To The Moon

$Hewlett Packard Enterprise(HPE)$ is scheduled to release its fiscal Q2 2025 earnings on Tuesday, 03 June 2025, after the market closes.

Revenue: HPE estimates revenue to be in the range of $7.2 billion to $7.6 billion. The analyst consensus for Q2 2025 revenue is around $7.51 billion. This guidance, when initially provided, was below consensus expectations, causing some investor concern.

Non-GAAP Diluted Earnings Per Share (EPS): HPE guided for non-GAAP diluted EPS in the range of $0.28 to $0.34. The analyst consensus for non-GAAP EPS for Q2 2025 is around $0.28.

Hewlett Packard Enterprise (HPE) Last Neutral Earnings Call Saw Share Price Declined By 0.95%

HPE had a neutral earnings call on 06 March 2025 which saw its share price declined by 0.95% since.

Hewlett Packard Enterprise reported strong revenue growth driven by the server and Intelligent Edge segments, as well as significant growth in AI system orders and GreenLake adoption. However, the company faced challenges in the server segment, with operating margin pressures due to pricing and inventory issues, compounded by recent tariff impacts. Workforce reductions and cost-saving measures are being implemented to address these challenges.

Hewlett Packard Enterprise (HPE) Guidance

During the first quarter of fiscal 2025, Hewlett Packard Enterprise (HPE) demonstrated strong performance with a 17% year-over-year revenue growth, reaching $7.9 billion, despite facing challenges in the server segment. The company reported non-GAAP diluted net earnings per share of 49 cents, aligning with its outlook. HPE's server revenue surged by 30% year-over-year, although profitability was impacted due to aggressive pricing competition and inventory valuation issues.

The Intelligent Edge segment recorded a 2% quarter-over-quarter revenue increase, while hybrid cloud grew by 11% year-over-year. HPE's annual recurring revenue reached $2.1 billion, up 46% year-over-year, driven by AI and Intelligent Edge. The company plans to achieve at least $350 million in gross savings by fiscal 2027 through workforce reductions and attrition management. For fiscal 2025, HPE expects constant currency revenue growth of 7% to 11%, with revenue weighted towards the second half, and non-GAAP diluted net earnings per share ranging between $1.70 and $1.90.

What To Watch For In The Actual Q2 FY 2025 Earnings Report

AI Server Momentum and Profitability: The most critical aspect will be the continued demand for AI servers and any updates on chip availability. More importantly, investors will be looking for signs of margin improvement or a clearer roadmap for margin recovery in the AI server segment. Commentary on the "normalization" of AI inventory levels will be key.

HPE booked $1.6 billion in new AI system orders in Q1, with cumulative AI system orders reaching $8.3 billion. AI systems revenue for Q1 was $900 million.

Performance against Guidance: Whether HPE meets, beats, or misses its revenue and non-GAAP EPS guidance for Q2.

Hewlett Packard Enterprise delivered a 17% year-over-year revenue growth in Q1, marking the fourth consecutive quarter of improved year-over-year top-line growth. The server business grew revenue by 30% year-over-year, with hybrid cloud also showing strong performance.

HPE launched several new products, including the ProLiant Gen 12 server platform and new vertical solutions for the Intelligent Edge segment, demonstrating continued innovation.

Non-GAAP operating margin was 9.9%, down 160 basis points year-over-year and 120 basis points sequentially, primarily due to headwinds in gross margin from the server segment.

GreenLake ARR Growth: Continued strong growth in Annualized Revenue Run-Rate for its GreenLake platform indicates successful execution of its as-a-service strategy.

GreenLake remains a key differentiator, ending Q1 with more than 41,000 enterprises using HPE GreenLake Cloud and AIR surpassing $2 billion for the first time, up 46% year-over-year.

Intelligent Edge Performance: Any improvements or continued softness in this segment will be closely watched.

The Intelligent Edge segment recorded 2% quarter-over-quarter revenue growth, with double-digit year-over-year order growth across all key geographies and products, including campus switching.

Overall Segment Performance: Breakdown of revenue and profitability across Servers, Intelligent Edge, Hybrid Cloud, and Financial Services.

The server segment faced unexpected challenges, with operating margins falling below expectations at 8.1%, impacted by pricing strategy issues and increased competition.

Cash Flow: Improvement in cash flow from operations and free cash flow after a negative Q1.

Full-Year Fiscal 2025 Outlook Reaffirmation or Adjustment: HPE previously guided for full-year FY 2025 revenue growth of 7% to 11% (constant currency) and non-GAAP diluted EPS in the range of $1.70 to $1.90. Any changes to this full-year guidance will significantly impact investor sentiment.

HPE plans to reduce its employee base by 5% over the next 12 to 18 months, impacting approximately 2,500 positions as part of cost-saving measures.

Impact of Activist Investor Elliott Management: Elliott Management revealed a $1.5 billion stake in HPE in April 2025. While this happened after Q1, investors will be listening for any commentary or signs of strategic shifts that might result from this activist involvement, such as potential efforts to enhance cost efficiency, boost shareholder returns, or optimize assets.

The recent US tariff announcements and higher-than-normal AI inventory levels posed challenges. The impact of tariffs is expected to be more pronounced in Q2, affecting server margins.

Hewlett Packard Enterprise (HPE) Price Target

Based on 13 analysts from Tiger Brokers offering 12 month price targets for Hewlett Packard Enterprise in the last 3 months. The average price target is $19.05 with a high forecast of $24.11 and a low forecast of $15.00. The average price target represents a 7.93% change from the last price of $17.65.

Technical Analysis - Exponential Moving Average (EMA)

HPE continued to maintain positive momentum in RSI, but the price consolidate for quite a long time, one important note is the bears are in control as HPE share is trading below 200-day period, as we saw Dell raise its annual profit forecast on strong AI server demand as their Q1 AI orders reach $12.1 billion, surpassing fiscal 2025 shipments.

So we might expect an earnings surprise with strong AI server order.

Positive Reaction: A beat on revenue (especially if it comes in at the higher end of or above its guidance) and/or non-GAAP EPS, strong AI server order bookings, better-than-expected margin trends, and/or an upbeat reaffirmation of full-year guidance could lead to a positive stock reaction. Progress on integrating AI profitably will be crucial.

Negative Reaction: Missing revenue or EPS targets, continued significant margin pressure in AI servers without clear signs of recovery, weaker-than-expected GreenLake ARR growth, or a further reduction in full-year guidance would likely result in a negative stock price reaction.

Summary

HPE is navigating a transformative period driven by AI, and its Q2 FY 2025 earnings report will provide important insights into its execution and ability to capitalize on the robust demand for AI infrastructure while managing associated profitability challenges.

Appreciate if you could share your thoughts in the comment section whether you think HPE would be able to show results from theri execution and ability to capitalize on the robust demand for AI infrastructure.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.