Exchange: LSE | Sector: Technology | Industry: Hardware Equipment Parts
Q1 2025
Published: Mar 7, 2025
Earnings Highlights
Revenue of $7.81B up 16% year-over-year
EPS of $0.44 increased by 50% from previous year
Gross margin of 28.3%
Net income of 627.00M
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Hewlett Packard Enterprise Company (0J51.L) QQ1 2025 Results: Revenue Growth Amid Margin Moderation and Robust Balance Sheet
Executive Summary
Hewlett Packard Enterprise (HPE) reported Q1 2025 results with solid topline growth and a favorable net income trajectory, underscoring ongoing demand for data-center hardware and hybrid IT solutions. Revenue reached $7.81 billion, up 16.0% year over year, while gross margins stood at 28.33% and operating margins at 6.02%, signaling a healthier mix of high-value offerings even as the quarter faced sequential headwinds. Net income totaled $627 million (EPS diluted $0.44), aided by non-operating income and tax effects that helped offset pressure in operating profitability. However, free cash flow remained negative at $(918) million, driven largely by working capital dynamics and ongoing capital expenditure, with cash from operations negative by $(390) million. The company finished the period with a substantial cash balance of ~$13.85 billion and a manageable net debt position (~$4.45 billion), reinforcing a strong liquidity cushion to fund strategic initiatives and shareholder returns. The results imply a constructive longer-term trajectory supported by HPC/Cray, data-center refresh cycles, Aruba networking, and as-a-service opportunities, even as near-term cash flow normalization and margin discipline remain critical to unlocking sustainable profitability.
- Revenue: $7.81B, YoY +16.0%, QoQ -7.92% (Q1 2025)
- Gross Profit: $2.213B, Gross Margin 28.33%, YoY -6.31%, QoQ -13.59%
- Operating Income: $0.470B, Op Margin 6.02%, YoY -16.67%, QoQ -42.89%
- Net Income: $0.627B, Net Margin 8.03%, YoY +62.02%, QoQ -54.10%
- EPS (GAAP): $0.45, EPS (diluted) $0.44, YoY +50.00%, QoQ -55.88%
- EBITDA: $1.514B, EBITDA Margin 19.38%
- Operating Cash Flow: $(0.39)B; Free Cash Flow: $(0.918)B
- Cash and cash equivalents: $13.431B; Total debt: $17.877B; Net debt: $4.446B
- Working capital dynamics: Change in working capital $(1.711)B; DSO 83.21 days; DIO 137.92 days; CCC 221.13 days; Payables Outstanding 172.81 days
- Liquidity: Current ratio 1.322; Quick ratio 0.978; Cash ratio 0.531
- Valuation snapshots: P/E ~11.3x; P/S ~3.62x; Dividend yield ~0.69%
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
7.81B
16.03%
-7.92%
Gross Profit
2.21B
-6.31%
-13.59%
Operating Income
470.00M
-16.67%
-42.89%
Net Income
627.00M
62.02%
-54.10%
EPS
0.45
50.00%
-55.88%
Key Financial Ratios
currentRatio
1.32
grossProfitMargin
28.3%
operatingProfitMargin
6.02%
netProfitMargin
8.03%
returnOnAssets
0.89%
returnOnEquity
2.49%
debtEquityRatio
0.71
operatingCashFlowPerShare
$-0.3
freeCashFlowPerShare
$-0.7
dividendPayoutRatio
31.3%
priceToBookRatio
1.12
priceEarningsRatio
11.28
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Notes: The earnings transcript for QQ1 2025 was not provided in the data set. As such, specific management quotes and thematic highlights from the call are unavailable. The analysis below incorporates the reported financial results and prevailing market conditions to infer potential management priorities (e.g., balance sheet discipline, portfolio mix optimization, and growth investments in data center, HPC/Cray, and Aruba). If the transcript becomes available, we can append verbatim quotes and theme-based synthesis (strategy, operations, market conditions).
