Hewlett Packard Solid Performance in FY 2023, Eyes AI Growth

Hewlett Packard Enterprise (NYSE:HPE) reported strong performance in fiscal year 2023, with record-breaking non-GAAP diluted net earnings per share and free cash flow, according to the latest earnings call. The company's Intelligent Edge and HPC and AI segments, as well as the HPE GreenLake platform, drove its revenue and profit growth. HPE also raised its dividends for 2024 and expressed confidence in delivering value for shareholders in fiscal year 2024 and beyond.

Key takeaways from the call:

i. HPE achieved significant financial success in FY 2023, with its Intelligent Edge segment being the largest driver of revenue and profit growth.

ii. The company ended the year with its highest gross margin, highest operating profit, and highest annual revenue in four years.

iii. HPE's as-a-service orders grew 11% year-over-year in Q4, and cumulative as-a-service TCV reached nearly $13 billion.

iv. The company generated $2.3 billion in free cash flow in Q4 and $2.2 billion in FY '23, surpassing their guidance.

v. The company's FY '24 guidance includes 2% to 4% revenue growth in constant currency and a non-GAAP structural tax rate of 15%.

vi. HPE plans to increase its dividend by 8% in FY '24 and aims to return 65% to 75% of free cash flow to shareholders between FY '24 and FY '26.

HPE executives highlighted the strong demand for AI and the company's ability to capture it. The company's strategy is focused on driving top-line growth and expanding gross margins, with a non-GAAP gross margin of 34.8% in Q4. The company also reiterated its free cash flow guidance of $1.9 billion to $2.1 billion.

HPE's CEO, Antonio Neri, discussed the company's collaboration with NVIDIA (NASDAQ:NVDA) and their joint plan to win in different market segments. He highlighted HPE's unique software for running supercomputers and AI systems at scale, including technologies for checkpointing and networking interconnect. Neri also mentioned their machine learning development environment and the use of NVIDIA's AI enterprise software and GPUs.

HPE's revenue mix and the flexibility of its Gen 11 server, which can accept different processing units, were also discussed during the call. The company expects a quick recovery in its storage business in Q1, with improved revenue mix and moderation in operating expenses. The company's HP (NYSE:HPQ) Electra product experienced significant growth, although some revenue was deferred due to the subscription model.

The company expressed confidence in its strategic investments and innovation, which have led to revenue growth and increased profit. As a result, HPE plans to raise its dividend for 2024. The call concluded with Neri expressing wishes for a fulfilling year-end and holiday season.

Technical Analysis
HPE is trading in the middle of its 52-week range and above its 200-day simple moving average. Investors are still evaluating the share price, but the stock still appears to have some upward momentum. This is a positive sign for the stock's future value.

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