By Connor Hart

Hewlett Packard Enterprise approved a cost-reduction program that includes job cuts, as the company said it expects fiscal 2025 profit to be dragged down in part by tariffs.

The server and cloud-software company's board approved a cost-reduction program that is expected to deliver $350 million in savings by fiscal 2027. However, it didn't say how many jobs it expects to eliminate.

HPE expects to incur about $350 million in charges related to the program. Approximately $250 million will be incurred during fiscal 2025, with the remaining $100 million expected to hit in fiscal 2026.

Chief Financial Officer Marie Myers said Thursday that the tariff situation is highly fluid, and the outlook reflects the latest tariffs on goods from China, Canada and Mexico. HPE has been taking steps to limit their effects for several months, including relocating pieces of its global supply chain.

"We would expect some pricing adjustments as well," Myers said. "I think that will absolutely be part of our mitigation strategy."

Higher prices would be reflective of incremental costs to HPE, she said, adding that it is too early to tell if consumers would be as accepting of higher prices like they were during the Covid pandemic.

"All of us are going to be faced with the scenario, and we just can't predict how customers and competitors will respond, so that makes for a little bit more uncertainty out there," Myers said.

She also attributed HPE's weaker outlook to server execution problems, or a mix of pricing challenges and discounting, combined with inventory-management concerns as HPE transitions to using Nvidia's Blackwell chip, rather than its Hopper chip.

HPE, which last month shipped its first artificial-intelligence systems with Blackwell chips, continues to see this business as lumpy, Myers said.

"You get these large transactions, and they will sort of skew your shipment results in the quarter, but that really is the nature of this business," Myers said. Still, HPE had strong orders for these AI systems in its recent quarter.

In its fiscal first quarter, HPE notched AI systems bookings of $1.6 billion and shipped $900 million in revenue, up from $400 million a year earlier.

The Houston-based company logged higher profit and revenue during the same period, which ended Jan. 31. Earnings came in just below analyst estimates, while revenue beat Wall Street's consensus, according to FactSet.

For its fiscal second quarter, HPE forecast adjusted per-share earnings of 28 cents to 34 cents on revenue of $7.2 billion to $7.6 billion. Analysts expect adjusted earnings of 50 cents on revenue of $7.92 billion. Myers noted that the company's second quarter would be most affected by tariffs as mitigation efforts ramp up.

For its fiscal 2025, the company forecast revenue to grow between 7% and 11%. Analysts modeled sales of $32.5 billion, representing a 7.9% increase from last year. HPE additionally said it expects adjusted per-share earnings of $1.70 to $1.90, missing the $2.13 that analysts forecast.

The company hadn't previously issued a fiscal-year outlook, as it was waiting to close its acquisition of Juniper Networks.

However, the Justice Department in January sued to block the $14 billion deal, which would join the second- and third-largest providers of wireless networking solutions, citing it would reduce competition and weaken innovation. The court set a trial commencement date of July 9.

"We plan to vigorously defend ourselves in the court, and we see this transaction as pro-competitive in terms of customers and bringing innovation to the market," Myers said.

In its recent quarter, HPE posted a profit of $598 million, or 44 cents a share, compared with a profit of $387 million, or 29 cents a share, a year earlier.

Adjusted per-share earnings were 49 cents, just below the 50 cents that analysts surveyed by FactSet expected.

Revenue increased 16% to $7.85 billion, topping the $7.81 billion that analysts modeled.

Write to Connor Hart at Connor.Hart@wsj.com

(END) Dow Jones Newswires

March 06, 2025 16:59 ET (21:59 GMT)

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