Second Quarter Fiscal 2023 Financial Results                                

• Revenue: $7.0 billion, up 4% from the prior-year period and 9% in constant currency ⁽¹⁾ 
   
• Annualized revenue run-rate (“ARR”)⁽²⁾: $1.1 billion, up 35% from the prior-year period and 38% in constant currency⁽¹⁾
   
• Gross margins:
  • GAAP of 36.0%, an all-time record for the company, up 360 basis points from the prior-year period and up 200 basis points sequentially
     
  • Non-GAAP of 36.2%, also an all-time record, up 200 basis points from the prior-year period and sequentially
     
• Diluted net earnings per share (“EPS”):
  • GAAP of $0.32, up 68% from the prior-year period and down 16% sequentially, above the midpoint of our guidance range of $0.27 to $0.35
     
  • Non-GAAP of $0.52, up 18% from the prior-year period and down 17% sequentially, at the top of our guidance range of $0.44-$0.52
     
• Cash flow from operations: $889 million, an increase of $510 million from the prior-year period
   
• Free cash flow⁽³⁾: $288 million, up $499 million from the prior-year period
   
• Capital returns to shareholders: $261 million in the form of dividends and share repurchases

Outlook

• Revenue: Estimates Q3 fiscal 2023 revenue to be in the range of $6.7 billion to $7.2 billion, and fiscal 2023 revenue growth to be in the range of 4%-6% in constant currency⁽¹⁾
   
• ARR⁽²⁾: Reiterates our 2022 HPE Securities Analyst Meeting ARR guidance of 35%-45% Compounded Annual Growth Rate from fiscal 2022 to fiscal 2025
   
• Diluted net EPS:
  • Estimates Q3 fiscal 2023 GAAP diluted net EPS to be in the range of $0.34 to $0.38 and non-GAAP diluted net EPS to be in the range of $0.44 to $0.48
     
  • Raises guidance for fiscal 2023 GAAP diluted net EPS to be in the range of $1.42 to $1.50 and non-GAAP diluted net EPS to be in the range of $2.06 to $2.14
     
• GAAP operating profit: Targets fiscal 2023 GAAP operating profit growth to be in the range of 180%-184%
   
• Non-GAAP operating profit⁽⁴⁾: Raises fiscal 2023 non-GAAP operating profit growth to be in the range of 6%-7%
   
• Free cash flow⁽³⁾⁽⁵⁾: Reiterates guidance of $1.9 billion to $2.1 billion

Portfolio mix shift drives revenue, margin and ARR growth; raising operating profit and EPS guidance for the full year

HOUSTON – May 30, 2023 – Hewlett Packard Enterprise (NYSE: HPE) today announced financial results for the second quarter ended April 30, 2023.

“Building on a great start to the fiscal year, HPE grew revenue, increased the contribution of recurring revenue through the HPE GreenLake edge-to-cloud platform, and delivered exceptional profitability to generate a strong second quarter performance,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “Our shift to a higher-margin portfolio mix led by the Intelligent Edge segment, and the strong demand for our AI offering, further strengthen the investment opportunity for our shareholders.”

“We are very pleased that the progress we are making against our strategy continues to deliver on both the top and bottom lines,” said Tarek Robbiati, executive vice president and CFO of Hewlett Packard Enterprise. “These results demonstrate that our strategy to pivot our portfolio to higher-growth, higher-margin areas is working – and that we are operating with discipline.”

Second Quarter Fiscal 2023 Segment Results
 

• Intelligent Edge revenue was $1.3 billion, up 50% from the prior-year period in actual dollars and 56% in constant currency⁽¹⁾, with 26.9% operating profit margin, compared to 12.6% in the prior-year period. The business exceeded the Rule of 40 for a second consecutive quarter.
   
• High Performance Computing & Artificial Intelligence (“HPC & AI”) revenue was $840 million, up 18% from the prior-year period in actual dollars and 22% in constant currency⁽¹⁾, with (0.2)% operating profit margin, compared to (5.6)% from the prior-year period.
   
• Compute revenue was $2.8 billion, down 8% from the prior-year period in actual dollars and 3% in constant currency⁽¹⁾, with 15.2% operating profit margin, compared to 14.1% from the prior-year period.
   
