HPE’s stock craters on mixed earnings results, tariffs and layoffs

Shares of Hewlett Packard Enterprise Co. cratered in extended trading today after the company’s fiscal first-quarter earnings results were overshadowed by a big round of layoffs and a warning that incoming tariffs are likely to affect its results in the future.

The company, which primarily sells servers, storage arrays and software for enterprise data centers, revealed it’s embarking on a cost-cutting exercise that will result in about 2,500 workers, or 5% of its employee base, being let go. The layoffs will add charges to its second-quarter and full-year results, the company added, causing it to lower its guidance.

In addition, HPE Chief Financial Officer Marie Myers admitted that the Trump administration’s global tariffs are also going to have an impact its earnings this year, as many of its products are manufactured outside of the U.S. She added that the company is also having “server execution issues” within its server business. The issues include pricing problems and bigger-than-expected inventories of artificial intelligence servers, as a result of its transition to Nvidia Corp.’s new Blackwell graphics processing units.

HPE’s stock was down more than 19% after the report, having already declined 4% during the regular trading session, another down day for the overall market.

The company reported earnings before certain costs such as stock compensation of 49 cents per share, in-line with Wall Street’s forecast. Revenue for the quarter rose 16% to $7.9 billion, just ahead of the Street’s target of $7.8 billion.

During the quarter, HPE signed $1.6 billion in net orders for AI systems, while its enterprise AI orders increased 40% from the year-ago period. Total server revenue totaled $4.29 billion. The company was left with a net profit of $598 million, up from $387 million one year ago.

“We could have executed better,” HPE Chief Executive Antonio Neri (pictured) said on a conference call with analysts. “We had a higher than normal AI inventory because of the rapid transition to the next generation GPUs.”

Holger Mueller of Constellation Research Inc. said HPE’s numbers looked good on a year-over-year basis, but less so when comparing them to the previous quarter, with revenue down by $600 million sequentially, resulting in lower profitability.

“This is something the management doesn’t appear to have foreseen, and it shows that the company needs a better cost structure,” the analyst said. “The good news is that AI came to the rescue, and while partnering with Nvidia is not easy, it has been a real growth engine for server revenue.”

For its fiscal second quarter, HPE is guiding for earnings of between 28 and 34 cents per share on revenue of $7.2 billion to $7.6 billion. The earnings guidance includes a restructuring charge of about 20 cents per share. In contrast, the Street is looking for earnings of 50 cents per share on $7.93 billion in revenue.

“We included the impact of tariffs as they stand in our guide,” Myers told analysts on the call.

She added that the company is assuming there will be some decline in order volume as customers might decide to postpone new server purchases. “It’s a pretty fluid environment right now, information is changing at a fairly rapid rate,” she said.

For the full year, HPE is guiding for earnings of between $1.70 to $1.90 per share, trailing the Street’s target of $2.13 per share.

HPE also provided an update on its proposed $14 billion acquisition of Juniper Networks Inc. In January, the U.S. Justice Department filed a lawsuit against the companies in an effort to stop the deal from going ahead. As a result, the matter is expected to go to trial on July 9, the company said.

The company had originally hoped to close on the acquisition in early 2025, but said it’s unlikely to happen until October, assuming it triumphs in the pending trial.

Photo: SiliconANGLE