Hewlett Packard Enterprise Company (HPE) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $7.2 billion, up 4% year-over-year and above guidance, driven by AI systems revenue more than doubling sequentially and strong order conversion.

• Cumulative AI systems orders totaled $4.6 billion, with enterprise AI customers nearly tripling year-over-year.

• Cost discipline and process simplification, including digitization and automation with AI, reduced operating expenses year-over-year.

• Net earnings for the quarter were $314 million, down 24.9% year-over-year; diluted EPS was $0.24, while non-GAAP diluted net EPS was $0.42, above guidance.

• Raised full-year revenue and non-GAAP EPS guidance due to robust AI momentum and execution.

Financial highlights

• Q2 revenue: $7.2 billion, up 4% year-over-year and 7% quarter-over-quarter in constant currency, exceeding guidance by $400 million.

• ARR grew 39% year-over-year to above $1.5 billion, with AI as the fastest growth component.

• Non-GAAP gross margin was 33.1%, down 310 basis points year-over-year and sequentially; GAAP gross margin was 33.0%.

• Free cash flow for Q2 was $610 million, up $322 million year-over-year; cash flow from operations was $1.1 billion.

• $214 million returned to shareholders via dividends and share repurchases.

Outlook and guidance

• Q3 2024 revenue guidance: $7.4–$7.8 billion; GAAP diluted net EPS: $0.29–$0.34; non-GAAP diluted net EPS: $0.43–$0.48.

• Fiscal 2024 constant currency revenue growth expected at 1%–3%; non-GAAP diluted net EPS guidance raised to $1.85–$1.95.

• Free cash flow for fiscal 2024 expected to be at least $1.9 billion, with stronger second-half performance anticipated.

• Management expects continued growth in recurring revenue and ARR through expansion of as-a-service offerings.

• Supply chain constraints are easing but higher-than-normal inventory levels are expected to persist due to longer cycle times for AI-related orders.