• Storage revenue was $1.0 billion, down 3% from the prior-year period in actual dollars and up 2% in constant currency⁽¹⁾, with 7.9% operating profit margin, compared to 11.8% from the prior-year period. HPE Alletra revenue grew triple digits from the prior-year period.
   
• Financial Services revenue was $858 million, up 4% from the prior-year period in actual dollars and up 7% in constant currency⁽¹⁾, with 9.8% operating profit margin, compared to 12.6% from the prior-year period. Net portfolio assets of $13.3 billion, up 5% from the prior-year period in actual dollars and in constant currency⁽¹⁾. The business delivered return on equity of 16.5%, down 3.9 points from the prior-year period.

Dividend

The HPE Board of Directors declared a regular cash dividend of $0.12 per share on the company’s common stock, payable on July 14, 2023, to stockholders of record as of the close of business on June 15, 2023.

Fiscal 2023 Third Quarter Outlook

HPE estimates revenue to be in the range of $6.7 billion to $7.2 billion. HPE estimates GAAP diluted net EPS to be in the range of $0.34 to $0.38 and non-GAAP diluted net EPS to be in the range of $0.44 to $0.48. Fiscal 2023 third quarter non-GAAP diluted net EPS estimates exclude after-tax adjustments of $0.10 per diluted share, primarily related to, stock-based compensation expense, transformation costs and amortization of intangible assets.

Fiscal 2023 Outlook

HPE estimates fiscal 2023 revenue growth to be in the range of 4%-6% in constant currency⁽¹⁾, and targets fiscal 2023 GAAP operating profit growth to be in the range of 180%-184% and non-GAAP operating profit⁽⁴⁾ growth to be in the range of 6%-7%. HPE raises GAAP diluted net EPS to be in the range of $1.42 and $1.50 and non-GAAP diluted net EPS to be in the range of $2.06 and $2.14. Fiscal 2023 non-GAAP diluted net EPS estimates exclude after-tax adjustments of $0.64 per diluted share, primarily related to stock-based compensation expense, amortization of intangible assets, and transformation costs.

Fiscal 2023 Free Cash Flow ⁽³⁾⁽⁵⁾

Reiterates guidance of $1.9 billion to $2.1 billion.

Fiscal 2023 Capital Returns to Shareholders

Returning approximately 60% of free cash flow to shareholders in dividends and share repurchases.

Download the Q2 FY23 earnings infographic here.

H3C Technologies Co., Limited Update

HPE, through its relevant subsidiaries, has entered into a Put Share Purchase Agreement with Unisplendour International Technology Limited (“UNIS”) governing the sale of shares of H3C Technologies Co., Limited (“H3C”) held by HPE, through its relevant subsidiaries, which represent 49% of the total issued share capital of H3C.  This follows HPE’s decision in December 2022 to exercise an option to put its holdings in H3C to UNIS. Under the Put Share Purchase Agreement, UNIS will purchase all of HPE’s shares in H3C for a total of U.S. $3.5 billion in cash. The disposition remains subject to obtaining required regulatory approvals and completion of certain conditions necessary for closing. The parties anticipate that the transaction will close in the next 6 months to 12 months, however this timeline could be extended pursuant to the terms of the Put Share Purchase Agreement.

In addition, HPE has negotiated the terms of a new go-forward Strategic Sales Agreement to be entered into with H3C that covers direct sales, service and reseller arrangements between the companies. HPE is firmly committed to serving customers and continuing to do business in China through both direct sales and our partner H3C.

¹ A description of HPE’s use of non-GAAP financial information is provided below under “Use of non-GAAP financial information and key performance metrics.”

² Annualized Revenue Run-Rate (“ARR”) is a financial metric used to assess the growth of the Consumption Services (“CS”) offerings. ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-Service, software consumption revenue, and other as-a-Service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric. ARR should be viewed independently of net revenue and is not intended to be combined with it.

³ Free cash flow represents cash flow from operations, less net capital expenditures (investments in property, plant & equipment (“PP&E”) less proceeds from the sale of PP&E) and adjusted for the effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash.

⁴ Non-GAAP operating profit excludes costs of approximately $1.0 billion primarily related to stock-based compensation, amortization of intangible assets and transformation costs.

⁵ Hewlett Packard Enterprise provides certain guidance on a non-GAAP basis, as the Company cannot predict some elements that are included in reported GAAP results. Refer to the discussion of non-GAAP financial measures below for more information.