Hewlett Packard Enterprise (HPE) has forecasted quarterly revenue growth below estimates, triggering a nearly 20% drop in its shares during after-hours trading. The company cited uncertainty stemming from the U.S. tariff war as a key factor affecting its server business.
In a post-earnings call with analysts on Thursday, CEO Antonio Neri outlined HPE’s strategy to mitigate the impact of tariffs, including adjusting product prices and leveraging its global supply chain. Neri emphasized that the company’s forecast reflects its “best estimate of the net impact from U.S. tariff policy.”
Tariff Impact and Global Operations
The U.S. tariff landscape has become increasingly complex, with President Donald Trump recently exempting some goods from Canada and Mexico under a North American trade pact until April 2. However, a 25% tariff on steel and aluminum imports from these countries remains in effect. Additionally, a 10% duty on Chinese goods, imposed on February 4, took effect this week, further complicating global trade dynamics.
HPE, which derives nearly 64% of its net revenue from sales outside the U.S., faces significant exposure to these tariffs. The company’s production and final assembly operations are located in Mexico and China, among other regions. CFO Marie Myers noted that while HPE expects to mitigate the tariff impact significantly in the second half of the year, the second quarter will see a more pronounced effect as mitigation measures take time to implement.
Financial Forecast and Workforce Reduction
HPE projected second-quarter revenue between $7.2 billion and $7.6 billion, falling short of analysts’ expectations of $7.93 billion, according to LSEG data. The company’s profit forecast also missed estimates.
In response to these challenges, HPE announced a cost-saving program that includes laying off 5% of its global workforce, or approximately 2,500 employees. The company, which had nearly 61,000 employees as of October 31, aims to deliver gross savings of about $350 million by fiscal 2027.
First-Quarter Performance
Despite the challenges, HPE reported first-quarter revenue of $7.85 billion for the period ended January 31, slightly above analysts’ average estimate of $7.82 billion. The company’s server revenue grew 29% to $4.3 billion, highlighting strong demand in this segment.
Looking Ahead
HPE’s efforts to navigate the turbulent tariff environment and streamline operations underscore its commitment to maintaining profitability and competitiveness. However, the company’s cautious outlook and workforce reduction reflect the broader uncertainties facing global businesses amid ongoing trade tensions.
As HPE implements its mitigation strategies and cost-saving measures, investors and industry observers will closely monitor its ability to adapt to evolving market conditions and sustain growth in the long term.