Hewlett Packard Enterprise (NYSE: HPE) reported its fiscal second-quarter results on Tuesday, with revenue growing by 3% to $7.2 billion, beating estimates. The company’s server business received a boost from the availability of AI chips from Nvidia Corporation (NASDAQ: NVDA). Despite a 19% decline in earnings compared to the same quarter last year, HPE raised its full-year guidance.
Server revenue grew by 18% year-on-year to $3.9 billion, with AI systems revenue exceeding $900 million due to increased demand for AI servers. Dell Technologies Inc (NYSE: DELL) also reported strong sales of artificial intelligence systems, with revenue reaching $1.7 billion in its most recent quarter. Both HPE and Dell experienced margin impacts from the sales of AI servers.
HPE disclosed its AI systems revenue for the first time, noting that it more than doubled sequentially. CEO Antonio Neri attributed this growth to the company’s experience in designing and manufacturing AI systems at scale. The company benefited from Nvidia’s improved supply of H100 chips for its Enterprise servers, but saw a 19% decline in smart edge revenue to $1.1 billion.
For the current quarter, HPE expects sales between $7.4 billion and $7.8 billion, with adjusted earnings projected to range between 43 cents and 48 cents per share. Looking ahead to 2024, HPE raised its revenue growth outlook from stable 2% growth to a range of 1% to 3%. The company also increased its adjusted earnings guidance for the year.
Analysts like Simon Leopold from Raymond James noted HPE’s success in managing margin headwinds compared to its peers. As HPE and Dell continue to drive AI adoption and hardware sales, Nvidia remains a key player in this space. However, both companies will need to focus on profitability as they navigate the competitive landscape.
Overall, HPE’s focus on AI-driven growth has led to positive results in revenue, but profitability remains a challenge that the company and its competitors will need to address moving forward. This article originally appeared on Benzinga.com and is for informational purposes only.
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