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Investing.com - Shares in Hewlett Packard Enterprise (NYSE:HPE) surged in premarket trading on Wednesday, rising more than 6% following better-than-expected second-quarter results and a robust forecast backed by strength across its key business units.
The enterprise IT giant posted adjusted earnings per share (EPS) of $0.38, outpacing the Wall Street consensus of $0.32, while revenue climbed 6% year-over-year to $7.63 billion.
CEO Antonio Neri credited discipline and innovation for the consistent growth, despite an uncertain macroeconomic climate. “We delivered a solid performance, achieving yet another quarter of year-over-year revenue growth with strength in each of our product segments,” Neri said in a statement.
HPE reported notable gains in its core divisions, led by a 13% jump in its hybrid cloud revenue to $1.5 billion, and a 6% increase in server revenue to $4.06 billion. Revenue at its Intelligent Edge division was also strong, up 7% year-over-year to $1.2 billion, propelled by growing enterprise demand for edge computing capabilities.
Despite the upbeat sales, margins remain under pressure, a concern that has lingered since Q1 in which aggressive pricing and inventory issues cut into Server profitability. Gross margin for the second quarter on an adjusted basis held steady at 29.4%, while unadjusted gross margin dropped 460 basis points year-over-year to 28.4%.
Executive Vice President and CFO Marie Myers emphasized operational efficiency and cost controls as pivotal in navigating market headwinds. “We are maintaining our focus on achieving efficiencies and streamlining operations across our businesses to position HPE for the future and deliver financial results aligned with our fiscal 2025 outlook,” Myers said.
HPE guided for third-quarter EPS of $0.40 to $0.45, ahead of the $0.42 consensus, and revenue between $8.2 billion and $8.5 billion, in line with forecasts. Full-year 2025 guidance was also raised, with adjusted EPS now expected to land between $1.78 and $1.90 compared to the prior $1.70 to $1.90 range.
The company remains focused on artificial intelligence as a growth driver, particularly through its server segment, which posted a 30% year-over-year revenue increase in the first quarter. While AI-related demand offers upside, investors continue to watch for improvement in margins and execution of HPE’s $350 million cost-cutting plan, which includes a 5% workforce reduction.
HPE’s GreenLake platform and financial services business will also be closely monitored, with revenue in the latter slipping slightly but returning higher operating margins. Despite recent challenges, the company’s upward guidance suggests confidence in the strategy’s durability as it seeks to deliver long-term shareholder value.
The figures come as media reports have suggested that hedge fund Elliott Investment Management has built a stake worth more than $1.5 billion in HPE -- making the activist investor one of the company’s biggest backers. Elliott also has plans to engage with management of the business, reports have said.
"We think HPE is poised to see sustained upside bias with or without an activist over next few quarters," analysts at Evercore ISI said in a note to clients.
(Scott Kanowsky contributed reporting.)