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Forward Guidance
No formal forward-looking guidance was included in the provided data. Based on the quarterly results and prevailing industry dynamics, the following qualitative outlook is outlined:
- Revenue trajectory: Expect mid-single-digit to low-double-digit growth in FY2025 driven by continued strength in data-center infrastructure, HPC/Cray deployments, and Aruba networking solutions, with potential benefit from hybrid IT adoption and edge compute opportunities.
- Margin progression: Gross margin in the high-20s to low-30% range appears attainable as the mix shifts toward higher-value product families, services, and consumption-based models; operating margin may experience modest expansion if cost controls and utilization improve and if the company sustains disciplined capital deployment.
- Cash flow: Near-term free cash flow may remain negative or near breakeven due to working capital fluctuations and ongoing capex; normalization of working capital and continued free cash flow generation would be a key driver of capital allocation flexibility (dividends, buybacks, and strategic investments).
- Key factors to monitor: global data-center capex cycles, AI/HPC deployment spend, progress on as-a-service offerings, supply chain stability, currency movements impacting USD-denominated reporting, and the pace of strategic initiatives in Aruba and edge ecosystems.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0J51.L Focus
28.34%
6.02%
2.49%
11.28%
0IDR.L
68.30%
31.80%
4.96%
12.05%
0ITS.L
41.30%
6.32%
5.84%
12.78%
0JYA.L
4.28%
2.16%
-0.45%
-154.06%
0KEF.L
0.00%
22.70%
2.61%
11.74%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
HPE presents a balanced risk-reward profile. The company demonstrates durable profitability and a strong liquidity cushion, with revenue showing solid YoY growth and margin stability suggesting resilience in enterprise IT spend. The near-term concern centers on cash flow normalization and sustaining margin expansion amid a heavy capex cycle and working capital fluctuations. If HPE can stabilize operating cash flow, accelerate the transition to higher-margin offerings (HPC/Cray, Aruba services, and as-a-service platforms), and execute portfolio optimization, the stock could show improved earnings quality and shareholder returns. Valuation multiples in the low-to-mid teens on earnings and reasonable price-to-sales reflect a cautious but constructive stance for a technology hardware player exposed to cyclical IT spend. Investors should monitor data-center renewal cycles, AI-driven demand patterns, and progress toward sustainable free cash flow growth as the primary catalysts for re-rating.
Key Investment Factors
Growth Potential
Growth potential centers on strengthening core infrastructure offerings (servers, storage, HPC/Cray), expansion of Aruba networking in hybrid/edge environments, and the shift toward as-a-service/consumption-based models; AI and data-center refresh cycles are potential tailwinds for demand and higher-margin portfolios.
Profitability Risk
Key risks include pro-cyclical IT spending, ongoing supply chain volatility, competitive intensity from hyperscalers and peers, currency headwinds given non-USD reporting and global revenue mix, and execution risks in portfolio optimization and cost discipline.
Financial Position
Strong liquidity with ~$13.85B in cash and equivalents; solid balance sheet with total assets of ~$70.3B and net debt ~$4.45B; favorable debt maturity profile and capacity to fund strategic investments and shareholder returns while maintaining a prudent financial posture.
SWOT Analysis
Strengths
Large cash position and robust liquidity (~$13.85B cash) supporting strategic investments and dividends
Weaknesses
Negative operating cash flow in the quarter (-$0.39B) and negative free cash flow (-$0.918B) signaling working capital and capex headwinds
reliance on enterprise IT spending cycles and hardware refresh demand
high goodwill/intangible asset base (~$18.09B) which could be impaired if demand weakens
Opportunities
AI/HPC market demand via Cray and data-center optimization; Aruba growth in edge networking and security software/services; expansion of as-a-service and consumption-based models; potential acquisitions to accelerate portfolio optimization
Threats
Macro slowdown in enterprise IT budgets; pricing pressure and competitor intensity; supply chain disruptions; currency volatility given USD reporting; technology cycle risk in traditional hardware segments