5 HPE Earnings Takeaways: Partners Drive Record GreenLake Growth
From a record 55 percent year-over-year channel growth in HPE GreenLake to 10 percent growth in intelligent edge, these are the five biggest channel takeaways from HPE’s third fiscal quarter.
A ‘Perfect Storm” Channel Growth Quarter
Hewlett Packard Enterprise Worldwide Channel Chief George Hope told partners that the channel business was up three percent overall to $3.7 billion in HPE’s third fiscal quarter ended July 31 with a record-breaking 55 percent growth in the GreenLake cloud services platform.
“We’re growing in every dimension and we are making progress both year over year and sequentially,” said Hope in a quarterly earnings channel review for partners that he hosted alongside HPE CEO Antonio Neri. “We have kind of had an indirect perfect storm if you will.”
HPE’s intelligent edge business – which includes HPE’s Aruba wireless networking business – was up 10 percent year over year in the channel to $833 million. The channel accounts for 91 percent of the Aruba business.
HPE’s storage business through the channel, meanwhile, was up seven percent year over year, while the compute business was up two percent year over year for partners, said Hope.
With overall product mix taken into account, HPE’s channel business accounts for 69 percent of sales.
With supply chain issues remaining unchanged, mew orders during the quarter exceeded expectations, pushing HPE’s sales backlog to yet another record level. That backlog is up 96 percent year over year.
“What I am really pleased about is what I said during the (earnings) call is the fact that we continue to see enduring demand,” Neri told partners. “That is particularly true in many areas of the portfolio because of our unique differentiated value proposition whether it is the edge or GreenLake.”
Overall, HPE reported non-GAAP earnings per share of 48 cents on sales of $7 billion- up four percent when adjusted for currency impact. That compares with non-GAAP earnings of 47 cents per share on sales of $6.89 billion in the year-ago quarter.
HPE expanded gross margins by half a point sequentially during the quarter, with non-GAAP gross margin of 34.7 percent, up 50 basis points sequentially, matching the highest gross margin the company has delivered since it began it as a service sales offensive in 2019.
Here are the five biggest channel takeaways from HPE’s third fiscal quarter ended July 31.
HPE GreenLake – A Record Quarter
GreenLake orders through the channel were up 55 percent in the quarter compared with the overall GreenLake orders of 39 percent. “We are seeing a lot of (GreenLake) momentum from our partners,” said Hope.
The record-breaking quarter marks the 21st consecutive quarter of GreenLake growth with the greatest number of partners ever doing GreenLake transactions. In fact, the number of partners doing GreenLake transactions was up 75 percent from a year ago.
The number of partners that sold more than one GreenLake deal doubled year over year, said Hope.What’s more, the number of partners selling their third GreenLake deal tripled, he said.
“We’re starting to see those numbers (of partners doing multiple GreenLake deals) starting to move, that is a huge testament to GreenLake getting baked into the offerings of a lot of our partners,” he said.
Systems integrators working closely with HPE through the managed program grew their GreenLake business 13 percent year over, said Hope. Approximately 30 percent of those managed systems integrator’s business now comes from GreenLake, he said. “There is a super steep adoption curve there,” he said.
GreenLake sales through distribution also saw an uptick with 12 percent more partners participating in the most recent quarter compared with the preceding quarter. In addition, the number of GreenLake projects that distributors are working with partners on are up 13 percent.
HPE also had a record quarter for GreenLake partner acceleration workshops aimed at teaching partners how to transform to a GreenLake business outcome sales model.
That GreenLake acceleration workshop activity has doubled in the most recent quarter with more partners than ever before looking for assistance in transforming to the GreenLake pay per use cloud services model.
The record GreenLake channel performance in the quarter came as HPE doubled the number of net-new GreenLake logo wins, driving an annualized revenue run rate of $858 million, up 22 percent from the prior year. HPE’s total as a service orders are up 86 percent year to date.
Intelligent Edge Growth
HPE’s intelligent edge business in the channel was up 10 percent in the quarter to $833 million with robust demand with Silver Peak posting a “phenomenal” 36 percent growth through the channel in the quarter, said Hope.
Intelligent edge as a service annualized revenue run rate was up more than 60 percent from the year ago period. There are now more than 120,000 Aruba users on the GreenLake platform.
Overall, the intelligent edge business was up eight percent from the year ago period to $941 million with a 16.5 percent operating margin.
With supply chain issues continuing to impact Aruba, the Aruba backlog hit 20 times historical levels.
Among the biggest Aruba wins in the quarter: creating a secure network to support thousands of athletes and staff and 4,400 athletes at the Birmingham Commonwealth Games in the United Kingdom.
HPE Channel Chief George Hope
HPE Partners Deliver Storage And Compute Growth
The storage business through the channel was up seven percent year over year with the compute business up two percent through partners even with supply chain constraints.
HPE’s storage business also posted a 12 percent year over year growth through distribution, said Hope.
HPE’s most innovative storage offerings – HPE Alletra and Nimble- showed ‘very strong” continued growth and order momentum through subscription offerings, said Hope.
HPE’s midmarket -SMB storage growth was also strong in the non transactional market up 27 percent sequentially, said Hope.
In the Compute business, HPE ended the quarter with order backlog hitting a record five times normal levels.
The most “important metric” in that compute business was the 13.3 percent operating margin for the business, said Neri. That compares with Dell’s operating income of 11 percent for its entire Infrastructure Solutions Group (ISG).
“Clearly we and Dell are managing this business 180 degrees opposite,” said Neri. “For us it is a belief to grow profitably- for them it is just a matter of revenue.”
HPE Block Storage As A Service- A ‘Massive’ Opportunity
HPE’s new GreenLake block storage-as-a-service – which it refers to as the industry’s “first” block storage-as-a-service offering - is a massive opportunity for partners as it rolls out across the world, said Hope.
The Block Storage as a Service provides the ability for partners and customers to self-provision storage through a SaaS platform with 100 percent availability guaranteed.
The block storage as a service is not a fully managed offering like GreenLake, opening the door for partners to provide a wide range of services including assessment services, installation services, site inspection services, and managed services. “There is a significant opportunity for you as partner to layer in your capabilities,” said Hope.
HPE’s backup and recovery service and ransomware protection from Zerto are critical storage service opportunities, said Hope.
The HPE Financial Services Opportunity
With GreenLake channel momentum on the rise, HPE Financial Services’ ability to help drive transformation for partners and customers is a huge competitive advantage for HPE partners, said Hope.
Overall, HPE Financial Services volume increased four percent year over year in the quarter in constant currency with strong performance in GreenLake deals.
HPE Financial Services’ “ability to provide capital for partners to invest in their transformation is pretty incredible and unmatched,” said Hope. “We want you to continue focus on looking for those opportunities.”
HPE partners, in fact, are finding success with GreenLake by tapping into HPE Financial Services to buy back stagnant or older IT assets to fund a digital transformation.
The total number of HPE Financial Services customers supported by channel partners was up nearly eight percent year in the most recent quarter, said Hope. “They have seen significant growth with our Platinum, Gold and Silver partners up 14 percent year over year,” he said. “Continue to leverage them for that digital transformation.”