hewlett packard enterprise reported weak fourth-quarter revenue and server counts, but profits beat expectations and reaffirmed its outlook for the fiscal year on strong demand for artificial intelligence.
“We’re very pleased with the results we reported in the fourth quarter, even though sales were at the lower end of our guide, due to the conversion of some unique AI-related deals, some due to U.S. closures and one in Europe due to data center readiness,” CEO Antonio Neri said on CNBC’s “Money Movers” on Friday.
The company released its results after Thursday’s close, with sales of $9.68 billion, up 14% from a year earlier, but falling short of analysts’ estimates of $9.94 billion compiled by LSEG.
The company’s stock price initially fell by 9% due to declining revenue and a weak server division. Stocks rebounded on Friday.
HPE beat fourth-quarter earnings expectations, with adjusted earnings of 62 cents per share, beating LSEG’s estimate of 58 cents per share.
Chief Financial Officer Marie Myers said on an earnings call with analysts that the adjustment was “responsible for the amortization of intangible assets, Juniper-related acquisition costs, stock-based compensation expense and cost reduction program costs, partially offset by taxes and other adjustments.”
The company reaffirmed its fiscal 2026 sales guidance range of 17% to 22%, but issued a weak outlook for the first quarter.
The company said it expects first-quarter fiscal 2026 revenue to be in the range of $9 billion to $9.4 billion, short of the $9.87 billion that FactSet analysts expected.
Escalating costs, seasonality, and the timing of AI server transactions were all factors in the guidance.
The drop in sales from the fourth quarter is “consistent with historical seasonality,” Myers told analysts. He also noted the continued rise in the cost of DRAM, dynamic random access memory, and NAND memory, which is flash memory typically used in memory cards.
He told analysts that most of those costs are expected to be passed through.
Orders for AI systems reached $1.9 billion in the fourth quarter, and Myers said he expected AI demand to be “uneven” and that large sovereign customers were ordering with extended lead times, potentially delaying shipments into future quarters.
Neri said on a conference call with analysts that the company expects the largest portion of AI revenue transformation to occur in the second half of fiscal 2026.
HPE’s server division’s revenue for the fourth quarter was $4.46 billion, down 5% from $4.68 billion in the year-ago period. The fourth-quarter figure was below the $4.58 billion expected by analysts on Street Accounts.
Meyers cited the shortfall in the company’s earnings call, saying it was due to lower-than-expected shipping timing for AI services and lower-than-expected government spending.
“Despite these headwinds, we are encouraged by strong server order growth for both traditional servers and AI products, with demand significantly exceeding revenue during the period,” she said.
Server revenue was down 10% from the third quarter.
A positive sign was fourth-quarter network revenue of $2.81 billion, boosted by the Juniper Networks acquisition completed in July.
Neri told CNBC on Friday that the acquisition will make HPE a “network-centric company.”
HPE reported fourth-quarter net income of $146 million, or 11 cents per share, which was significantly lower than net income of $1.34 billion, or 99 cents per share, in the year-ago period.
HPE’s daily stock price chart.
