Hewlett Packard Enterprise (HPE) is as close as you’ll come to a business firing on all cylinders, based on its most recent quarterly performance and forward-looking guidance.
HPE’s GreenLake hybrid cloud technology is central to that performance. Strong customer uptake shows the priority customers are giving to hybrid cloud technology, which lets them unify multiple clouds, including public and private clouds.
The company significantly exceeded quarterly revenue forecasts and raised its outlook going forward. Quarterly earnings were in line with expectations.
Executives cited strong demand, successful supply chain and pricing actions that contributed to results, and confidence that already taken actions have positioned HPE for success in the quarters to come.
Reviewing the full fiscal year results, CEO Antonio Neri said: “The HPE GreenLake platform has enhanced our financial profile with more resilient recurring revenue. Our portfolio is steadily becoming richer in software and services. We continue to shift our mix to higher growth markets and more IP-rich offerings.”
The company ended fiscal 2022 with more than $8.3 billion in GreenLake total contract value, which is more than twice the revenue from two years ago. Annual Recurring Revenue (ARR) more than doubled to $936 million since the company ramped up its focus on as-a-service offerings in 2019.
Winning Numbers
Revenue for the fourth quarter rose 7% to $7.9 billion, significantly exceeding expected expectations of $7.37 billion; earnings were in line with estimates of 57 cents per share, and they rose 10%.
For the quarter ending in January, the company raised revenue guidance to $7.4 billion from $6.98 billion and raised earnings guidance to 54 cents per share.
The company’s ARR of $936 million is an increase of 17% vs. the year-earlier period; adjusted for currency, the increase is 25%.
For the full year, revenue was $28.5 billion, up 3% (or 5% adjusted for currency) and non-GAAP (generally accepted accounting principles) earnings were $2.02, above the company’s earlier guidance.
“The combination of our right-sized cost structure and substantial order book is expected to deliver profitable growth that is increasingly recurring at higher margins as our as-a-service transformation continues to unfold,” EVP and CFO Tarek Robbiati said.
How HPE Is Winning
In a conference call with analysts following its earnings report, HPE execs detailed the successful actions to optimize performance that have been taken to date and the improving outlook as they go forward.
Neri, discussing the Q4 strength said, “orders remained steady, showing continued interest in our differentiated edge-to-cloud solutions across industries, from enterprises large and small. Demand over the course of the year was enduring and proved to be better than we anticipated.”
On supply constraints that have plagued tech and other companies over the last couple of years, Neri said the company has begun to see a slight improvement. Increased demand for GreenLake was reflected in an annualized revenue run rate increase of 25% year over year, despite supply constraints as a headwind. Total as-a-service orders increased more than 30% from one year ago, contributing to a year-end close with as-a-service order growth of 68%.
Referencing spending priorities, Neri said: “It is clear that customers view their data-first digital transformation as critical to their success and are prioritizing hybrid cloud solutions to propel them forward.”
GreenLake will play a central role in their efforts, he said, because it “enables customers to flex capacity up and down based on their business needs while benefiting from a wide range of cloud services to protect and analyze their data.”
Another positive indicator with GreenLake: The HPE partner ecosystem booked more HPE GreenLake orders during the fourth quarter than in any previous quarter. That shows the company has an important ally as it looks to continue building out its GreenLake customer base.
Robbiati said the results show the company has executed a successful transition, which is now complete: “Our cost optimization and resource allocation program announced during the pandemic of 2020 and which is now substantially finished, has achieved annual savings of $875 million, well above our initial target of $800 million.
Powerful Partners
Another strategic development — an alliance with VMware announced in early November —should contribute to HPE’s momentum.
HPE GreenLake for VMware will bring together HPE GreenLake and VMware Cloud to deliver a fully integrated hybrid cloud platform with a simple pay-as-you-go consumption model that gives customers the flexibility to purchase only the amount of infrastructure they require.
VMware Cloud can be fully integrated across the HPE GreenLake portfolio including HPE GreenLake for Private Cloud Enterprise and customers will be able to deploy on-premises, in colocation facilities, or at the edge, all managed by HPE GreenLake, the companies said.
HPE GreenLake for VMware is expected to be available in the first half of calendar year 2023.
More HPE Insights:
- HPE Goes All In On Hybrid Cloud; Supply Chain Measures Pay Off
- Cloud Earnings: Taking the Pulse of Customer Demand
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