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HP Enterprise Beats Earnings. The CEO Remains Bullish Despite Supply Challenges.


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Shares of HP Enterprise are up 62% over the last 12 months.


Courtesy of HPE


Hewlett Packard Enterprise

beat earnings expectations during its fiscal third quarter, though sales came in a bit below expectations. The stock was rising slightly in premarket trading Friday.

CEO Antonio Neri told Barron’s that the company delivered record-breaking gross margins despite challenges like supply constraints and inflationary costs.


HP

Enterprise (ticker: HPE), the computing infrastructure firm that split from computer and printer specialist HP (HP) in 2015, reported fiscal third-quarter adjusted earnings of $623 million, or 47 cents a share. That topped consensus estimates of 42 cents a share, according to FactSet. On the flip side, sales of $6.9 billion came in just short of the consensus estimate of $6.94 billion.

HP Enterprise stock bounced up and down in extended trading after the earnings release. It was up 0.19% in premarket trading Friday to $15.42. Shares have risen 30% in 2021 and 62% over the past 12 months.

“This quarter was really marked by strong orders from customers, strong profitability, and record breaking free cash flow,” Neri said. “We have a unique strategy, a unique portfolio from edge to cloud that is resonating with our customers.”

Neri noted that the company’s adjusted gross margins of 34.7% was the highest the company has achieved in a quarter. He pointed to steps mitigating costs amid supply challenges. He also touted engineering capabilities that allow HP Enterprise to redesign and swap components when needed.

The company raised its outlook for adjusted earnings in the current fiscal year to a range from $1.88 and $1.96 a share, up from a prior range of $1.82 to $1.94.

“Even with the supply tightness that we’ve seen, we are very confident about our ability to execute in [the fiscal fourth quarter], and then the beginning of 2022,” Neri said. “And that’s why we have raised our guidance again.”

Asked about information technology spending amid some efforts by companies to return to the office, Neri said he’s not only bullish but doesn’t expect the Delta variant of Covid-19 to impact such spending.

“I think customers have now adjusted to this new way to work,” he said. “And as offices reopen, I think that will be an accelerator of that demand. But right now, even in a hybrid environment, or even companies that have no return at all to the office, the demand is very, very solid.”

Revenue in HP Enterprise’s core compute segment was down 9% from 2020, to $3.1 billion, but up from just under $3 billion in the fiscal second quarter. High Performance Computing and Mission Critical Systems saw sales jump 11% to $741 million. Sales in Intelligent Edge, which provides edge-computing systems, jumped 27% year-over-year to $867 million, accelerating from 20% growth in the April quarter. Storage revenue was up 4% to $1.2 billion.

Write to Connor Smith at connor.smith@barrons.com