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HPE Revenue Hits $6.95B for Q3, Up 1% YoY, Beating Estimates
by Daniel Newman and Todd R. Weiss | September 1, 2022

The News: HPE revenue reached $6.95 billion for the third quarter of fiscal year 2022, up one percent from $6.9 billion for the same quarter one year ago, as the global technology vendor reported its latest earnings on August 30. The Q3 revenue just beat analyst consensus estimates of $6.97 billion for the quarter from Yahoo Finance. Read the full earnings Press Release on the HPE website.

HPE Revenue Hits $6.95B for Q3, Up 1% YoY, Beating Estimates

Analyst Take: HPE revenue results for Q3 arrived in line with expectations, giving the company a bit of breathing room as many tech companies in the tech space are continuing to report revenue and profit challenges amid a still roiling market.

Overall, HPE’s results are aided by the company’s low exposure to consumer markets, which are seeing more turmoil due to global inflation, lower demand, and other factors.

Here are HPE’s Q3 FY2022 earning results by the numbers:

  • Q3 FY2022 revenue of $6.95 billion, up one percent from $6.9 billion for the same quarter one year ago. The Q3 revenue just beat analyst consensus estimates of $6.97 billion for the quarter from Yahoo Finance.
  • Q3 FY2022 non-GAAP net earnings of $629 million, up one percent from $623 million one year ago.
  • Q3 FY2022 non-GAAP basic and diluted net earnings per share (EPS) of $0.48, which is up two percent from the $0.47 basic and diluted net EPS price from one year ago. The EPS met consensus estimates of $0.48 per share from analysts at Yahoo Finance.
  • Q3 FY2022 non-GAAP gross profit of $2.4 billion, which is up 0.8 percent from $2.39 billion in the same quarter one year ago.
  • Q3 FY2022 non-GAAP gross profit margin of 34.7 percent, which is unchanged from one year ago.
  • Q3 FY 2022 cash flow from operations of $1.3 billion, which is up by $124 million from a year ago, and free cash flow of $587 million, which HPE said is in line with normal seasonality.
  • An Annualized Revenue Run-Rate (ARR) of $858 million, which is up 22 percent from one year ago. HPE said it is “confident” in delivering on its recent guidance of an ARR of 35 percent to 45 percent compounded from FY2021 to FY2024.
  • HPE also announced that it recorded a $36 million pre-tax charge in Q3 related to its managed exit of its remaining business in Russia and Belarus due to the Russian invasion of Ukraine in February.

HPE’s latest quarterly results provide clear evidence that the company is continuing its pivot from requiring CapEx-heavy investments from customers as it has in the past to its maturing strategy of focusing on an ARR model. This smart transition is changing the ways that this mature and previously more cautious company is seeking to do business with its enterprise and other customers. Times are changing and HPE has been wisely adapting to meet those new customer demands. We believe that this is the right direction and strategy in today’s global marketplace.

HPE’s Sales Market Breakdown for Q3

For Q3, HPE again generally performed well, with growth in its Intelligent Edge and High Performance Computing and AI units. HPE revenue was down slightly in HPE’s Compute, Storage and Financial Services units. Here is the complete breakdown:

  • Intelligent Edge revenue totaled $941 million, up eight percent from $871 million one year ago.
  • High Performance Computing (HPC) and AI revenue was $830 million, up 12 percent from $740 million one year ago from the prior-year period in actual dollars and 15% when adjusted for currency, with 3.4% operating profit margin, compared to 3.8% from the prior-year period. HPE also reported that its HPC market share expanded to 39 percent and includes four of the global top 10 supercomputers.
  • HPE’s Compute unit saw its revenue hit $3 billion, which is down three percent from $3.1 billion one year ago.
  • HPE’s Storage unit saw its revenue total $1.15 billion, down two percent from $1.175 billion one year earlier.
  • The company’s Financial Services revenue hit $817 million, down three percent from $844 million one year ago.

HPE’s segment performance was notable, especially due to the ongoing tough market conditions being faced in the tech sector around the world by many companies.

At the same time, HPE beating or meeting analyst revenue and EPS estimates was positive news, particularly as many tech and consumer markets everywhere continue to be roiled by a tumultuous global macroeconomic environment which is continuing to see the effects of the lingering Covid-19 pandemic, the Russian war in Ukraine, supply chain issues, and other disruptions.

Yet despite the lingering effects of the pandemic and significant macroeconomic challenges, HPE continues to be well-positioned to take advantage of secular trends such as edge computing, hybrid cloud, multi-cloud, storage, HPC, AI, and other market segments.

A good part of that success, of course, is attributable to leadership. HPE President and CEO Antonio Neri, has wisely set the company’s path to future success by touting an ARR mantra as he molds the monolithic HPE into providing deeper as-a-service models to better serve customers that want to use them. We believe that this strategy of recurring revenue is the right move for HPE as it battles its competitors in the marketplace. Neri has said previously that this transition will take some time to complete – perhaps by the end of 2023 – but we continue to believe that it will be well worth the time and investments to make it happen.

HPE Provides Q4 Earnings Outlook

The edge-to-cloud vendor also provided HPE revenue and earnings guidance for Q4 and for the full fiscal year of 2022 as part of its Q3 FY2022 financial report.

For the fourth quarter of fiscal 2022, HPE said it expects non-GAAP diluted net EPS to be in the range of $0.52 to $0.60 per share.

For the full fiscal year of 2022, HPE said it expects non-GAAP diluted net EPS to be in the range of $1.96 to $2.04 per share, reflecting unfavorable currency exchanges and constrained supply environments.

HPE also provided fiscal full year 2022 free cash flow guidance to be in the range of $1.7 to $1.9 billion.

The company also reiterated its earlier estimate of full FY2022 revenue growth of three to four percent, adjusted for currency exchanges.

HPE Q3 Overview

Overall, Q3 2022 was a pretty good quarter for HPE, especially when viewed through the challenging global economic lens of 2022.

Every quarter, we seem to repeat our views from the prior quarter, echoing our messages of solid earnings from HPE amid the recent supply chain and other challenges. HPE is continuing to make smart and bold moves to keep itself ahead of the tough environment and we are continuing to see reasonable growth spread across its business units, even with the minor revenue disappointments in the compute, storage, and financial services areas.

It will be interesting to watch HPE’s ongoing performance through 2022 and into 2023 as Neri and his executive team continue to execute their “everything-as-a-Service” (XaaS) model and drive more dependable and lasting ARR revenue for the long term.

Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.

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Image Credit: Barrons

About the Authors

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio

Todd is an experienced Analyst with over 21 years of experience as a technology journalist in a wide variety of tech focused areas.