HPE annual profit forecast misses estimate on margin crunch
For the fiscal year ending in October 2028, the company expects adjusted profit of at least US$3.00 per share and free cash flow of more than US$3.5 billion
[NEW YORK] Hewlett Packard Enterprise (HPE) gave an outlook for profit and cash flow for its upcoming fiscal year that fell short of analysts’ estimates, reflecting a margin crunch in the artificial intelligence (AI) era.
Earnings, excluding some items, will be US$2.20 to US$2.40 a share in the year ending in October 2026. Free cash flow will be US$1.5 billion to US$2 billion, HPE said on Wednesday (Oct 15). Analysts, on average, projected profit of US$2.41 and free cash flow of US$2.41 billion, according to data compiled by Bloomberg.
HPE, one of the largest makers of computing equipment, is betting on networking as a major prong of its future expansion with the July acquisition of Juniper Networks for about US$13 billion. It has also seen increased demand for high-powered servers used for AI workloads.
“We are poised to gain share in the markets that matter most to our customers,” chief executive officer Antonio Neri said, which coincided with the company’s analyst day event.
Still, HPE is dealing with tighter margins in part due to building servers with expensive AI chips that have made the machines less profitable. In the coming years, the company intends to “achieve greater profitability and improve free cash flow generation in order to provide higher capital return to shareholders,” HPE said.
The company announced it would increase the dividend for the coming fiscal year by 10 per cent from its current quarterly 13 US cents a share. The board also has authorised an additional US$3 billion in share buybacks.
The shares declined about 5 per cent in extended trading after closing at US$25.04 in New York. The stock has gained 17 per cent this year.
For the fiscal year ending in October 2028, HPE expects adjusted profit of at least US$3.00 per share and free cash flow of more than US$3.5 billion. Those projections were just ahead of the average analyst estimate of US$2.95 per share and US$3.42 billion in free cash flow. BLOOMBERG
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