Hewlett Packard Enterprise (HPE), the American data server equipment maker, is planning to lay off around 2,500 employees over the next 18 months as part of a cost-cutting program. The job cuts were announced after the company reported disappointing financial results for the first quarter of FY25.
As of October, HPE’s total workforce stood at 61,000. By cutting around 5% of its workforce, the firm aims to save $350 million by 2027.
As part of the cuts, the company also plans to reduce other discretionary spending.
HPE reported a 16% revenue growth in its latest quarterly earnings, but CEO Antonio Neri expressed disappointment with the results.
He noted that the company faced challenges due to an inventory buildup of older AI servers, which were being replaced with newer models featuring Nvidia's latest chips.
Additionally, HPE had to sell traditional servers at discounted prices, impacting profits.
Weak Earnings, Guidance Lead to Share Sell-off
The server maker's revenue for the quarter ending January 31 rose 16% year-on-year to $7.9 billion. The company reported a profit of $598 million, or 44 cents per share.
HPE's quarterly revenue showed mixed results: Server revenue rose 29% to $4.3 billion, Hybrid Cloud revenue grew 10% to $1.4 billion, and Financial Services revenue remained flat at $873 million. However, Intelligent Edge revenue declined 5% to $1.1 billion. Operating profit margins ranged from 7.0% to 27.4% across segments, with the Financial Services segment delivering a return on equity of 16.4%, up 1 percentage point from the previous year.
HPE expects its second-quarter revenue to be between $7.2 billion and $7.6 billion. According to Reuters, analysts had expected Q2 FY25 revenue of $7.93 billion. Its profit forecast also fell short of expectations.
For the full year, HPE forecasts revenue growth of 7-11% in constant currency.
Hewlett Packard Enterprise’s weak forecast triggered a nearly 20% drop in its shares on March 6.
HPE CEO Antonio Neri said the company plans to adjust product prices and leverage its global supply chain to minimize the impact of imposed and potential tariffs. During a post-earnings call with analysts, Neri assured that HPE's forecast accounts for the estimated effects of US tariff policies.
