Hewlett Packard Enterprise tops profit estimates as AI order momentum continues

Hewlett Packard Enterprise (NYSE:) shares have rallied in early Wednesday trading after the company topped quarterly earnings estimates.

The IT company reported Q4 EPS of $0.52, $0.02 better than the analyst estimate of $0.50, while revenue for the quarter came in at $7.35 billion, down 7% YoY, and in line with the consensus estimate of $7.35 billion.

HPE said its strategic investments and innovation across the growth areas of Edge, Hybrid Cloud, and AI are resonating with customers, while its “steady execution” boosted its results. In addition, it sees promising indicators of continued demand in areas it is prioritizing, especially AI.

“The progress we’re making aligned to our edge-to-cloud strategy is evident in our top and bottom-line results,” said Jeremy Cox, senior vice president and interim CFO of Hewlett Packard Enterprise. “Given our disciplined execution and focus, we closed Q4 and fiscal year 2023 strong within an uneven IT market.”

Looking ahead, HPE sees Q1 2024 EPS from $0.42 to $0.50, versus the consensus of $0.47, with revenue from $6.9 billion to $7.3 billion, versus the consensus of $7.28 billion.

Hewlett Packard Enterprise sees FY2024 EPS between $1.82 and $2.02, versus the consensus of $1.93.

Reacting to the report, analysts at Morgan Stanley raised the firm’s price target on the stock to $16 from $15 per share, maintaining an Underweight rating. The analysts said HPE’s FQ4 results were “largely as expected, with encouraging signs for HPC/AI business.”

“We believe visibility on Intelligent Edge remains too low to get involved as we likely near the end of the worst of server/storage headwinds,” the analysts added.

Analysts at BofA lowered the HPE price target to $19 from $20, reiterating a Neutral rating on the stock. The analysts said the company’s AI order momentum continued, but there were “puts and takes in [the] rest of the portfolio.”

“AI orders saw a significant acceleration and HPE ended the year with their largest HPC & AI order book on record, driven by $3.6bn in company-wide APU orders. In F4Q23, Greenlake ARR of $1.3bn grew 39% y/y. Intelligent Edge (IE) revs grew +41% y/y (+40% y/y in CC) and segment OM was 29.5%. IE contributed 18% of total revenue and 47% of total company operating profit,” the analysts explained.