HPE revenue boosted by digitisation drive

Strong order growth drove the third quarter for Hewlett Packard Enterprise (HPE), the company said in its latest quarterly filing. 

“We delivered a very impressive Q3 performance, marked by strong order growth, expanded margins and record free cashflow,” said Antonio Neri, president and CEO of HPE. “I am pleased to see how our differentiated portfolio is resonating with the market, and our edge-to-cloud strategy is driving improved momentum across our businesses.”

Neri added: “The impacts of the pandemic continue to accelerate the shift we predicted years ago to an edge-centric, cloud-enabled and data-driven world. Now, more than ever, companies need secure connectivity, faster insights from data, and a cloud experience everywhere. We expect those trends to continue.”

According to the transcript of the earnings call, posted on the Seeking Alpha financial blogging site, Neri believes the company has benefited from demand for digital transformation. “Digital transformation is no longer a priority, but a strategic imperative,” he said. “To help our customers transform their businesses and be future-ready today, we have been focused on doubling down in key areas that are resonating strongly in the market. We had a record number of orders in both our Intelligent Edge business and high-performance computed and mission-critical solutions business.”

Neri said that because of “strong demand and execution”, HPE’s Intelligent Edge and HPC business made up nearly 25% of the company’s total revenue.

He added that exponential growth in data, along with artificial intelligence and big data analytics, drove demand for high-performance computing and mission-critical capabilities.

The company recently announced a $2bn, 10-year deal with the US National Security Agency. When asked how revenue would be recognised, Neri said: “I think it will be definitely recognised over time. There will be periods that will be a little bit lumpier because of the infrastructure, but the one thing you need to understand about this deal is it’s not just about selling infrastructure and consumer-as-a-service through HPE.

“GreenLake is the true as-a-service model and management at the same time. We are operating the whole environment.” This is very different from a traditional IT contract, he added.

During the earnings call, HPE was questioned about increases in the average unit price (AUP) of its products. “AUP was up to mid to high single-digits quarter on quarter, reflecting pass-through of commodity costs and richer configurations,” said Tarek Robbiati, enterprise vice-president and CFO at HPE. “As always, configurations that are richer play a big role in the AUP.”

However, Robbiati acknowledged that due to the constrained supply environment, HPE needed to manage pricing of products across its Compute business. Given that HPE reported flat growth in terms of units shipped within its Compute business, Robbiati said: “We still see scope for continuous gross margin improvement across the board and in Compute as well.”