Hewlett Packard Enterprise is reaping the benefits of its well-timed Juniper Networks acquisition.
Networking has proven an increasingly hot area as artificial intelligence drives up the need for connectivity technologies. HPE
HPE+3.22% said on Monday that it saw a 40% bump in data-center switching orders during the latest quarter, along with a mid-20% increase in routing orders.
“Networking now represents a very important component of revenue, but actually an even more significant part of our operating profit,” Chief Financial Officer Marie Myers told MarketWatch, noting that HPE currently gets about 30% of its revenue, as well as half of its operating profit, from networking.
Shares of HPE rose 1.4% in the extended session.
The company on Monday raised its networking revenue guidance for the full fiscal year. HPE now expects 68% to 73% growth, versus a prior projection of 65% to 70% growth. The unit now receives contributions from Juniper’s business, and HPE has been making a push to drive synergies there.
HPE left intact its overall revenue outlook for the full fiscal year, which calls for 17% to 22% growth.
With that, the company is “being prudent,” according to Myers. “We’re at a fairly uncertain time right now.”
HPE increased its full-year outlook for adjusted earnings per share, which now calls for $2.30 to $2.50, compared with $2.25 to $2.40 before. While HPE isn’t immune to the memory-supply crunch, the company has found ways to manage the situation, according to Myers.
She noted that HPE has long-term supply agreements, is making “agile” pricing decisions and is steering customers toward the sorts of configurations that are optimal based on supply availability.
HPE has generally been benefiting from demand for AI servers, although Myers said the company is emphasizing deals that play to its strengths — namely to sovereign and enterprise customers. Enterprise AI orders were up “quite significantly” both sequentially and relative to a year before, she said.
“That will continue to be a part of our story, albeit it’ll be somewhat lumpy in the back half of the year,” she added.
In the fiscal first quarter, HPE reported adjusted earnings per share of 65 cents on revenue of $9.3 billion, which was up 18% from a year before. In a release, CEO Antonio Neri said this was one of the company’s “most profitable quarters on record.” Adjusted EPS topped the 59-cent FactSet consensus view, while revenue was a bit below the $9.35 billion that analysts were forecasting.
For the fiscal second quarter, HPE projects 51 cents to 55 cents in adjusted EPS, as well as $9.6 billion to $10 billion in revenue. Analysts were looking for 53 cents and $9.57 billion, respectively. https://www.marketwatch.com/story/hpes-stock-rises-as-earnings-benefit-from-two-big-ai-trends-a3df2732?mod=newsviewer_click
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