Highlights from HPEs Second Quarter Earnings Results

May 22, 2018 • Antonio Neri, President & CEO• Blog Post


  • HPE reported Q2 revenue of $7.5 billion, up 10% year-over-year, with solid revenue growth across all business segments
  • Raised FY18 non-GAAP EPS outlook to $1.40 to $1.50 from the previously provided outlook of $1.35 to $1.45

CEO Antonio Neri shares some of the key takeaways from HPE's second quarter earnings report

Today we reported our Q2 results and I'm very pleased with another strong quarter. We continued to execute well across all business segments while delivering on a number of strategic initiatives.

Revenue of $7.5 billion was up 10% from the prior year period. Given our strong execution, helped by a $0.01 tax benefit, we delivered non-GAAP EPS of $0.34, above our outlook range of $0.29 to $0.33.

Looking forward, as a result of our strong performance in Q2, as well as a continued benefit from a lower tax rate, we are raising our FY18 non-GAAP EPS outlook to $1.40 to $1.50 from our previously provided outlook of $1.35 to $1.45. Please take a look at our press release for the detailed financial results.

Beyond the facts and figures, here are some of the key takeaways from the quarter:

  1. Delivered strong performance across all business segments:

In Q2, we experienced solid revenue growth across each business segment. Intelligent Edge revenue was $710 million, up 17% year over year, with strength in both products and services. Hybrid IT revenue was $6 billion, up 7% year over year, with particular strength in high performance compute, storage, hyperconverged and composable infrastructure. We also saw strong customer traction from our newest HPE Pointnext offering called HPE GreenLake. And, HPE Financial Services also performed well in the quarter with revenue of $916 million, up 5% year over year, driven by strong growth in our asset management business.

  1. Began executing against $7 billion capital return plan

In Q2, we began executing against our $7 billion capital return plan, which we announced last quarter. We returned $1 billion to shareholders in the form of share repurchases and dividends. And, we announced that we are raising our dividend by approximately 50% starting in the current third quarter.

  1. Achieved significant HPE Next milestones and kicked off phase two

As a reminder, HPE Next is our company-wide initiative to re-architect HPE to deliver on our strategy and drive a new wave of shareholder value. It is all about simplification, execution and innovation.

Over the first half of this year, we have achieved some significant milestones across each of these areas. For example, we've reduced spans and layers between the CEO and the customer. We've significantly streamlined our sales structure, empowering the frontline to make key decisions. And, we've dramatically reduced SKUs and platforms across our volume and value segments, which simplifies our operations and makes us easier to work with.

Looking into the second half of the year, we will be concentrating our efforts on the next phase of the initiative, including building out our no-touch sales model for certain product segments and accelerating our IT transformation to better service customers and partners. The changes we are making through HPE Next will not only improve our cost structure, they will also give us a significant, long-term competitive advantage.

  1. Announced three acquisitions that will deliver exciting new technology to our customers and partners

In Q2, we continued to invest in innovation for our customers and partners, and this quarter we made three strategic acquisitions. For example, we strengthened our Intelligent Edge portfolio with the acquisition of Cape Networks. Cape expands Aruba's AI-powered networking capabilities with a sensor-based network assurance solution that improves network performance, reduces disruptions and significantly simplifies IT management for our customers. We also announced the acquisition of Plexxi. Plexxi provides innovative software-defined networking technology, which we plan to integrate into both SimpliVity and our composable infrastructure offerings. With Plexxi, we'll enable customers to move and manage their data more quickly and effectively and also significantly reduce capex and opex - by up to 50% in some cases. And, we also continued to strengthen our advisory capabilities, building on our acquisition of Cloud Technology Partners with the acquisition of RedPixie. RedPixie is a UK-based cloud consulting company, with deep Microsoft Azure expertise, which perfectly complements CTP's strong AWS relationship.

  1. Continued to win exciting new customer deals

Customers are responding well to the actions we're taking both from an operational and an innovation perspective. They believe in our strategy and the powerful portfolio of products and services we are building, and that confidence can be seen in some recent wins.

For example, in Q2, we won a major High Performance Compute deal with the US Department of Energy; Time Warner selected Aruba for their state-of-the-art Hudson Yards Smart Digital Workplace project in NYC; and, we announced a new supercomputer installation at Flemish university KU Leuven, one of the most innovative universities in the world.

Overall, I am very pleased with our performance in the first half of FY18. Looking ahead to the rest of the year, as we indicated last quarter, we expect the growth rate to moderate given tougher compares, lapping acquisitions and a smaller currency tailwind. While we see a more challenging second half, we've got great momentum and I'm confident that we will deliver on our annual FY18 outlook.

Forward Looking Disclosures

This post contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HPE may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, financial projections and any statements of the plans, strategies and objectives of management for future operations. Please review the cautions regarding these forward-looking statements in our earnings presentation here, as well as the descriptions of the risks underlying these forward-looking statements in HPE's Annual Report on Form 10-K for the fiscal year ended October 31, 2017.

Use of non-GAAP and adjusted financial information

This post contains non-GAAP financial measures. Please review the related information in our earnings presentation here for details on the use of these non-GAAP financial measures, definitions, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.