Hewlett Packard Enterprise Co (HPE) reported strong financial results for the second quarter of 2024, with revenues reaching $7.2 billion, up 4% year over year and 7% quarter over quarter in constant currency. Non-GAAP Diluted Net EPS exceeded expectations at $0.42, above the upper end of the guidance range. Free cash flow exceeded $600 million, while income from AI systems more than doubled sequentially to over $900 million. AI system orders reached $4.6 billion in the quarter, with an Annualized Revenue Run Rate (ARR) growing by 39% year over year to exceed $1.5 billion.
Despite these positive figures, there were some challenges highlighted in the earnings report. Non-GAAP Gross Margin dropped by 310 basis points sequentially and year over year to 33.1%, while Non-GAAP operating margin decreased by 200 basis points sequentially and year over year to 9.5%. Server income saw a significant increase of 16% sequentially and 18% year over year to $3.9 billion, but hybrid cloud revenue was down 9% year over year.
HPE Financial Services Revenue increased by 1% year over year, with a funding volume of $1.7 billion. Cash Flow from Operations reached $1.1 billion, with $240 million returned to shareholders in the form of dividends and share buybacks. The company provided guidance for the third quarter, expecting revenue between $7,400 and $7,800 million, with GAAP Diluted Net EPS projected to be between $0.29 and $0.34.
Looking ahead to fiscal 2024, HPE expects revenue growth of 1% to 3% in constant currency, with Non-GAAP Diluted Net EPS guidance of $1.85 to $1.95. Free Cash Flow for fiscal year 2024 is expected to be at least $1.9 billion.
During the earnings call, it was noted that HPE exceeded expectations for non-GAAP revenue and diluted net earnings per share, driven by strong demand for AI systems. The company’s leadership in AI at scale and across the AI lifecycle continues to attract new customers, including partnerships with major players such as Microsoft and NVIDIA. However, challenges were also acknowledged, such as the decline in Intelligent Edge revenue and the challenging traditional storage market.
Overall, HPE remains confident in its ability to perform well in the second half of fiscal 2024, with continued focus on AI solutions, GreenLake growth, and strategic partnerships driving future success.
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