HPE revenues for Q4 2024 rose 15 percent to a record $8.5 billion boosted by AI server sales and Alletra storage arrays.
It reported GAAP net income of $1.34 billion, 109 percent higher than a year ago. Full-year revenues were $30.13 billion, 3.4 percent higher year-on-year, with a profit of $2.55 billion, 26 percent higher than a year ago. The company also added more than 9,000 new customers. HPE generated a record-breaking $2.3 billion in free cash flow, exceeding its guidance of at least $1.9 billion for the year.
CEO Antonio Neri said in the earnings call: “We had an exceptional fourth quarter to cap off a strong year. In actual dollar terms, we generated a record quarterly revenue of $8.5 billion, up 15 percent year-over-year, exceeding $8 billion for the first time in our history. Our results reflect the continued adoption of HPE GreenLake and the acceleration of our revenue growth in AI.”
The “Q4 and fiscal year 2024 results exceeded our expectations for revenue, dilute, and net earnings per share and free cash flow. We draw sequential revenue growth across each of our segments, a continuation of the positive momentum we saw build throughout the year across our business.”
“Q4 constituted our third consecutive quarter of improved year-over-year growth rates and revenue … There was record server revenue of $4.7 billion, up 31 percent year-over-year, a third consecutive quarter of double-digit growth.”
Financial summary
- Gross margin: 30.9 percent, down 3.9 points year-on-year
- Diluted EPS: $0.99, up $0.50 from the prior year
- Cash flow from operations: $2.0 billion
- Free cash flow: $1.5 billion
- Capital returns to shareholders of $219 million in the form of share repurchases and dividends
HPE splits its revenues into five main buckets and their fortunes differed:
- Servers: $4.7 billion, up 32 percent
- Hybrid Cloud: $1.6 billion, up 18 percent
- Intelligent Edge: $1.1 billion, down 20 percent
- Financial services: $893 million, up 2 percent
- Corporate Investments & Other: $262 million, down 2 percent
Servers runs the gamut from supercomputers such as El Capitan and GPU-enhanced servers (both grouped into AI systems), to traditional ProLiants. Neri said: “Our server business was a key driver of record quarterly revenue and grew double digits year-over-year for the third consecutive quarter … Sequentially, AI systems revenue was up 16 percent to $1.5 billion, exiting fiscal year 2024 with $6.7 billion in cumulative orders since Q1 of fiscal year 2023.”
CFO Marie Myers added: “Server revenue achieved an all-time high of $4.7 billion, up 31 percent year-over-year and up 9 percent quarter-over-quarter with sequential growth in AI systems and traditional servers. The traditional compute business continued its momentum during the quarter and grew sequentially for the fourth consecutive quarter, driven by ongoing refreshes to our [ProLiant] Gen11 server products.”
The Hybrid Cloud segment consists of on-premises gear and the GreenLake subscription business spanning the on-premises and public cloud environments. There are now some 39,000 GreenLake customers.
Hybrid Cloud’s growth was led by HPE’s Private Cloud offerings and the Alletra Storage MP arrays, which were announced 20 months ago, in April 2023. Neri said: “Customer adoption of our HPE Alletra Storage MP solutions continues to rise at an accelerated pace. Since launch, we have sold approximately 3,000 systems.” That’s an average rate of 150 systems per month.
He said: “Alletra MP Storage today is … already on a $1 billion annualized basis,” with Myers saying: “Alletra MP remains ahead of our expectations and is the fastest ramping storage product in our company’s history.”
HPE is developing the array, with Neri saying: “We continue to invest in our multi-protocol HPE Alletra Storage MP platform as we transition our storage portfolio to an AI-driven, cloud-native, and disaggregated architecture.”
The Alletra Storage MP platform has a similar architecture to VAST Data’s storage, and HPE OEMs VAST Data’s file storage software. The Alletra MP product is becoming the primary storage system, with other Alletra systems appearing vulnerable to replacement by MP derivatives.
Myers said: “We continued our product transition within storage and ended the year with Alletra MP accounting for a meaningful portion of total storage orders. Our transition to more software-defined storage will drive a greater mix of higher-margin recurring revenue over the long-term.”
The networking side of things, mostly the Aruba-based Intelligent Edge, is trending down and HPE is hoping that the Juniper acquisition, which adds datacenter networking gear like routers to its portfolio, will revive it. Edge achieved its third consecutive quarter of order growth.
Neri said: “Networking needs to catch up to the demands of AI. And that’s why we believe that the combination of HPE and Juniper is so important to drive that next wave of innovation. But networking clearly is going to be a topic for 2025 and beyond.” He anticipates the acquisition deal will close in the early part of 2025.
One problem in the quarter was the de-booking of a very large order, with Neri saying: “We booked $1.2 billion of new orders in Q4. However, we de-booked a large order, which was $700 million during the same quarter because we had concern with a specific customer. … It has nothing to do with competitive. It has nothing to do with anything else. We had a concern with a specific customer, and we decided it was prudent to de-book it.” Walking away from a $700 million order must have hurt.
Neri added a tad more color answering an analyst’s question about this: “We look at the customers from a variety of angles. Obviously, the ability to verify end user, ability to obviously fulfill the payment of the orders, and risk associated with allocated components and the like. And we felt that particular order had a lot of risk and we decided not to fulfill it because of our stringent controls. And my view is that this was the right thing to do.”
The outlook is for mid-teens percent revenue growth next quarter, in line with normal seasonality on a sequential basis. No actual revenue number was provided, with Myers coupling this with the Juniper deal: “We expect to close the Juniper transaction in early 2025 at which time we will provide combined company guidance for fiscal 2025.”
Neri said: “I’m excited about 2025. I think we have an amazing set of assets that will continue to drive profitable growth and drive shareholder value.”
