Would-be HPE customers may face a long wait for their servers. An HPE backlog of orders has doubled in a year, and is five times historical levels, due to supply chain issues, it said on a Q3 earnings call.
The company's earnings were robust nonetheless. HPE saw revenue of $7 billion over the quarter ending 31 July, marginally up year-on-year, with a GAAP gross profit of $2.4 billion, also up.
The company's HPE GreenLake managed infrastructure as-a-service meanwhile saw its growth double in Q3, and now manages an exabyte of data via two million devices, said HPE CEO Antonio Neri.
That growth in HPE's as-a-service offering means that "the solutions for storage, compute, private clouds and the like are more standardized, which give us a better predictability on that front" Neri added.
"So that will also help us move through this supply tight environment..."
Its Compute business remains the largest with $3 billion revenue, followed by Storage at $1.2 billion – with both segments seeing flat or slightly falling revenue, and a slight fall in margin for Storage.
HPE’s Compute business saw its margin increase, from 11.2% to 13.3% year-on-year – because of “strategic pricing actions”. While these were driven by the ongoing components shortage across the IT sector, HPE’s executives boasted about its “pricing discipline” which has allowed it to make bank from the shortages.
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HPE did not reveal specific details about the size of its order backlog.
But during a Q&A session analysts voiced concern about the potential for those orders to be cancelled, as customers face likely recessions worldwide. Tarek Robiatti, HPE’s CFO, pushed back against that view: “Demand is not slowing to the point where this affects our fiscal year '23 guide that we gave you at [Security Analyst Meeting] last year, and we reiterated during the course of this year. We still see continuous demand.
“Even in Q3, the demand was sustained across the portfolio in Compute, in Storage, in HPC & AI and at the Edge. It's probably lower than what it used to be four quarters ago for obvious reasons.”
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This longer-term bullishness was in contrast to Dell, which downgraded its full-year outlook last week, as a result of what it described as “more cautious customer behaviour” – a move which sent its stock tumbling, despite stronger-than-expected performance for the quarter.
While HPE’s optimism is good news for its shareholders, it is less positive for enterprises whose orders are stuck in the firm’s enormous backlog. Neri and Robiatti both said HPE was working to redesign products and dual-source components to tackle the shortages – but they expect the supply chain constraints to last well into 2023.
HPE’s other segments saw decent growth, with Intelligent Edge up 8% year-on-year at $941 million revenue, HPC and AI up 12% at $830 million – although the latter only saw a 3.4% profit margin, well below every other business segment. Neri said HPE had grown its as-a-service bookings 86% for the year to date, and 39% year-on-year, resulting in 28% year-on-year growth of its as-a-service annualised run-rate to $858 million.
