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Hewlett Packard Enterprise gains on high AI demand

Wednesday, June 05, 2024

Today’s headlines

What’s happening: Shares of Hewlett Packard Enterprise Company rose sharply in extended trading after the company released results for its second quarter.

What happened: The company reported stronger-than-expected sales and earnings for its fiscal second quarter.

Hewlett Packard Enterprise (HPE) also issued an upbeat sales forecast for the current quarter amid strong demand for its AI servers.

How were the results: The company reported low single-digit growth in sales for the quarter ended April 30.

  • Sales grew by 3.3% year-over-year to $7.2 billion, topping consensus estimates of $6.82 billion.
  • Earnings came in at 42 cents per share, which exceeded Wall Street expectations of 39 cents per share.

Why it matters: In January, Hewlett Packard Enterprise had announced plans to acquire Juniper Networks for $14 billion in a bid to increase its networking offering.

HPE said its AI systems revenues more than doubled from the previous quarter, driven by strong demand for its AI-optimised servers. The company also saw higher demand for hybrid cloud and data storage solutions in the fiscal second quarter.

Server revenue jumped 18% year-over-year to $3.9 billion during the quarter, while Intelligent Edge revenues contracted 19% to $1.1 billion. Hybrid Cloud revenues declined 8% year-over-year to $1.3 billion, while Financial Services revenues rose 1% to $867 million last quarter.

“Our deep expertise in designing, manufacturing, and running AI systems at scale fueled growth of cumulative AI systems orders to $4.6 billion, with enterprise AI orders representing more than 15%. HPE’s AI advantage, increased HPE GreenLake adoption, and leading infrastructure portfolio, as well as an improved supply chain environment, set us up very well to deliver a strong second half,” CEO Antonio Neri said.

Management guided to revenues of $7.4 billion to $7.8 billion for the third quarter, while projecting earnings of 43 cents to 48 cents per share, broadly in-line with market expectations. They raised the full-year earnings guidance to $1.85 to $1.95 per share, from the earlier outlook of $1.82 to $1.92 per share.

How shares responded: Hewlett Packard Enterprise’s shares climbed 15.3% to $20.29 in after-hours trading following the release of quarterly results. The stock has gained more than 9% over the past six months.

What to watch: Investors will continue monitoring rising demand for AI servers, which is expected to further boost the company’s overall results ahead.

The markets today

The euro will be in focus today ahead of a basket of economic reports from the Eurozone

Context: The EUR/USD forex pair moved lower on Tuesday, after hitting around a three-month high earlier in the session.

Details: The European Central Bank is scheduled to announce its interest rate decision on Thursday. Markets widely expect central bank policymakers to lower interest rates for the first time since 2019. There are growing speculations of the ECB announcing at least two interest rate cuts this year.

Europe’s inflation rate accelerated again in May, exerting pressure on European policymakers to be cautious of multiple rate cuts.

Meanwhile, the US Federal Reserve is expected to begin lowering interest rates only in September, following soft economic reports from the country.

Some weakness in the US dollar limited the overall losses for the EUR/USD pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 104.11 on Tuesday.

The EUR/USD forex pair fell around 0.2% to 1.0882 on Tuesday, after earlier hitting its strongest level since March 21. The STOXX Europe 600 Index shed 0.43% to settle at 517.05.

What to watch: Investors await the release of economic data on industrial producer prices, composite PMI and services PMI from the Eurozone today. Industrial producer prices in the Eurozone, which fell by 0.4% in March, are expected to decline by 0.5% in April.

Analysts expect the HCOB Eurozone services PMI to remain unchanged at 53.3 in May, while composite PMI is projected to increase to 52.3 in May, from 51.7 in April.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.36%, 0.15% and 0.29%, respectively.

The news shaping the markets

French President Emmanuel Macron announced plans to hold talks with Ukrainian President Volodymyr Zelenskyy in Paris on Friday to discuss the ground situation. The news sent the safe-haven US dollar index higher in forex trading this morning.


Japan’s au Jibun Bank services PMI was revised higher to 53.8 in May, compared to a preliminary reading of 53.6. However, the latest reading came in lower than April’s eight-month high of 54.3, exerting pressure on the JPY/USD forex pair.


Singapore’s S&P Global PMI rose to 54.2 in May, compared to the nine-month low of 52.6 recorded in April. The region’s private sector activity expanding the 15th straight month sent the SGD/USD pair higher in forex trading this morning.


Australia’s Judo Bank flash services PMI business activity index declined to 52.5 in May, from 53.6 in the previous month. However, the region’s services activity expanded for the fourth straight month, which lent support to the AUD/USD forex pair.


New Zealand’s merchandise (goods) terms of trade grew by 5.1% during the first quarter, compared to a 7.8% decline in the prior quarter. The latest reading also topped market expectations of a 3.1% increase and sent the NZD/USD pair higher in forex trading this morning.

What else to watch today

Russia’s unemployment rate, business confidence, corporate profits, real wage growth, gross domestic product, retail sales, composite PMI and services PMI, France’s industrial production, composite PMI and services PMI, South Africa’s S&P Global PMI, Spain’s composite PMI and services PMI, Italy’s composite PMI and services PMI, Germany’s new passenger car registrations, composite PMI and services PMI, UK’s new passenger car registrations, composite PMI and services PMI, US MBA mortgage applications, ADP employment change, S&P Global composite PMI, S&P Global services PMI, ISM services PMI, crude oil stocks change, gasoline stocks change and distillate inventories, Brazil’s industrial production, composite PMI and services PMI, Mexico’s consumer confidence indicator, Canada’s labour productivity, composite PMI, services PMI and Bank of Canada’s interest rate decision, Turkey’s total motor vehicles production and total vehicle sales, as well as Argentina’s industrial production.


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