Hewlett Packard 2025 Q2 Earnings Misses Targets with Net Income Falling 434%

Hewlett Packard (HPE) reported its fiscal 2025 Q2 earnings on June 3, 2025. The company experienced a 6% increase in revenue compared to the prior year, reaching $7.63 billion. Despite this growth, HPE fell short of expectations in net income, reporting a substantial loss. The company narrowed its full-year profit forecast and raised its non-GAAP diluted EPS guidance, predicting revenue growth between 7% and 9%. Analysts had expected adjusted EPS of $0.32, which HPE surpassed with a reported $0.38, indicating operational improvements despite the overall net loss.

Revenue
Hewlett Packard's revenue climbed by 5.9% to reach $7.63 billion in Q2 2025, compared to $7.20 billion in Q2 2024. The Server segment contributed $4.06 billion, showcasing robust performance. The Hybrid Cloud sector also demonstrated impressive growth, generating $1.45 billion. Intelligent Edge reported revenue of $1.16 billion, while Financial Services added $856 million. Additionally, Corporate Investments and Other accounted for $194 million. After eliminating intersegment net revenue, the total consolidated net revenue stood at $7.63 billion.

Earnings/Net Income
Hewlett Packard experienced a significant shift from a profit of $0.24 per share in 2024 Q2 to a loss of $0.82 per share in 2025 Q2, reflecting a 441.7% negative change. The company reported a net loss of $1.05 billion for 2025 Q2, compared to a net income of $314 million in 2024 Q2, marking a 434.4% deterioration. Despite sustained profitability for 11 years in the corresponding fiscal quarter, the company faced operational challenges, resulting in unfavorable EPS performance.

Price Action
The stock price of Hewlett Packard edged up 2.14% during the latest trading day, decreased by 1.39% over the most recent full trading week, and saw a 7.80% rise month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing HPE shares following a revenue beat and holding for 30 days yielded moderate returns, albeit with considerable volatility and risk. The compound annual growth rate of the strategy was 8.70%, trailing the benchmark by 27.43 percentage points. The strategy experienced a maximum drawdown of -47.58% and a Sharpe ratio of 0.24, indicating a challenging risk-return profile. This underlines the importance of effective risk management when navigating such volatile scenarios. Investors employing this strategy need to be prepared for fluctuations and potential losses, even if the initial revenue results appear positive.

CEO Commentary
Antonio Fabio Neri, CEO, stated that HPE delivered solid results in Q2, with revenue growth of 7% year-over-year, driven by higher AI system revenue, strong performance in Intelligent Edge, and robust growth in the Hybrid Cloud segment. He acknowledged operational challenges in the Server segment but emphasized that focused actions have been implemented to improve profitability. Neri expressed optimism about the company's strategy, noting a strengthened pipeline and the successful rollout of new pricing analytics and inventory management. He highlighted the importance of addressing these challenges swiftly to enhance shareholder value and reaffirmed confidence in future growth opportunities.

Guidance
HPE tightens its revenue outlook for fiscal 2025, now expecting year-over-year growth of 7% to 9%. The company raises its non-GAAP diluted EPS guidance to a range of $1.78 to $1.90, reflecting lower-than-anticipated tariff impacts and operational improvements. For Q3, HPE anticipates revenue between $8.2 billion and $8.5 billion, with expected operating margins improving sequentially in the Server segment, targeting approximately 10% by Q4. The forecast for free cash flow remains around $1 billion, with GAAP diluted EPS expected between $0.24 and $0.29.

Additional News
In recent developments, Hewlett Packard Enterprise has been involved in merger and acquisition activities that are capturing market attention. The company announced its proposed acquisition of Juniper Networks, Inc., aiming to expand its portfolio and enhance technological offerings. Furthermore, HPE's collaboration with NVIDIA continues to drive innovation, particularly in generative AI adoption within enterprises. The partnership has led to the integration of NVIDIA's latest GPUs into HPE's supercomputers and AI systems, achieving record-breaking performance for AI inferencing. Additionally, HPE has been active in returning capital to shareholders, with $221 million distributed through dividends and share repurchases in Q2 2025.