Hewlett Packard Enterprise (HPE) has announced a decision to cut its workforce by approximately 2,500 roles following weaker-than-expected results for the first quarter of fiscal 2025. CEO Antonio Neri communicated that around 3,000 employees might leave the organisation, with an additional 500 expected to exit through natural attrition, as reported by Bloomberg.
The announcement comes in the wake of a significant 19% decline in HPE’s stock value during extended trading sessions. This downturn occurred after the company presented a more cautious outlook during its earnings call. “We took actions in the quarter to streamline costs, which helped us offset other impacts to profitability,” said Myers. “We continue to align our strategy and execution with long-term growth trends that will fuel our performance.”
HPE is implementing a cost-cutting initiative aimed at reducing structural operating costs while focusing on profitable growth. This plan will be executed through fiscal year 2026 and aims to achieve gross savings of around $350m by fiscal year 2027 via workforce reductions. To realise these savings, the edge-to-cloud company anticipates incurring cash charges of $350m over two years, with roughly $250m expected in fiscal year 2025, and the remaining $100m in fiscal year 2026.
Despite a surge in demand driven by AI technologies, high expenses associated with AI components have led to lower profit margins for HPE than anticipated. Additionally, HPE faced surplus inventory following Nvidia’s switch to Blackwell GPUs, leading to significant discounts on older servers.
Looking ahead, HPE projects fiscal 2025 revenue growth between 7% and 11%, while forecasting GAAP operating profit growth ranging from negative 24% to negative 9%. Non-GAAP operating profit growth is expected between negative 10% and 0%. The company also estimates GAAP diluted net earnings per share (EPS) between $1.15 and $1.35, with non-GAAP diluted net EPS projected between $1.7 and $1.9. For fiscal year 2025, HPE anticipates generating approximately $1bn in free cash flow.
The challenges are not limited to HPE, as its parent company, HP, has also undergone workforce reductions, recently cutting around 2,000 positions.
In its first quarter fiscal 2025 results, HPE reported revenue of $7.9bn, marking a 16% increase from the previous year. The operating profit margin for servers stood at 8.1%, compared to 11.4% in the prior year period. There was a notable increase in the company’s server revenue, which reached $4.3bn. This figure represents a 29% rise from the same period last year.
Regulatory challenges with Juniper Networks acquisition
HPE’s Intelligent Edge segment experienced a downturn, with revenue declining to $1.1bn, marking a 5% decrease compared to the previous year. The operating profit margin for this segment was 27.4%, down from 29.4% a year earlier. Conversely, Hybrid Cloud revenue saw growth, increasing to $1.4bn, which is a 10% rise from the prior-year period in actual dollars and an 11% increase when accounting for currency variations. The operating profit margin for Hybrid Cloud improved significantly to 7%, up from 4% in the previous year.
Meanwhile, HPE continues to encounter regulatory obstacles concerning its planned acquisition of Juniper Networks for $14bn. Although the European Union has approved the deal, antitrust authorities in both the UK and US have cited competition concerns. In late January, the US Department of Justice filed a legal challenge seeking to block the merger, arguing it would concentrate market power significantly. In response, HPE and Juniper intend to dispute these claims in court, with proceedings set to begin on 9 July 2025. The companies maintain that the merger would enhance competition and strengthen the US networking infrastructure by offering more innovation and choices for customers.
Read more: US DOJ files lawsuit against HPE’s $14bn acquisition of Juniper Networks
