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HPE Continues to Deliver Sluggish Revenue Growth in Q2

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HPE revenues lagged Q2 estimates 

Hewlett Packard Enterprise (HPE) failed to beat analysts’ revenue estimates in the recently reported second quarter of fiscal 2019. Revenues also declined on a YoY basis as well as on a quarter-over-quarter basis. HP Enterprise’s revenues of $7.2 billion lagged the Wall Street estimate of $7.4 billion, while it declined 4.3% YoY and 4.6% quarter-over-quarter in the second quarter.

HPE peer Cisco Systems managed to beat revenue expectations by 0.5% in its third quarter of fiscal 2019 results ending in April. HP Inc., another software company, also released its Q2 earnings results on May 23 after the market bell and posted better-than-expected revenues.

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Revenue growth

HP Enterprise’s revenues declined 4.3% YoY as all three segments, Intelligent Edge, Hybrid IT, and Financial Services, dropped in the second quarter. Q2 revenues were also unfavorably impacted by currency. Excluding currency, revenues were down 2% in Q2. Further, after excluding Tier 1 server sales, China sales and currency impact, revenues grew around 1%.

HPE generates significant revenues and profit from a joint venture with H3C Technologies in China. While HP Enterprise holds a 49% stake in H3C, Tsinghua Holdings owns 51% of the company. However, the joint venture underperformed analysts’ expectations in the quarter due to the trade war uncertainty. The company could reportedly sell fewer products to H3C, as it was offering more China-based hardware.

The hardware company also had some execution issues in North America while selling its Aruba networking devices, which include Wi-Fi routers and switches, which also led Aruba’s product revenue to decline 8% YoY in the quarter.

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