Hewlett Packard Enterprise Reports Q3 2024 Revenue Growth Driven by AI and Cloud

Hewlett Packard Enterprise Reports Q3 2024 Revenue Growth Driven by AI and Cloud

Analyst(s): Steven Dickens
Publication Date: September 12, 2024

Hewlett Packard Enterprise’s earnings reflect a successful pivot towards AI-driven solutions and hybrid cloud services, which have been at the core of its business strategy. The growing enterprise appetite for AI, alongside the company’s leading-edge cloud platform, contributed to solid revenue performance.

What is Covered in This Article:

  • AI solutions generated strong demand across sectors, driving hardware and software revenue.
  • GreenLake’s Annualized Revenue Run Rate (ARR) reached new heights, showcasing the growing shift towards as-a-service models.
  • Expansion in HPE’s AI and cloud capabilities indicates future growth potential, especially in data-heavy industries such as finance, healthcare, and manufacturing.

Hewlett Packard Enterprise Reports Q3 2024 Revenue Growth Driven by AI and Cloud

The News: Hewlett Packard Enterprise reported revenue of $7.3 billion for Q3 2024, a 3% year-over-year increase, driven primarily by strong demand for AI and cloud solutions. Net earnings were $400 million, or $0.33 per share, up from $360 million, or $0.30 per share, in the same period last year. Non-GAAP earnings per share came in at $0.51, reflecting steady profitability in its core segments.

Notably, HPE’s GreenLake cloud platform continues to attract enterprise customers seeking scalable, pay-per-use solutions. GreenLake’s ARR grew 30% year-over-year, now accounting for over $1.6 billion annually. The company also announced new AI-driven solutions and enhanced capabilities for hybrid cloud environments, which are expected to sustain its upward trajectory in the coming quarters.

Hewlett Packard Enterprise Reports Q3 2024 Revenue Growth Driven by AI and Cloud

Analyst Take: Hewlett Packard Enterprise (HPE) reported strong fiscal Q3 2024 results, showcasing the company’s resilience and strategic alignment with key industry trends such as AI adoption. Despite a complex macroeconomic environment, HPE demonstrated significant growth across key business segments, driven by the accelerating demand for AI infrastructure and cloud services. The company’s edge-to-cloud strategy and innovative AI offerings positioned it as a critical player in the rapidly evolving technology landscape.

For the third quarter of fiscal 2024, HPE reported revenues of $7.7 billion, reflecting a 10% increase from the prior-year period in actual dollars and constant currency. The company delivered diluted net earnings per share (EPS) of $0.38 on a GAAP basis, representing a 9% increase from the previous year and a remarkable 58% increase sequentially.

Non-GAAP diluted EPS stood at $0.50, a 2% improvement year-over-year and a 19% sequential rise. GAAP and non-GAAP EPS surpassed HPE’s guidance, demonstrating the company’s operational efficiency and ability to thrive despite external challenges.

HPE’s gross margins experienced a slight dip, with GAAP gross margins at 31.6%, a decrease of 420 basis points from the previous year. Non-GAAP gross margins were similarly affected, registering at 31.8%, down by 410 basis points year-over-year. The dip in margins, while notable, did not overshadow HPE’s solid financial performance, which was buoyed by its strategic focus on high-growth areas such as AI and cloud services.

Cash flow from operations for the quarter was $1.154 billion, down by $371 million from the same period last year. Free cash flow also declined, coming in at $669 million, a reduction of $286 million year-over-year. Despite these declines, HPE remained committed to returning capital to shareholders, providing $221 million in dividends and share repurchases during the quarter.

How AI Impacted HPE’s Earnings

Artificial intelligence has become a key driver of HPE’s growth, with the company making significant strides in the AI infrastructure market. AI-powered solutions have enhanced HPE’s technological offerings and substantially increased revenue in the third quarter. HPE’s AI system conversion was pivotal in driving the 10% revenue growth, positioning the company to capture a larger share of the burgeoning AI market.

HPE’s edge-to-cloud strategy has been instrumental in aligning its AI capabilities with customer needs. By focusing on delivering AI infrastructure, HPE is enabling organizations to process and analyze data at the edge, accelerating their AI workloads and reducing latency. This strategic focus on AI will continue propelling HPE’s revenue growth, mainly as more organizations invest in AI-driven solutions to gain a competitive edge. We covered HPE’s moves into AI focused solution design in our recent coverage, and this will be crucial to their continued success going forward.

