Generative AI boosts HPE Q2 earnings

Hewlett Packard Enterprise (HPE) has posted second-quarter revenue of $7.0bn, up 4% from the same quarter last year. While its compute hardware business saw less demand during the quarter, the company experienced significant growth in areas of the business that directly support customers building out artificial intelligence (AI).

Its high performance computing and artificial intelligence business reported revenue of $840m, an increase of 18% compared to last year. However, its compute business posted revenue of $2.8bn, down 8% from the prior-year period. Storage revenue was $1.0bn, down 3% from the same quarter last year. HPE’s intelligent edge business reported revenue of $1.3bn, up 50% from the prior-year period.

Antonio Neri, president and CEO of Hewlett Packard Enterprise, said: “Our shift to a higher-margin portfolio mix led by the Intelligent Edge segment, and the strong demand for our AI offering, further strengthen the investment opportunity for our shareholders.”

In a transcript of the earnings call posted on Seeking Alpha, Neri spoke about how the company’s hybrid cloud offering, HPE Greenlake was experiencing growth in higher margin services.

“Our HPE GreenLake platform continues to power the growth of our software infrastructure and services, capturing more than $10bn in total contract value for the first time this quarter,” he said.

“HPE GreenLake also drove our ARR [annual renewal rate] to $1.1bn in the second quarter, with an increasing portion coming from margin rich software and services, which now is 66% over total ARR mix.”

But overall, the company has benefited from the industry hype surround generative AI, with CFO Tarek Robiatti saying: “The emergence of large language models and generative AI has prompted many inquiries from our customer base during the past quarter, which are turning into pipeline and orders.

“In the past few months, we have had multiple large enterprise AI wins totaling more than $800m and counting. This includes large AI-as-a-service deals under the GreenLake model.

“We believe building and operating large AI models requires unique computational capabilities, including silicon and software that our great supercomputers and HPC and AI solutions are extremely well-positioned to enable. We expect the AI demand to drive healthy revenue growth in the future and intend to invest organically and inorganically to fully grasp this opportunity.”

Among the big wins during the quarter is a new supercomputer for BASF, which uses AMD processors (CPUs) and employs a new approach to cooling.

The company also recently signed a memorandum of understanding (MoU) with the Crown Commercial Service (CCS), centred on GreenLake, to enable the public sector organisations to run their workloads and applications in the cloud.