In this article

  • Q1 earnings totaled $7.7 billion, up 11% from the prior year
  • Our portfolio is stronger than ever, with new software-defined services being added such as HPE OneSphere and HPE GreenLake
CEO Antonio Neri shares his thoughts on the first quarter of 2018, and what’s in store for the rest of the year

Today was my first quarterly earnings report as the CEO of HPE.  Overall, I’m pleased with the results.  First quarter revenue of $7.7 billion was up 11% from the prior year.  We saw growth across each of our business segments driven by better market conditions, higher average unit prices and strengthened execution. While we do not expect this rate of growth to continue, given tougher compares in the second half of the year, the go-to-market changes we have made and our current portfolio mix have put us in a strong position.  We delivered Q1 non-GAAP EPS of $0.34, well ahead of our previously provided outlook of $0.20 to $0.24, due to strong revenue, continued cost discipline and a number of favorable one-time items, like benefits from tax reform.  We also raised our FY18 non-GAAP EPS outlook to $1.35 to $1.45 from our previously provided outlook of $1.15 to $1.25.  Please take a look at our press release for the detailed financial results. 

Beyond the facts and figures, here are some key takeaways from the quarter:

  1. We Saw Growth Across All Business Segments

In Q1, we had good revenue growth across every business segment.  The Intelligent Edge business grew 9% with strength in campus switching and services, offset by disappointing results in wireless, which we expect to rebound quickly.  The Hybrid IT business grew 10% year over year, driven by strong growth across the portfolio, including core industry standard servers, high performance compute, hyperconverged, Synergy, storage and data center networking.  And, Financial Services grew 8% year over year, driven by strong residual sales and improving direct business.    

  1. HPE Next is On Track

HPE Next is on track to deliver the results we laid out in October, with no disruption to the business.  We have already completed several critical parts of the program, including the salesforce transformation, which significantly reduced the spans and layers between the CEO and the frontline and streamlined the number of sales compensation plans.  

  1. Tax Reform is Enabling Increased Shareholder Returns & Investment in Employees

Given the recent tax reform in the U.S., which will provide easier access to off-shore cash, we are increasing our shareholder return commitment and our investment in employees.  We now plan to return $7 billion to shareholders in the form of share repurchases and dividends by the end of FY19, including a 50% increase in our dividend.  In addition, we will significantly increase the matching contribution for our employees’ 401(k) program and create new degree assistance programs to encourage development and learning for employees around the world.

  1. Our Portfolio is Stronger than Ever

In Q1, we announced a number of new software-defined, services-led solutions that are changing the way IT is purchased, consumed and managed.  For example, in December we launched HPE GreenLake, a suite of pay-per-use solutions available for top customer workloads. We also launched HPE Onesphere, a software management platform that lets customers deploy, operate, and optimize on-premises private cloud environments and public cloud capabilities through a simple, unified experience. In November, we announced the world’s most scalable and modular in-memory computing platform, called HPE Superdome Flex, and an innovative enterprise-grade blockchain-as-a-service solution.  

  1. Customers are Taking Notice

And, we continue to win new customers.  Just a few recent examples include Wellington Management, one of the world’s largest independent investment management firms, which purchased mobility access switches and Aruba ClearPass for secure network access control; Royal Dutch Shell, which selected Aruba wireless LAN for their new wireless standard worldwide; the U.S. Department of Defense, for supercomputers that will support research including hypersonics and computational modeling of current and advanced air, naval, and ground weapon systems; and, one that I personally love as a big soccer fan, Ajax, a professional football club in the Netherlands, who is using our network and storage solutions to analyze player performance in real time through artificial intelligence. 

So, overall, the year is off to a strong start. I believe Q1 is a solid proof point that shows we are doing the right things, but there is still much more to do.  We remain focused on executing our strategy, driving HPE Next and continuing to introduce the innovative products and services our customers are looking for.  As long as we sustain that approach, I am confident we will continue to deliver solid financial results and shareholder returns.

Forward Looking Disclosures

This post contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HPE may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, financial projections and any statements of the plans, strategies and objectives of management for future operations.  Please review the cautions regarding these forward-looking statements in our earnings presentation here, as well as the descriptions of the risks underlying these forward-looking statements in HPE’s Annual Report on Form 10-K for the fiscal year ended October 31, 2017.

Use of non-GAAP and adjusted financial information

This post contains non-GAAP financial measures. Please review the related information in our earnings presentation here for details on the use of these non-GAAP financial measures, definitions, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.