HPE’s quarterly revenue rose 16% compared to a year ago, but challenges lie ahead.
After sharing a mostly positive revenue report for the first quarter of its 2025 fiscal year, HPE executives detailed a number of challenges the company will face in the coming months, including layoffs, a court case over its proposed buy of Juniper Networks, and the U.S. government’s tariff plan.
Revenue was $7.9 billion, up 16% from the prior-year period, CEO Antonio Neri told Wall Street analysts. Still, “We could have executed better,” Neri said.
At the same time, Neri said the company would begin implementing a cost-cutting program involving layoffs of about 2,500 employees over the next 18 months. HPE employs about 61,000 people worldwide.
“Corporate cost actions will further strengthen our financial profile,” Neri said. “These are not easy decisions to make, as they directly affect the lives of our team members. We will treat all those transitions with the highest level of care and compassion.”
“This tough decision will help streamline our organization, improve productivity and speed up decision making,” added Marie Myers, executive vice president and CFO of HPE. “We expect to achieve at least $350 million in gross savings by fiscal 2027 with about 20% of the savings achieved by the end of this year, the timing of reductions will vary by geography.”
In terms of challenges, Neri said HPE was dealing with a higher-than-normal AI server inventory driven by the fact that the company didn’t respond quickly enough to the shift to next-generation Blackwell GPUs from Nvidia. That situation has been remedied, Neri said. HPE partners with Nvidia to resell a packaged AI server offering.
AI systems backlog rose 29% quarter over quarter to $3.1 billion, and total server revenue totaled $4.29 billion, Myers said.
The company reported Intelligent Edge revenue was down 5% from the prior-year period to $1.1 billion, but Hybrid Cloud revenue was $1.4 billion, up 10% from the prior-year period.
Then there’s the matter of HPE’s proposed $14 billion buy of Juniper Networks that is now being held up by the U.S. Justice Department. A trial has been set for July 9, Neri said.
“The DOJ analysis of the market is fundamentally flawed. We strongly believe this transaction will positively change the dynamics in the networking market by enhancing competition, HPE and Juniper remain fully committed to the transaction, which we expect will deliver at least $450 million in gross annual run rate synergies to shareholders within three years of the deal closing,” Neri said.
“We believe we have a compelling case and expect to be able to close the transaction before the end of fiscal 2025.”
Like other industry players, HPE is trying to negotiate the tariffs that the U.S. has threatened to or implemented against China, Mexico, and other countries.
“In anticipation of this decision, we have been evaluating numerous scenarios and mitigation strategies since December to assess the potential net impact,” Myers said. “We intend to leverage our global supply chain to mitigate aspects of the expected impact with pricing adjustments. Our outlook for the balance of the year reflects our best estimate of the net impact from this tariff policy,” Myers said.
“We build products around the globe close to the customer, because obviously we need to be close to them to meet the turnaround times that they require, but we’re able to shift productions from one side to the other,” Neri said. “What I don’t know, and this is best guess for everyone, what the overall price increases will be and how that will materialize and what that means for the market and demand in the second half of the year,” Neri said.
