Hewlett Packard Enterprise (HPE) reported its fiscal fourth-quarter earnings, showing slower growth in its artificial intelligence-related systems. Despite this, analysts expect long-term benefits for the company’s stock from increased data center servers processing AI workloads.
The maker of computer servers and networking equipment reported a 15% increase in revenue to $8.5 billion, with adjusted earnings rising 12% to 58 cents per share. However, the company’s AI server revenue fell short of expectations, coming in at $1.5 billion, up 16% from the previous quarter.
Analysts attribute this slowdown to increased competition from Dell Technologies and expect HPE to benefit from a recovery in IT spending, as well as strength in hybrid cloud and higher AI server margins. Bank of America analyst Wamsi Mohan noted that HPE is well-positioned to capitalize on these trends, citing the company’s acquisition of Juniper Networks.
Morgan Stanley analyst Meta Marshall upgraded HPE stock to “over-weight” prior to the earnings report, citing potential upside from the Juniper deal and improved networking performance. The company expects the deal to be earnings- and free-cash-flow-accretive in the first year post-close.
Shares of HPE rose 1% on the market today, following the earnings report, which also included a revenue growth forecast of “mid-teens” for the current quarter ending in January.
Source: https://www.investors.com/news/technology/hpe-stock-hpe-earnings-news-q3-2024