HPE Cuts Full-Year Profit Forecast on Currency, Supply Chain and Russia

Hewlett Packard lowered its full-year profit forecast due to unfavorable currency movements, supply chain disruptions and the impact of exiting the Russian market.

The previous guidance issued in March was for a profit of $2.10 a share, but this time it will be as much as $2.10 a share. The current period ends in July and the company expects earnings to be between 44 cents and 54 cents a share.

Antonio Neri said in an interview that customer demand remains strong despite supply chain challenges and the costs of pulling out of Russia.

HPE is trying to reduce its reliance on hardware sales by encouraging customers to pay for additional services with subscriptions. The company said its revenue run-rate increased 25% to $829 million. Revenue from the Intelligent Edge service grew 8% to $867 million, less than analysts anticipated, and less than the 12% growth rate during the same quarter last year.

Fiscal second-quarter revenue was $6.71 billion, little changed from the period a year ago, and shy of analysts' average estimate of $ 6.8 billion. The profit was 44 cents a share, compared with the average projection of 45 cents.

Revenue from HPE's Intelligent Edge service grew 8% to $867 million, less than analysts anticipated and about half the growth rate from a year ago. The unit covers products that let companies gather and process data where it is generated instead of sending it to an external storage center.

In the second quarter, the company spent $126 million on sales and shipments to Russia. Non-material charges will be incurred in the current period due to the company's decision to end all operations in the countries.

The company's ability to meet demand was restricted by supply chains, particularly in the Chinese cities of Shenzen and Shanghai. The impact from Russia and China cost the firm $250 million during the quarter.

A strong U.S. dollar weighed on earnings since most of the business is generated by international sales. The dollar index hit its highest point since the early days of the epidemic, and remains elevated.

After closing at $15.78 in New York, the stock fell as low as $14.50 in extended trading. The shares gained less than 1% this year.