Hewlett Packard Enterprise (HPE), a major player in the tech industry, saw a modest retreat in shares on Wednesday following its fiscal third-quarter earnings report. Outperforming Wall Street’s predictions, the company’s earnings rose 2% from the previous year, while revenue increased 1% to $7 billion. Despite the positive figures, the company’s outlook for HPE stock remains uncertain, leading to a mixed reaction among investors.

HPE, renowned for its production of computer servers, networking equipment, and data storage systems, released its earnings report after the market closed on Tuesday. Analysts had anticipated earnings of 47 cents per share on sales of $6.99 billion for the period ending July 31. However, the company surpassed these expectations, reporting earnings of 50 cents per share. This report comes amidst a turbulent year for HPE, which saw the resignation of its Chief Financial Officer, Tarek Robbiati, and the sale of its stake in a Chinese joint venture for $3.5 billion.

Hewlett Packard Enterprise Stocks Stumble Despite Beating Q3 Expectations

Q3 Earnings and Revenue Beat Wall Street Predictions

Hewlett Packard Enterprise (HPE) stocks took a hit on Wednesday following the company’s fiscal third-quarter earnings and revenue report, which slightly surpassed Wall Street estimates. The company, a leading producer of computer servers, networking equipment, and data storage systems, revealed its earnings after market closure on Tuesday. For the July quarter, HPE reported earnings of 50 cents per share, a 2% increase from the previous year. Furthermore, the company’s revenue rose by 1% to reach $7 billion. These figures exceeded analysts’ expectations of 47 cents per share on sales of $6.99 billion for the period ending July 31. In the same period a year ago, HPE reported earnings of 48 cents a share on sales of $6.95 billion.

A Mixed Outlook for HPE Stock

The outlook for HPE stock in the current quarter ending in October is mixed according to the company’s predictions. HPE forecasts earnings of 50 cents a share at the midpoint of its outlook, slightly above estimates of 49 cents. However, the company anticipates revenue of $7.35 billion, less than the predicted $7.46 billion. Evercore ISI analyst Amit Daryanani noted that HPE’s revenues increased by 3% due to significant growth in Edge (up 53% year-over-year). However, he also highlighted a double-digit sales decline in Compute (-10%) and ongoing challenges in Storage (-2%). Daryanani added, "HPE noted they expect fiscal 2024 to see positive revenue growth (Street is at 2%) and importantly mix should enable margin expansion as well."

Shares Slide after an Encouraging Year

Despite the overall positive performance, HPE stock slipped 1.6% to 16.56 in early trading on the stock market today. Prior to the HPE earnings report, shares had increased by about 5% in 2023. Furthermore, HPE stock has pulled back from a 52-week high of 18.14 set on Aug. 8. In other company news, HPE’s Chief Financial Officer, Tarek Robbiati, resigned in early August to become the chief executive of RingCentral. Moreover, in May, HPE sold its stake in a Chinese joint venture for $3.5 billion.

Takeaways

While HPE’s Q3 report revealed overall positive performance, the mixed outlook and the slight slip in stock prices remind us that even strong performances can be met with market scepticism. The company’s growth in Edge and the expected positive revenue growth in 2024 provide encouraging signs for the future. However, challenges in Compute and Storage sectors, coupled with the recent reshuffling in the company’s leadership, suggest that HPE needs to navigate carefully in the coming quarters.