Hewlett Packard Enterprise reported better-than-expected quarterly results though its server and storage businesses failed to keep up with the revenue growth of competitors.
For the third quarter, HPE earned an adjusted 44 cents per share as total revenue rose 4% to $7.76 billion. Analysts had expected earnings of 37 cents per share on revenue of $7.68 billion.
It was the second quarter in a row in which adjusted earnings per share doubled. Earnings were boosted in part by the rescheduling of tax payments from the third to fourth quarter.
“HPE has delivered a strong Q3 and our results prove we have the right strategy to deliver in the areas of highest value for our customers,” CEO Antonio Neri said in a news release. “Solid execution across each of our business segments, combined with market momentum, will enable us to deliver FY18 revenue and earnings well beyond our original outlook provided at our securities analyst meeting last year.”
Revenue from HPE’s Hybrid IT business, its largest segment that includes compute (server), storage, and data center networking products, rose 3% to $6.24 billion. Compute revenue was up 5%, while storage revenue increased 1%.
But according to TheStreet, HPE’s latest earnings report “hardly puts to rest the long-term growth concerns that have swirled around the IT hardware giant for some time. Particularly since HPE’s numbers benefited from a pretty favorable macro and IT spending backdrop.”
The publication noted that rivals such as Cisco Systems, IBM, and NetApp “have posted stronger server and/or storage numbers in recent weeks amid a favorable IT spending environment and solid Intel server CPU and IBM mainframe upgrade cycles.”
Additionally, HPE’s shipments of commodity servers to “tier-1” cloud service providers have declined since its decision in 2017 to exit the business.
As cloud service providers “keep growing their capital spending, and as more enterprise server workloads move to public cloud infrastructures, HPE’s limited exposure to tier-1 cloud firms is a clear growth handicap,” TheStreet said.
HPE also said non-GAAP gross margin improved to 30.7% from a year-ago level of 29.3%.