Hewlett Packard Enterprise (HPE) recently held its Securities Analyst Meeting (SAM) at the New York Stock Exchange, unveiling their financial outlook for fiscal year 2024. HPE‘s President and CEO, Antonio Neri, along with Jeremy Cox, Senior Vice President and Interim CFO, outlined the strategies to accelerate shareholder value over the next three years.
Strategies and Financial Progress
Neri emphasized HPE’s success in establishing itself as the leading “edge-to-cloud” company. With a robust strategy aligned with major trends in edge computing, hybrid cloud, and artificial intelligence (AI), HPE is poised to capitalize on profitable market expansion opportunities.
HPE is strategically shifting its portfolio towards higher-growth, higher-margin sectors, bolstering its long-term profitability. The company’s key growth areas include Intelligent Edge, HPC & AI, and the forthcoming Hybrid Cloud segment, which are expected to contribute over 50% of total segment revenue by fiscal year 2026.
HPE aims to enhance profitability through continuous investments in these segments and expand its addressable market by nearly $100 billion in the next four years, driven by the growing AI market.
Sustaining Momentum at the Edge and Networking
HPE’s Intelligent Edge segment plays a pivotal role in its strategy. Significant investments have been made in HPE Aruba Networking, and the company continues to expand its offerings in security, private 5G, and data-center networking. The Intelligent Edge segment is on track to become a $5 billion annual business in fiscal year 2023, with the highest profitability among HPE’s segments.
HPE intends to gain market share in high-growth, margin-rich areas, ensuring sustained growth and creating value for shareholders.
Scaling the Hybrid Cloud Offering
HPE elaborated on its forthcoming Hybrid Cloud segment, operational from November 1, 2023. This segment combines Storage and Compute aaS offerings, including HPE GreenLake Private Cloud and software solutions, offering a superior, cloud-native experience. HPE’s customer value proposition sets it apart, providing a compelling alternative to public cloud providers.
HPE’s cloud-native offerings and capabilities, particularly HPE GreenLake, are expanding gross margins. The company aims to become the world’s top hybrid cloud provider as HPE GreenLake accelerates its growth.
Capturing the AI Market
HPE acknowledges the growing demand for AI and has identified three key areas: supercomputing, AI infrastructure, and AI platform software. With substantial investments in AI, HPE leverages its IP, expertise, and market leadership in supercomputing to capture value from the AI market.
Delivering Value through Compute
HPE’s strong position in the Compute market generates cash flow for further investments and capital returns. The demand for Compute is rising, driven by cloud repatriation, edge workloads, telco sector needs, and the growing demand for AI-inferencing.
Gaining Advantage with HPE Financial Services
HPE Financial Services offers IT lifecycle solutions, focusing on sustainability. Customers increasingly demand ways to accelerate sustainability goals through HPE services and circular economy solutions.
Long-Term Financial Outlook
HPE projects revenue growth of 2% to 4% in constant currency and a compounded annual growth rate of 35% to 45% for annualized revenue run-rate from fiscal year 2024 to 2026. The company is committed to disciplined, returns-based capital allocation, aiming to balance capital returns and investments for growth while maintaining an investment-grade credit rating. HPE plans to return 65% to 75% of free cash flow to shareholders over the next three years, targeting an 8% increase in its dividend per share for fiscal 2024.
Outlook for Fiscal Year 2024
For fiscal year 2024, HPE anticipates revenue growth of 2% to 4% in constant currency, with a foreign exchange impact of 50-to-100-basis points. The company forecasts GAAP operating profit growth of 15% to 21% and non-GAAP operating profit growth of 3% to 5%. The company aims to maintain investment-grade credit while balancing capital returns to shareholders and growth investments.
Expectations for Fiscal Year 2023
HPE expects revenue growth of 4% to 6% in constant currency for fiscal year 2023, with a foreign exchange impact of approximately 300 basis points. GAAP operating profit growth is forecasted at approximately 163%, while non-GAAP operating profit growth is expected to be about 4%. The company maintains a focus on achieving sustainable, profitable growth.
Exploring the Full Presentation
For a comprehensive understanding of HPE’s strategies and financial outlook, including the management’s presentations and materials, you can access the SAM webcast recording on the HPE Investor Relations website.
HPE continues to drive innovation and value creation, offering a compelling alternative to public cloud providers. Discover how HPE’s expertise can empower your business by visiting Router-switch.com for more insights and solutions.