The company’s AI initiatives are not limited to infrastructure. HPE’s investments in AI are also expected to shape the future of its product portfolio. As AI adoption continues to accelerate across industries, HPE is well-positioned to offer a comprehensive suite of AI-powered solutions, ranging from hardware to software and cloud-based services. The increasing demand for AI-driven applications and workloads will likely drive HPE’s growth in the coming quarters, solidifying its leadership position in the AI market.

Looking ahead, HPE’s AI strategy is expected to evolve further, with the company planning to expand its AI capabilities to meet the growing demand for AI-powered solutions. As organizations continue integrating AI into their operations, HPE’s AI infrastructure offerings will likely play a crucial role in helping them scale their AI initiatives. This presents a significant growth opportunity for HPE, as the company is uniquely positioned to deliver AI solutions that address the complex needs of modern enterprises.

AI, AI, and AI with HPE

HPE’s focus on AI is about capitalizing on current market trends and preparing for the future. The company’s AI strategy is expected to drive long-term growth by enabling organizations to unlock AI’s full potential. HPE’s AI offerings, which include high-performance computing (HPC) and machine learning solutions, are designed to support the most demanding AI workloads, providing customers with the infrastructure they need to scale their AI efforts.

One of the critical future impacts of AI on HPE is the expansion of its GreenLake platform. As more organizations adopt AI, there is a growing need for scalable, flexible, and secure cloud platforms that can handle AI workloads. HPE GreenLake, the company’s edge-to-cloud platform, is well-suited to meet this demand. By offering AI-as-a-service through GreenLake, HPE can provide customers with the flexibility to scale their AI initiatives while only paying for the resources they use. This consumption-based model is expected to drive increased adoption of HPE’s AI solutions, further boosting revenue.

Moreover, HPE’s commitment to responsible AI development positions it as a leader in the ethical deployment of AI technologies. As AI becomes more pervasive, data privacy, security, and bias issues become increasingly important. HPE actively addresses these concerns by developing AI solutions that prioritize transparency, fairness, and accountability. This focus on responsible AI is expected to enhance HPE’s reputation as a trusted provider of AI infrastructure, further strengthening its position in the market.

GreenLake ARR for the Quarter

HPE’s GreenLake platform has been a cornerstone of its growth strategy, particularly as the demand for cloud-based services continues to rise. In the third quarter of fiscal 2024, HPE reported an annualized revenue run-rate (ARR) of $1.7 billion for GreenLake, representing a 35% increase from the prior-year period in actual dollars and a 39% increase in constant currency. This growth underscores the strong demand for HPE’s edge-to-cloud platform, which allows customers to manage their workloads across hybrid and multi-cloud environments.

GreenLake’s ARR growth highlights the increasing adoption of HPE’s consumption-based services as more organizations shift towards a pay-as-you-go model for their IT infrastructure. The platform’s ability to deliver cloud-like agility while maintaining the security and control of on-premises infrastructure has resonated with customers, particularly in industries with strict regulatory requirements. As a result, GreenLake has become a key driver of HPE’s recurring revenue, contributing significantly to the company’s overall financial performance.

HPE’s continued investment in expanding GreenLake’s capabilities is expected to drive further growth in ARR. The platform’s integration with AI and machine learning technologies and its robust security features make it an attractive solution for organizations looking to modernize their IT infrastructure. Additionally, HPE’s strategic partnerships with leading cloud providers and technology companies are expected to further enhance GreenLake’s value proposition, driving increased adoption across various industries.

Looking Forward: An Optimistic Outlook for HPE

HPE’s Q3 2024 earnings showcase the company’s ongoing transformation into an AI and cloud solutions leader. AI’s growing contribution to revenue and GreenLake’s strong performance highlight the success of HPE’s pivot towards future-proof technologies.

The company’s solid growth in GreenLake ARR is a testament to its innovative approach to cloud services. This as-a-service model, complemented by AI, is creating a differentiated offering that continues to attract a broad range of enterprise customers. HPE’s continued investment in AI and cloud technology will likely sustain its momentum into 2025.

Moreover, the global surge in demand for AI infrastructure solutions is positioning HPE to capitalize on a long-term trend that will transform the enterprise IT landscape. As more organizations look to integrate AI-driven insights into their operations, HPE’s ability to deliver scalable and intelligent infrastructure positions it well for future growth.

In conclusion, HPE’s Q3 2024 results reflect a company meeting the market’s current needs and preparing for the future. With its focus on AI, edge computing, and cloud solutions like GreenLake, HPE is well-positioned to thrive in an increasingly digital, data-driven world.

See the complete HPE Q3 FY2024 earnings release on the HPE website.

Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses HPE’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

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Author Information

Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.

Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.

Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.

Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.

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