Hewlett Packard Enterprise (HPE) shares surged 15.3% in extended trading after reporting strong second-quarter results for fiscal 2024. The company exceeded earnings expectations, driven by sales growth in AI servers. Optimistic guidance for the third quarter and full fiscal year further boosted investor confidence. Despite a 19% decline in non-GAAP earnings year-over-year, HPE’s stock has performed well, up 16.5% year-to-date.
Revenue for the second quarter reached $7.2 billion, up 3% from the prior year and 7% sequentially, with server sales showing significant growth. The server segment saw sales increase 18%, driven by demand for AI servers. However, the operating profit margin for this segment decreased due to aggressive pricing in the server market.
The Intelligent Edge division revenue dropped 19% year-over-year due to weak demand environment. Operating margin also contracted, reflecting lower revenue and business changes. In contrast, the Hybrid Cloud division saw a 1% sequential increase in sales, driven by cross-selling benefits.
Financial Services segment revenue increased 1% year-over-year, with an expanded operating margin. HPE’s balance sheet showed $2.68 billion in cash and cash equivalents at the end of the second quarter. The company generated operating cash flow and free cash flow of $1.09 billion and $610 million, respectively, during the quarter.
HPE provided guidance for the third quarter and updated its outlook for fiscal 2024, expecting revenue between $7.4 billion and $7.8 billion for the third quarter. The company revised non-GAAP revenue and EPS guidance for fiscal 2024, with a growth rate of 1-3% and non-GAAP EPS in the range of $1.85-$1.95. HPE anticipates GAAP and non-GAAP operating profit growth for the year, with free cash flow expected to be at least $1.9 billion.
HPE currently holds a Zacks Rank #3 (Hold). Some top-ranked stocks in the technology sector include Dropbox, Tyler Technologies, and Datadog, each with a Zacks Rank #1 (Strong Buy). These companies have shown positive earnings estimates and growth potential. Dropbox, Tyler Technologies, and Datadog have all seen increases in consensus estimates for their earnings, indicating strong performance and growth prospects.
In conclusion, HPE’s strong second-quarter performance, coupled with positive guidance for the future, has bolstered investor confidence in the company’s prospects. With a focus on AI servers and cloud computing, HPE is well-positioned for future growth and success in the technology industry.
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