Hewlett Packard Enterprise (HPE) reported second-quarter financial results that exceeded Wall Street’s revenue and profit estimates, driven by heightened demand for AI servers and hybrid cloud solutions. Shares of the company jumped 3.2% in extended trading following the announcement, Reuters reported.

In the quarter ending 30 April 2025, HPE recorded revenue of $7.6bn, marking a 6% increase in actual dollars compared to the prior-year period. The server segment, the cornerstone of HPE’s business, generated $4.1bn in revenue in Q2 FY25, representing a 6% increase from the same period last year. The Intelligent Edge division reported revenue of $1.2bn, up 7% year-on-year (Y-o-Y).

Key HPE business segments report strong growth

HPE’s Hybrid Cloud segment, meanwhile, recorded a 13% jump in Y-o-Y quarterly revenue to $1.5bn. However, its financial services revenue declined by 1.3%, totalling $856m in the same period. The HPE Board of Directors also declared a regular cash dividend of $0.13 per share on the company’s common stock, payable next month.

“We drove higher revenue year-over-year in Q2 across Server, Intelligent Edge, and Hybrid Cloud, and, importantly in Server, we improved margin performance over the course of the quarter,” said HPE executive vice-president and CFO Marie Myers. “We are maintaining our focus on achieving efficiencies and streamlining operations across our businesses to position HPE for the future and deliver financial results aligned with our fiscal 2025 outlook.”

HPE reports margin squeeze and cash flow issues

Despite revenue growth, HPE faced margin pressures and reported negative cash flow for the quarter. The company posted a GAAP diluted net loss per share of $0.82, compared to $0.24 in the previous year, largely due to a $1.36 billion impairment of legacy goodwill, which impacted GAAP diluted net earnings per share (EPS) by $1.03. Non-GAAP EPS stood at $0.38, a 10% decline from the prior year.

HPE’s operational cash flow was negative $461m, down by $1.55bn from the previous year. Additionally, the free cash flow was negative $847m in the second quarter. Despite these challenges, HPE anticipates generating approximately $1bn in free cash flow for the full fiscal year 2025, suggesting potential improvement in the latter half of the year.

Looking ahead, HPE forecasts third-quarter revenue between $8.2bn and $8.5bn, above the estimated figure of $8.17bn. The company projects GAAP diluted net EPS to range from $0.24 to $0.29 and non-GAAP diluted net EPS to be between $0.40 and $0.45.

For fiscal 2025, HPE expects revenue growth of 7%-9% in constant currency, with GAAP diluted net EPS ranging from $0.30 to $0.42 and non-GAAP diluted net EPS between $1.78 to $1.90.

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