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Hewlett Packard Enterprise Co. (NYSE:HPE) saw its shares tumble nearly 20% in premarket trading after reporting mixed Q1 results and issuing disappointing guidance. The company also announced a cost-cutting initiative, including workforce reductions.
HPE reported adjusted earnings per share (EPS) of $0.49, slightly missing analyst expectations of $0.50. Revenue, however, grew 16% year-over-year (YoY) to $7.85 billion, just above the $7.81 billion consensus. CEO Antonio Neri highlighted this as the fourth consecutive quarter of YoY revenue growth, expressing confidence in HPE’s market position.
Despite solid revenue gains, gross margins took a hit, with non-GAAP gross margin dropping 680 basis points YoY to 29.4%. The Server segment performed well, surging 29% YoY to $4.3 billion, while the Intelligent Edge (IE) segment declined 5% to $1.1 billion.
HPE’s weak outlook spooked investors. The company expects Q2 EPS of $0.28-$0.34, far below Wall Street’s $0.50 estimate. Revenue guidance of $7.2-$7.6 billion also missed the $7.93 billion consensus. For fiscal 2025, HPE projects EPS between $1.70-$1.90, significantly below the $2.13 analysts anticipated.
Adding to concerns, HPE announced a cost reduction plan targeting $350 million in gross savings by 2027. Analysts at Bank of America and Morgan Stanley slashed their price targets, citing disappointing margins and increased competition. The acquisition of Juniper Networks (NYSE:JNPR) is now seen as crucial for HPE to regain investor confidence and drive long-term growth.
