Hewlett Packard Enterprise sees downbeat Q2 revenue on weak networking solutions demand

Figurines with computers and smartphones are seen in front of Hewlett Packard Enterprise logo in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration

(Reuters) - Hewlett Packard Enterprise on Thursday forecast second-quarter revenue below Wall Street estimates, as businesses scale down spending on the server maker's technology solutions.

Shares of the Spring, Texas based company fell about 3% in extended trading.

An uncertain economy and high interest rates have led clients to cut back on expenses in a push for stronger profitability.

Enterprises are hesitant to sign new contracts, commit to long-term initiatives or take on new technology partners, although IT spend is expected to increase in 2024, according to research firm Gartner.

HPE expects revenue in the second quarter in the range of $6.6 billion to $7 billion, below analysts' average estimate of $7.11 billion, according to LSEG data.

It also reported a 13.5% fall in first-quarter revenue to $6.76 billion, missing estimates of $7.11 billion.

CFO Marie Myers said that the "softening of the networking market and GPU deal timing" impacted the company in the first quarter.

On an adjusted basis, the company reported 48 cents per share in the November-to-January quarter, above estimates of 45 cents per share.

Annualized revenue run-rate, a measure of future revenue, was up 42% to $1.4 billion in the reported quarter.

HPE is expected to roughly double its networking market share with its planned $14 billion deal for Juniper Networks, according to analysts.

(Reporting by Harshita Mary Varghese; Editing by Shailesh Kuber)

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