Good News for HP Enterprise, Modest Fair Value Increase

HP Enterprise's second-quarter net revenue rose 10% year over year to $7.5 billion. Intelligent Edge was the best performing segment of the quarter, with 17% year-over-year growth. Similar to last quarter, the Aruba product was largely responsible for the spike, due to its campus switching popularity and wireless LAN turnaround. Overall, on the profitability front, HP Enterprise saw a healthy boost. Non-GAAP operating margins of 8.6% marked a 270 basis point increase year over year.

Seasonality explained the quarter's free cash flow of negative $269 million, though management noted the company is still expected to generate free cash of $1 billion in fiscal 2018. Non-GAAP diluted earnings per share just surpassed the high end of management's outlook, coming in at $0.34 per share due mainly to favorable tax conditions. Relatedly, HPE significantly bumped fiscal 2018 outlook for GAAP and non-GAAP earnings per share.

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