Hewlett Packard Enterprise Reports Solid Q2 Results As Expansion in AI and Hybrid Cloud Drives Growth
Highlights
- Q2 revenue: $7.6 billion (+7% YoY)
- Non-GAAP diluted net earnings per share: $0.38 (above guidance)
- AI system orders: $1.1 billion (converted over $1 billion to revenue)
- GreenLake annualized revenue run rate: $2.2 billion (+47% YoY)
- Hybrid cloud revenue: $1.5 billion (+15% YoY)
- Non-GAAP gross margin: 29.4% (down 370 basis points YoY)
- GAAP diluted net loss per share: $0.82 (below guidance)
- Free cash flow: -$847 million
Hewlett Packard Enterprise Co. (HPE) reported robust results in its fiscal second quarter of 2025, presenting a 7% growth in revenue year-over-year which reached $7.6 billion, surpassing the high end of its previously issued guidance. This growth was largely spurred by advancements in AI system orders and continued strength in their hybrid cloud offerings.
Strong Performance Across Key Segments
HPE achieved significant revenue growth across every product segment, highlighted by a notable increase in its AI systems segment. The company converted over $1 billion of AI system orders into revenue, marking a considerable leap from the previous quarter and reinforcing its strategic focus on AI as a key growth driver.
HPE's hybrid cloud segment experienced a third consecutive quarter of double-digit growth, with revenue climbing to $1.5 billion, a 15% year-over-year increase. Similarly, the GreenLake cloud services reported a towering 47% increase in annualized revenue run rate, reaching $2.2 billion, reflecting healthy adoption and expansion of its hybrid cloud services.
Margin Challenges Persist
However, the company also faced some headwinds, particularly in its gross margin performance. Non-GAAP gross margin declined by 370 basis points year-over-year to 29.4%. Furthermore, despite solid top-line growth, HPE registered a GAAP diluted net loss per share of $0.82 due to a non-cash goodwill impairment charge, falling short of its earnings guidance.
While free cash flow registered a negative $847 million, slightly better than expectations due to improvements in inventory management and higher-than-anticipated net earnings, the broader cash flow narrative reflects ongoing challenges in managing operational costs and inventory levels.
Conclusion
While Hewlett Packard Enterprise's fiscal Q2 results showcased commendable top-line growth driven by strategic advancements in AI and hybrid cloud segments, margin pressures and cash flow dynamics highlight areas needing further strategic focus. Nonetheless, the company's elevated revenue performance and robust order pipeline point toward continued capitalizing on technology trends in AI and hybrid cloud domains.