Financial Results of HPE Q1 2022 - Rise in As-A-Service Demands

HPE has announced the financial results for the first quarter, ended January 31, 2022.

“The quarter was characterised by robust customer demand and profitability, demonstrating the strength of our differentiated edge-to-cloud strategy and portfolio innovation,” said Antonio Neri, President and CEO of Hewlett Packard Enterprise. “It is clear from strong customer feedback and momentum across our businesses that we are increasingly well positioned to capitalise on the significant mega trends through our HPE GreenLake platform.”

Q1 2022 Financial Highlights                                

• Orders: Strong customer demand drives order growth up 20% from the prior year period, the third consecutive quarter of more than 20% order growth
  • As-a-Service orders increased 136% from the prior year period
    
• Revenue: $7.0 billion, up 2% from the prior-year period and in-line with our Q1 outlook

• Gross margins drive improved quality of earnings despite ongoing supply chain constraints
  • GAAP of 33.7%, up 80 basis points sequentially and 20 basis points from the prior year period

  • Non-GAAP of 33.9%, up 90 basis points sequentially and 20 basis points from the prior year period
    
• Diluted net earnings per share (“EPS”):
  • GAAP of $0.39, above the previously provided outlook of $0.19 to $0.27 per share

  • Non-GAAP of $0.53, above the previously provided outlook of $0.42 to $0.50 per share
    
• Cash flow from operations of ($76) million and free cash flow of ($577) million, reflecting normal seasonality and strategic inventory actions due to strong customer demand

Segment Results

• Intelligent Edge revenue was $901 million, up 11% from the prior-year period in actual dollars and when adjusted for currency, with 17.4% operating profit margin, compared to 19.0% in the prior-year period. Aruba Services revenue was up double-digits from the prior-year period and Intelligent Edge as-a-Service ARR³ was up strong double-digits from the prior-year period.

• High Performance Computing & Artificial Intelligence (“HPC & AI”) revenue was $790 million, up 4% from the prior-year period in actual dollars and when adjusted for currency, with (0.9%) operating profit margin, compared to 5.7% from the prior-year period. The slight operating loss was driven by delayed customer acceptances and supply chain constraints.  We remain on track to exceed the expected 11% market CAGR from FY21-24.

• Compute revenue was $3.0 billion, up 1% from the prior-year period or flat when adjusted for currency, with 13.8% operating profit margin, compared to 11.4% from the prior-year period.  Margin expansion was driven by strategic pricing actions more than offsetting rising input costs.

• Storage revenue was $1.2 billion, down 3% from the prior-year period in actual dollars and when adjusted for currency, with 14.5% operating profit margin, compared to 19.6% from the prior-year period reflecting supply chain constraints, particularly in HPE-owned IP offerings.

• Financial Services revenue was $842 million, down 2% from the prior-year period or 1% when adjusted for currency, with 12.4% operating profit margin, compared to 9.8% from the prior-year period. Net portfolio assets of approximately $13.0 billion, down 3% from the prior-year period or flat when adjusted for currency. The business delivered return on equity of 19.7%, up 3.2 points from the prior-year period.

Net revenue of $7.0 billion, down 5% sequentially and up 2% from the prior-year period which is in-line with normal sequential seasonality was reported by HPE.