HP Enterprise Bolsters Profit Forecast on Strong Demand

(Bloomberg) -- Hewlett Packard Enterprise Co. increased its annual profit forecast amid strong demand for the hardware maker's products, especially tools to process data at the point of origination.

Fiscal-year earnings, excluding some items, will be as much as $2.17 a share, the Spring, Texas-based company said Tuesday in a statement. Analysts, on average, projected $2.03 a share, according to data compiled by Bloomberg. Profit will be 41 cents to 49 cents a share in the current quarter ending in April, with the midpoint meeting analysts' average estimate.

“We are also delivering a better quality of earnings demonstrated by our improved gross margin despite ongoing supply chain constraints that enabled us to deliver Q1 EPS well above our outlook range and raise our outlook for the full year,” Chief Financial Officer Tarek Robbiati said in the statement.

HPE is trying to reduce its reliance on sales of hardware such as data-center servers by encouraging customers to pay for additional services with subscriptions. The company said its annualized revenue run-rate, which reflects future payments under the subscription software-as-a-service model, jumped 23% to $798 million in the period ended Jan. 31. Order growth gained 20% from a year earlier, the third consecutive quarter with at least a 20% increase.

Total revenue increased 1.8% to $6.96 billion in the fiscal first quarter, narrowly missing analysts' projection of $7.02 billion. Profit, excluding some items, was 53 cents a share, compared with the average estimate of 46 cents.

Sales in the Intelligent Edge division, which covers products that allow companies to gather and process data where it is generated instead of transferring it to an external storage center, grew 11% to $901 million, exceeding Wall Street's expectations. Sales at HPE's biggest unit, Compute, rose 1% to $3.02 billion, which was below estimates. Data storage revenue declined 3% to $1.16 billion.

“Obviously the edge was probably the shining star,” Chief Executive Officer Antonio Neri said in an interview. “The first step to drive digital transformation is connectivity. And that's why you see tremendous amounts of connectivity at the edge.”