Hewlett Packard Enterprise Stock Plunges Amid Weak Q1 2025 Results, Guidance, and Job Cuts

HPE Shares Plunge Over 20% After Disappointing Earnings Report

Hewlett Packard Enterprise (NYSE: HPE) shares took a massive hit in after-hours trading on Thursday, dropping over 20% to $14.33 after the company reported mixed fiscal Q1 2025 results. A weaker-than-expected outlook, along with announced job cuts, further fueled the decline as concerns over HPE’s server business mounted.

Earnings Miss Sparks Heavy Selling

HPE reported adjusted earnings per share (EPS) of $0.49, slightly missing analyst expectations of $0.50. Despite a modest improvement from the year-ago EPS of $0.48, investors responded negatively to the underwhelming results.

Revenue Beats Expectations But Fails to Impress

On the revenue front, HPE delivered $7.9 billion, surpassing the $7.81 billion consensus estimate. This marked a 16% year-over-year (YoY) increase, representing the company’s fourth consecutive quarter of double-digit growth, according to CEO Antonio Neri. However, concerns about slowing growth in key segments overshadowed this positive aspect.

Server Growth Slows, AI Revenue Expected to Ramp Up

HPE’s server revenue, which accounts for 54% of total sales, grew 29% YoY to $4.3 billion. While this figure initially appeared strong, it marked a deceleration from the 32% growth reported in the previous quarter, raising concerns about future momentum.

Mixed Performance Across Business Segments

Beyond servers, other segments exhibited varied results:

• Hybrid Cloud: Revenue increased 10% YoY to $1.4 billion but decelerated from the prior quarter’s 18% growth.
• Intelligent Edge: Revenue declined 5% YoY to $1.1 billion, though this was an improvement over the 20% drop in Q4.
• Gross Margin Pressure: HPE’s non-GAAP gross margin shrank by 680 basis points YoY to 29.4%, prompting concerns about profitability and operational efficiency.

During the earnings call, CFO Marie Myers cautioned that server revenue growth would slow to low double-digits in 2025. However, she remained optimistic about AI-driven revenue acceleration in the latter half of the year.

Weak Guidance Weighs on Investor Sentiment

HPE’s forward guidance fell short of Wall Street expectations, exacerbating the post-earnings stock decline.

Q2 2025 Outlook:

• EPS: $0.28 to $0.34 (vs. analyst estimate of $0.50)
• Revenue: $7.2 billion to $7.6 billion (vs. analyst estimate of $7.93 billion)

Full-Year 2025 Projections:

• EPS: $1.70 to $1.90 (vs. analyst estimate of $2.13)
• Revenue Growth: 7% to 11% (constant currency basis)

The disappointing outlook fueled investor fears that HPE’s growth trajectory may be losing steam amid market headwinds.

Job Cuts and Cost Reduction Plan Announced

In a strategic move to enhance efficiency, Hewlett Packard Enterprise’s board approved a cost reduction program, which includes job cuts. The initiative, set to run through fiscal 2026, aims to achieve $350 million in gross savings by 2027.

Layoffs are expected to impact multiple departments as the company seeks to streamline operations and improve profitability in the face of slowing server growth.

Merger with Juniper Networks Faces DOJ Roadblock

Adding to HPE’s challenges, the company provided an update on its proposed $14 billion acquisition of Juniper Networks (NYSE: JNPR). The merger, announced in January, is facing opposition from the U.S. Department of Justice (DOJ), which has filed a lawsuit to block the deal.

Both HPE and Juniper have submitted responses to the DOJ’s concerns, but the regulatory battle introduces additional uncertainty to HPE’s near-term outlook. If successful, the merger could strengthen HPE’s networking and AI capabilities, but legal hurdles may delay or even derail the transaction.

Retail Investor Sentiment Remains Surprisingly Bullish

Despite the sharp stock decline, retail investor sentiment on platforms like Stocktwits spiked to ‘extremely bullish’ (82/100), up from the prior day’s ‘bullish’ rating. Message volume surged to ‘extremely high’ levels, indicating heightened interest in HPE’s volatile trading session.

Bullish Arguments:

Optimistic investors highlighted several factors supporting a potential rebound:

• Strong Free Cash Flow: HPE generated $1 billion in free cash flow, providing financial flexibility.
• Solid Revenue Growth: The company’s projected 9% full-year revenue growth suggests resilience.
• Attractive Valuation: Following the sell-off, HPE’s valuation appears compelling to value-oriented investors.

Despite these bullish takes, long-term growth concerns and competitive pressures in the server market remain key risks.

: What’s Next for HPE?

With HPE stock now down 16% year-to-date, investors are closely watching the company’s next moves as it navigates an increasingly challenging business environment.

• Near-Term Challenges: Weak guidance, slowing server growth, margin pressures, and regulatory hurdles surrounding the Juniper Networks merger present significant risks.
• Long-Term Opportunities: AI-driven revenue growth, cost-cutting measures, and potential synergies from the Juniper acquisition could provide upside if successfully executed.

Ultimately, HPE faces a critical period as it works to restore investor confidence and chart a path toward sustainable growth in a rapidly evolving tech landscape.