake consumption in North America that provides lower prices as customers increase their storage consumption.
As customers move from price band one for zero to 100 terabytes of data to price band two with 101 to 200 terabytes and then to price band three with 201 to 300 terabytes of data they are rewarded with lower-priced storage consumption.
The simplified pricing model is part of Hewlett Packard Enterprise Vice President of Global GreenLake Partner and Service Provider Sales Ulrich ‘Uli’ Seibold’s all-out offensive to “simplify” the GreenLake model for customers and partners.
HPE Server Sales Up Six Percent To $4.1 Billion
HPE server sales were up six percent in the quarter to $4.1 billion after the company addressed operational challenges that impacted the preceding quarter results.
“In the server business, even though we expected it to go down because of the backlog and what happened in Q1, we actually delivered better revenue, operating profit and operating margin compared to the guidance we had for Q2,” said Neri. “So all in all strong and solid performance.”
Among the changes implemented to drive server profitability during the quarter were the rollout of “new pricing analytics, increased discount scrutiny and inventory management,” said Neri. He said it will take a “couple of quarters to realize the full benefit” of the new measures.
HPE, Neri said, expects server operating profit margins to increase from the current 5.9 percent to approximately 10 percent as it exits the fourth fiscal quarter.
More Innovation Coming At HPE Discover June 23-26
Neri promised more innovation to come at HPE Discover which runs from June 23- 26 in Las Vegas.
“We continue to help enterprises accelerate their business transformation across networking, hybrid cloud and AI, and we will unveil even more exciting breakthrough innovations at the HPE Discover later this month,” said Neri.
For the second consecutive year, Neri is delivering his keynote at the Sphere, billed as one of the world’s most technology-advanced venues.
At HPE Discover last year, HPE introduced both HPE Private Cloud AI and VM Essentials which are now gaining significant traction from both partners and customers.
One area that Neri is sure to highlight given the enterprise AI acceleration is agentic AI integration which is gaining momentum among leading edge solution providers.
“We have gone from generative AI to this agentic approach,” said Neri. “The agentic approach works great in enterprises who are trying to automate a process and use AI to get better efficiency and reduce the human interaction in the loop.”