Hewlett Packard Enterprise Company (HPE 0.38%) released its Q2 FY2025 earnings on June 3, reporting revenue of $7.6 billion, a 7% year-over-year increase, and non-GAAP EPS of $0.38, exceeding the high end of guidance.

Management raised the lower end of its full-year non-GAAP EPS range and reaffirmed progress on operational remediation, while navigating sector volatility and implementing strategic cost initiatives.

Operational Discipline Yields Margin Recovery Amid Macro Headwinds

After encountering execution challenges in the server segment, the company enacted corrective pricing, inventory, and discount controls and a $481 million reduction in inventory. The broader IT sector is currently contending with tariff uncertainty, evolving AI-related policies, and dynamic demand patterns that impact short-cycle order visibility.

"Through focused and disciplined execution, we have addressed the operational challenges we experienced in our service segment last quarter. We expect these actions will contribute to margin improvement through fiscal year-end."
— Antonio Neri, President and Chief Executive Officer

Successfully engineering tangible operational improvements reinforces management’s ability to adapt to challenging external environments, supporting credible margin recovery and bolstering long-term profitability targets.

AI Systems and Subscription Model Drive Portfolio Transformation

HPE’s AI systems recorded $1.1 billion in new net orders and more than $1 billion in revenue, while HPE GreenLake’s subscription annualized revenue run rate (ARR) exceeded $2.2 billion, up 47% year over year. Orders for the Alletra MP storage platform grew above 75% year over year for four consecutive quarters, underlining rapid adoption of next-generation hybrid cloud solutions.

"Software and services continue to be more than 70% of our AIR demonstrating a portfolio shift to higher growth and higher margin areas of the stack."
— Antonio Neri, President and Chief Executive Officer

Aligning the company with secular IT industry trends favors as-a-service consumption models over transactional hardware sales.

Strategic Workforce and Cost Programs Enable Structural Efficiency

Headcount dropped to just under 59,000 – the lowest since HPE became an independent entity – with Catalyst initiatives rolling out to further streamline operations via automation, flattened hierarchies, and workflow digitization. Savings from these programs, including a 5% workforce reduction, are incorporated in FY2025 guidance and supported by $350 million in anticipated charges.

"We are focused on rethinking the business not just reducing our costs, but transforming the way we operate, we'll keep you regularly updated on our progress."
— Marie Myers, Chief Financial Officer

Embedding structural cost control and agile practices enhances HPE’s capacity to scale profitably, strengthening competitive positioning.

Looking Ahead

Management tightened full-year constant currency revenue growth expectations to +7% to +9% year over year, with non-GAAP diluted net EPS raised to a range of $1.78 to $1.90. Operating margin (non-GAAP) is expected to end the year above 9%, with the server segment specifically forecasted to reach approximately 10% operating margin exiting the fourth quarter.

The Juniper Networks transaction remains on track to close before FY2025-end, expected to deliver at least $450 million in annual run-rate synergies within thirty-six months of closing.