Hewlett Packard Enterprise Co (NYSE:HPE, ETR:2HP) (HPE) shares plunged more than 15% after the IT firm issued disappointing guidance and delivered an earnings miss for the fiscal first quarter.
For the second quarter, HPE projected adjusted earnings per share (EPS) in the range of $0.28 to $0.34, below the Wall Street consensus of $0.50.
It expects revenue in the range of $7.2 billion to $7.6 billion, short of the $7.93 billion consensus.
Full-year EPS was guided in the range of $1.70 to $1.90, below estimates of $2.13.
For Q1, adjusted EPS of $0.49 missed analyst estimates of $0.50. Revenue grew 16.3% to $7.85 billion, ahead of estimates of $7.81 billion.
The company’s server revenue grew 29% to $4.3 billion, but its operating profit margin shrank to 8.1% from 11.4% in the year-ago quarter.
'Particularly disappointing'
Analysts at Bank of America view HPE’s 2025 guidance as “particularly disappointing” in light of revenue growth driven by a recovery in Intelligent Edge and AI server growth.
However, they view the company’s shares as “too cheap” to turn structurally negative.
“We reiterate ‘Buy’ on valuation, cost takeouts, and long-term upside from AI servers but lower our price objective from $26 to $20,” they wrote.
“A new cost takeout initiative ($350 million over three years) despite revenue growth signals a much worse competitive pricing dynamic, which we view as structurally more bearish and a modest impact from tariffs,” analysts wrote.
“However, between the announced cost takeout and an additional $450 million (if the Juniper acquisition closes successfully) provides almost $800 million in total savings or approximately $0.60 in EPS which is extremely meaningful.”