Hewlett Packard Enterprise (HPE) has a strategic focus on offering a variety of compute engines, particularly in HPC simulation machines due to acquisitions of SGI and Cray. Despite being the underdog in general-purpose servers, HPE competes with Dell and other vendors in the XPU supply chain decisions. Dell reported a significant increase in AI system sales in its recent quarter, with rising margins in both AI and non-AI servers. In comparison, HPE has also seen growth in AI server sales, but is facing challenges in profitability. Both companies need to navigate the competitive landscape driven by GPU allocations.
HPE’s financial performance shows a growth in AI server sales, even though profits in the server group have decreased. The company is focusing on GreenLake cloud-like infrastructure pricing to meet customer needs for controlling their infrastructure. GreenLake has seen an increase in customers and value of contracts, with a larger portion contributing to software and services revenue. HPE’s core systems business, including servers, switching, and storage, has shown growth, driven by AI servers, but operating profit has decreased.
Looking ahead, HPE is optimistic about its future prospects, expecting growth in AI systems, traditional servers, and GreenLake services. The company anticipates improved GPU supply for AI systems and higher margin services revenue to balance out the impact on gross margin. HPE’s third-quarter sales are projected to increase by 10 percent at the midpoint, driven by growth in servers and networking. However, the shift from Aruba networking to AI systems may impact margins.
Overall, HPE and Dell, along with other OEMs, are facing challenges in the AI server market, influenced by GPU allocations and profitability. The companies are striving to navigate the competitive landscape and drive sales while balancing costs and margins. As the market evolves, OEMs need to adapt to changing dynamics and explore alternatives to maintain profitability in the AI server business.
Article Source
https://www.nextplatform.com/2024/06/05/hpe-is-also-having-trouble-making-money-with-ai-servers/