Highlights from HPE's third quarter earnings results

August 28, 2018 • Blog Post • Antonio Neri, President and Chief Executive Officer


  • HPE reported Q3 revenue of $7.8 billion, up 4% year-over-year, with solid results across all key financial metrics
  • Announced new CFO Tarek Robbiati

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


Today we reported our Q3 results. We had another strong quarter, delivering solid results across all key financial metrics. We grew revenues and we significantly expanded operating margins. We also delivered EPS well above our prior quarter outlook and generated strong cash flow.


Revenue of $7.8 billion was up 4% from the prior year, supported by strong performance across all our business groups. We delivered non-GAAP EPS of $0.44, double from the prior year and well above our outlook range of $0.35 to $0.39.


We are in a great position to finish out the year strong and we are making smart, critical investments that will contribute to our success in FY19 and beyond. Please take a look at the Q318 press release for the detailed financial results. Key takeaways include:


Delivered strong performance across each of our business segments


In Q3 we experienced solid revenue growth of $7.8 billion, up 4% year over year. Intelligent Edge revenue continues to produce strong results, with particular strength in our campus segment driven by our secured cloud offerings. Hybrid IT revenue was $6.2 billion, up 3% year over year, underscoring that we have the right strategy and are executing well. We saw particular strength in high performance compute, hyperconverged and composable infrastructure. We also saw growth in our HPE Pointnext Operational services business, largely due to strong improvement in services intensity, high growth in HPE GreenLake, and some larger deals. HPE Financial Services had another strong quarter, delivering revenue of $928 million, up 3% year over year, with strength in our asset management business, making this business both consistent and predictable as customers continue to look for flexible, alternative ways to consume and finance their technology needs.


Continued to execute against $7 billion capital return plan


In Q2 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. This quarter we continue to build on this as we returned $1.1 billion to shareholders in the form of share repurchases and dividends, and raised the quarterly cash dividend per share by 50%.


Saw continued strong performance and exciting new customer deals in the Intelligent Edge


In Q3, our Intelligent Edge portfolio continued its strong performance, with revenue of $785 million, up 10% year-over-year. During the quarter, Aruba won significant deals with customers including: Caesars Entertainment, which will roll out Aruba WLAN across their large public venues; and the University of Arkansas, where Aruba will completely replace the existing networking system, including software and security. We are also seeing strong traction with our Edgeline solutions in industrial IoT applications. For example, a leading auto manufacturer is deploying these systems that pioneer the convergence of operational technologies and enterprise class IT functions all in a single solution. This new integration allows customers to reduce cost in their manufacturing operations while increasing production rates.


We believe the rise of the Intelligent Edge is the next great market transition coming, and a significant long-term growth opportunity for HPE. That is why we recently announced that we plan to invest $4 billion in this segment over the next 4 years. We see a world that is edge-centric, cloud-enabled and data-driven.


Announced new CFO Tarek Robbiati


After four and a half years at the company during a period of incredible transformation, Tim Stonesifer is stepping down at the end of October 2018, which is the end of our fiscal year. Tim has played a significant role in the turnaround of HP, the creation of HPE, our two spin-merges, and the completion of 11 acquisitions. We are very well positioned for future success because of Tims leadership and are grateful for his contributions to HPE.


Effective Sept. 17, Tarek Robbiati will join HPE as our chief financial officer. Tarek is a seasoned executive with significant global experience managing business and financial strategy and operations at public and private companies within the telecommunications, media, technology and financial services industries. He most recently served as CFO at Sprint Corp. HPE will benefit from Tareks financial expertise, his customer-centric mindset and his industry segment knowledge.


Continued progress through HPE Next


During the quarter, our efforts through HPE Next continued to pay off. We have significantly simplified our portfolio by reducing our compute platforms by nearly 60% and options by nearly 80%, bringing our total live SKUs down by about 75%. In our supply chain, we are consolidating our manufacturing sites and have already reduced the locations by more than half. We completed a final wave of transitions to partner-led models in 11 countries in Europe Middle East and Africa, enabling us to continue serving these markets with our valued partners while we focus on improving our execution in our other markets. These simplifications are driving more focus and lowering costs.


HPE Next is all about simplification, execution and innovation, and we also continued to invest in innovation during Q3, with an emphasis in Intelligent Edge, Software-Defined, Artificial Intelligence, and cloud-enabled technologies.


Overall, I am pleased with our performance in the quarter. We continued to execute against our strategy, which is clearly resonating with customers.


I am excited about the company's position. And, against a strong market backdrop, we are well on track to meet or exceed our full year financial commitments as we continue to focus on delivering for our customers and partners, and driving significant shareholder value.


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 HPEs 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.


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