Analyst(s): Fernando Montenegro
Publication Date: June 5, 2025
HPE’s Q2 FY 2025 earnings report highlights broad strength across its core segments, driven by improved server execution, hybrid cloud momentum, and ongoing edge recovery. Cost discipline and AI system traction helped offset margin pressures, while a raised full-year EPS outlook and AI pipeline strength signal more confidence entering into H2 FY 2025.
What is Covered in this Article:
- HPE’s Q2 FY 2025 financial results
- Server recovery and AI systems momentum driving upside
- Hybrid Cloud strength led by storage, GreenLake, and Alletra MP gains
- Intelligent Edge rebound supported by Wi-Fi 7 demand and Aruba Central scale
- Structural cost reduction program powered by automation and AI tools
- Updated FY 2025 guidance and visibility into H2 FY 2025
The News: Hewlett Packard Enterprise (NYSE: HPE) reported Q2 FY 2025 revenue of $7.63 billion, up 6% year-on-year (YoY) and ahead of the $7.46 billion consensus estimate. Server revenue rose 6% YoY to $4.06 billion, Hybrid Cloud revenue grew 13% YoY to $1.45 billion, and Intelligent Edge revenue increased 7% YoY to $1.16 billion. Financial Services revenue declined 1.3% YoY to $856 million.Non-GAAP gross margin stood at 29.4%, down from 33.1% YoY, while non-GAAP operating margin declined to 8.0% from 9.5% in the prior year. Non-GAAP diluted earnings per share (EPS) was $0.38, down from $0.42 YoY but above the $0.33 consensus estimate.
“We made significant progress against the cost reduction program we announced last quarter, which we expect will contribute to our results in future quarters,” said Marie Myers, executive vice president and CFO of Hewlett-Packard Enterprise. “However, we continue to navigate a complex macroeconomic and geopolitical landscape, and remain prepared to take additional action in the back half of the year to deliver against our FY 2025 outlook.”
HPE Q2 FY 2025 Revenue Tops Estimates on Server and Cloud Gains
Analyst Take: HPE delivered a strong Q2 FY 2025 performance marked by broad-based segment growth and improving execution in its server business. While non-GAAP margins were lower YoY, the company posted revenue and earnings above consensus, with strong AI systems conversion and cost reduction initiatives helping support its outlook.
Server Recovery Gains Traction, AI Systems Support Upside
HPE’s server segment saw a 6% YoY revenue increase and reached the high end of management’s expectations. The recovery was driven by improved execution following Q1 challenges tied to pricing, discounting, and elevated inventory. Newly implemented pricing analytics, tighter deal desk controls, and inventory discipline helped mitigate backlog pricing headwinds, with management reaffirming its target to exit Q4 FY 2025 at approximately 10% operating margin. AI system revenue conversion exceeded expectations, reaching above $1 billion, up from $900 million in the prior quarter, aided by improved customer readiness. Net new AI orders reached $1.1 billion, with one-third from enterprise clients. HPE exited Q2 FY 2025 with a $3.2 billion AI backlog and a pipeline multiple of that, reinforcing strong momentum heading into Q3 FY 2025. Looking ahead, the execution of corrective actions and strength in AI demand should be positive for the server business.
Hybrid Cloud Delivers for a Third Straight Quarter
Hybrid Cloud revenue increased 13% YoY, marking the third consecutive quarter of double-digit growth. All product lines contributed, with storage seeing notable traction. Operating margin in the segment improved to 5.4% from 1.0% a year ago, demonstrating the benefits of portfolio optimization and cost management. The Alletra MP platform continued its momentum with triple-digit revenue growth and 75%+ YoY order growth for the fourth quarter in a row. GreenLake subscriptions also contributed to growth, with Annualized Infrastructure Revenue (AIR) from software and services now exceeding 70%. Management noted the transition to a subscription model presents near-term revenue headwinds but enhances long-term profitability. Meanwhile, the recent launch of HPE Alletra MPX 10,000 SDK, integrated with NVIDIA’s AI data platform, positions HPE to bring enterprise data into orchestrated AI pipelines — aligning closely with expected AI workload demand. The segment’s performance, product lineup, and increasing software-led revenue mix reinforce HPE’s position in hybrid cloud infrastructure.
Intelligent Edge Returns to Growth, Momentum Builds Around Wi-Fi 7
HPE’s Intelligent Edge segment rebounded after five quarters of revenue contraction, posting 7% YoY growth and a 23.6% operating margin. Segment performance was lifted by higher demand across campus switching and data center networking, with orders up double digits in both areas. Wi-Fi 7 demand surged, with sequential orders up significantly, supporting a broader networking recovery. The segment also benefited from enhanced AI-driven features in Aruba Networking Central, which expanded zero-trust capabilities and now manages over 5 million devices. HPE has positioned this as a key enabler of recurring revenue, further evidenced by AIR subscription growth. This expansion of Aruba Central’s capabilities and device footprint reinforces Intelligent Edge’s role as a contributor to HPE’s software- and subscription-led AIR growth.
Focus on Structural Efficiency with AI-Driven Cost Optimisation
Operational efficiency remains a central pillar of HPE’s near-term execution strategy. Q2 FY 2025 marked meaningful progress on the company’s $350 million cost reduction program, which includes a 5% workforce cut, flattening of organizational layers, and other initiatives targeting operational efficiency, portfolio simplification, and the use of AI to enhance productivity. A key example was the adoption of Zora AI CFO insights agents – co-developed with Deloitte and deployed on HPE’s private cloud platform – to automate some reporting. Management noted this has already accelerated reporting cycles by ~50% and reduced processing costs by ~25%. The company ended Q2 FY 2025 with its lowest headcount since becoming independent and is actively leveraging automation to scale these structural savings further into FY 2026.
Guidance and Final Thoughts
HPE raised the bottom end of its full-year non-GAAP EPS guidance range to $1.78-$1.90 (prior: $1.70-$1.90) and lowered its expected tariff impact by $0.03, indicating better-than-expected macro mitigation and improved execution. Q3 FY 2025 revenue is guided at $8.2-$8.5 billion (in line with consensus), supported by a large AI systems deal. The narrowed EPS range reflects increased visibility and execution confidence. Management’s conviction in AI pipeline conversion, structural cost savings, and portfolio momentum provides a clearer line of sight into profitable growth through the remainder of FY 2025.
See the complete press release on HPE’s Q2 FY 2025 financial results on the Hewlett Packard Enterprise website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
HPE Q1 FY 2025: Server Boom Fuels Revenue Jump, But Margins Pressured
RSAC 2025: HPE Transforms Cloud Security with ZTNA and Private Cloud Boosts
HPE and Intel – Building Future-ready Compute Platforms Together
Author Information
Fernando Montenegro serves as the Vice President & Practice Lead for Cybersecurity at The Futurum Group. In this role, he leads the development and execution of the Cybersecurity research agenda, working closely with the team to drive the practice's growth. His research focuses on addressing critical topics in modern cybersecurity. These include the multifaceted role of AI in cybersecurity, strategies for managing an ever-expanding attack surface, and the evolution of cybersecurity architectures toward more platform-oriented solutions.
Before joining The Futurum Group, Fernando held senior industry analyst roles at Omdia, S&P Global, and 451 Research. His career also includes diverse roles in customer support, security, IT operations, professional services, and sales engineering. He has worked with pioneering Internet Service Providers, established security vendors, and startups across North and South America.
Fernando holds a Bachelor’s degree in Computer Science from Universidade Federal do Rio Grande do Sul in Brazil and various industry certifications. Although he is originally from Brazil, he has been based in Toronto, Canada, for many years.
