Hewlett Packard Enterprise’s first quarter results reflected a mix of headwinds and operational improvements across its core segments, as management targeted execution issues in its server business and capitalized on expanding demand for AI-driven infrastructure. CEO Antonio Neri highlighted that the company “addressed the operational challenges we experienced in our service segment last quarter,” referencing the implementation of new pricing analytics and increased discount scrutiny. Growth was led by higher AI system revenue, improved performance in the Intelligent Edge segment, and robust adoption of the hybrid cloud platforms, particularly the HPE Alletra MP storage transition and GreenLake cloud services. CFO Marie Myers noted that the company also made significant progress with its cost reduction program, which included workforce reductions and organizational streamlining.
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Hewlett Packard Enterprise (HPE) Q1 CY2025 Highlights:
- Revenue: $7.63 billion vs analyst estimates of $7.46 billion (5.9% year-on-year growth, 2.3% beat)
- Adjusted EPS: $0.38 vs analyst estimates of $0.33 (16.3% beat)
- Adjusted EBITDA: $1.19 billion vs analyst estimates of $1.14 billion (15.6% margin, 4.3% beat)
- Revenue Guidance for Q2 CY2025 is $8.35 billion at the midpoint, above analyst estimates of $8.18 billion
- Management raised its full-year Adjusted EPS guidance to $1.84 at the midpoint, a 2.2% increase
- Operating Margin: -14.5%, down from 5.9% in the same quarter last year
- Annual Recurring Revenue: $2.23 billion at quarter end, up 45.5% year on year
- Market Capitalization: $23.37 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Hewlett Packard Enterprise’s Q1 Earnings Call
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Amit Daryanani (Evercore): Asked how server margins will reach 10% by year-end and the impact of the Juniper Networks deal. Management described targeted pricing, discount, and inventory actions and reiterated the Juniper acquisition as the preferred value driver, with alternatives considered if it does not close.
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Tim Long (Barclays): Inquired about the drivers of the stronger pipeline, particularly in AI. Neri highlighted broad-based strength across AI, hybrid cloud, and networking, with particular momentum in enterprise and sovereign AI deployments.
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Meta Marshall (Morgan Stanley): Requested details on where AI server traction is strongest and the path to improving storage margins. Neri cited varying demand across customer segments and emphasized that storage margins should improve by year-end due to product mix and subscription growth.
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Victor Chiu (Raymond James): Asked about demand for NVIDIA Blackwell-based AI servers and inventory optimization. Neri explained that prepayment models mitigate inventory risk and that older inventory exposure is now much lower.
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Michael Ng (Goldman Sachs): Queried about trends in federal and education spending and the timing of AI revenue. Management said federal pipeline remains solid despite temporary pauses and that AI revenue acceleration was due to improved customer deployment readiness, not component constraints.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the pace of server margin recovery and execution on cost reductions, (2) sustained growth in AI systems and hybrid cloud platforms as new product launches roll out, and (3) the closing and integration of the Juniper Networks acquisition. Other important indicators include annual recurring revenue expansion and signs of stabilization in the networking and Intelligent Edge segments.
Hewlett Packard Enterprise currently trades at $17.99, up from $17.67 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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