Hewlett Packard Enterprise Company (HPE) Q1 2025 earnings summary

Executive summary

• Revenue reached $7.9 billion, up 17% year-over-year, marking the fourth consecutive quarter of growth and exceeding guidance; ARR grew 46% to $2.1 billion.

• Strong performance in servers (up 30% YoY) and Hybrid Cloud (up 11% YoY); AI systems revenue was $900 million, with $1.6 billion in new AI system orders and a $3.1 billion AI backlog.

• Non-GAAP diluted net EPS was $0.49, GAAP EPS was $0.44, both in line or above guidance; net earnings rose 62% YoY.

• Announced a 5% workforce reduction (~2,500 positions) and a new cost reduction program targeting $350 million in gross savings by FY27.

• DOJ lawsuit seeks to block Juniper Networks acquisition; trial set for July 2025, but company expects to close by end of FY25.

Financial highlights

• Q1 revenue: $7.9 billion, up 17% YoY; annual recurring revenue: $2.1 billion, up 46% YoY.

• Non-GAAP gross margin: 29.4%, down 680 bps YoY; GAAP gross margin: 29.2%, down 720 bps YoY.

• Non-GAAP operating margin: 9.9%, down 1.6 pts YoY; operating profit margin: 5.5%, down from 7.8% YoY.

• Free cash flow: -$877 million, reflecting normal seasonality and higher inventory.

• Returned $223 million to shareholders via dividends and share repurchases.

Outlook and guidance

• Fiscal 2025 revenue growth expected at 7%-11% constant currency, weighted to the second half.

• Full-year non-GAAP operating margin expected around 9%, with gross margin below 30%.

• GAAP EPS guidance: $1.15-$1.35; non-GAAP EPS: $1.70-$1.90; free cash flow for FY25 expected at ~$1 billion.

• Q2 revenue guidance: $7.2-$7.6 billion; Q2 will be the trough for server operating margin.

• Non-GAAP EPS guidance excludes ~$0.55 per share in after-tax adjustments for cost reduction, stock-based compensation, acquisitions, and H3C divestiture.