Hewlett Packard Enterprise (HPE) continues to solidify its position in AI and hybrid cloud solutions, as highlighted in its Q1 2025 earnings call. The company reported strong demand for AI systems and significant growth in its hybrid cloud offerings, demonstrating its ability to navigate an increasingly AI-driven enterprise landscape.
AI: Strong Momentum and Key Investments
HPE’s AI business is seeing tremendous growth, with $1.6 billion in new AI system orders booked in Q1 alone, bringing cumulative AI orders to an impressive $8.3 billion. This surge in demand is largely driven by model builders, reinforcing HPE’s focus on high-performance AI solutions.
Blackwell GPU Transition and Revenue Growth
The latest Blackwell GPU generation accounted for approximately 70% of new AI system orders, reflecting its rapid adoption in AI workloads. Despite the lumpiness of AI system revenue—given the large-scale nature of AI deals—HPE delivered $900 million in AI revenue this quarter. The company expects significantly higher ARR revenue conversion in the second half of the year as the transition to Blackwell GPUs accelerates.
AI Backlog and Enterprise Adoption
HPE exited Q1 with a $3.1 billion AI systems backlog, up 29% quarter-over-quarter, reflecting sustained demand. Enterprise AI orders grew by 40% year-over-year, a clear indication that businesses are moving beyond proof-of-concept phases to real-world AI deployments.
Strategic Partnerships and Innovations
HPE is collaborating with Accenture on a new Agentic AI solution for procurement. This initiative leverages Accenture’s AI Refinery alongside HPE’s Private Cloud AI offering to enhance efficiency and scalability for enterprise customers.
Additionally, HPE is targeting service providers who value cutting-edge intellectual property, such as its 100% fanless direct liquid cooling technology, further reinforcing its commitment to innovation in AI infrastructure.
Hybrid Cloud: Strong Growth and GreenLake Expansion
HPE’s hybrid cloud business also demonstrated solid performance, growing 11% year-over-year. The company continues to differentiate itself through its GreenLake platform, which remains a crucial enabler of AI workloads and enterprise data management.
GreenLake and Subscription-Based Growth
HPE finished Q1 with over 41,000 enterprises using GreenLake Cloud, marking a 46% year-over-year increase in ARR, which surpassed $2 billion for the first time. This underscores the growing adoption of HPE’s as-a-service model, as more enterprises shift to subscription-based hybrid cloud solutions.
Alletra MP: A Disaggregated Approach to Hybrid Cloud
The Alletra MP portfolio saw triple-digit year-over-year growth and now represents over 50% of IP block product orders. This validates HPE’s strategy of offering a disaggregated data infrastructure with subscription-based hybrid cloud services. The platform also added over 150 new customers this quarter, further cementing its market traction.
VM Essentials and Private Cloud AI
HPE VM Essentials provides enterprises with a cost-effective virtualization solution, offering full hybrid cloud orchestration as an alternative to VMware. Meanwhile, HPE’s Private Cloud AI solution is gaining traction due to its fast deployment and strong return on investment, making it an attractive option for enterprises looking to integrate AI into their cloud environments.
Profitability and Future Growth
Hybrid cloud operating margins improved 300 basis points year-over-year to 7%, mainly due to cost controls. However, the margin dipped 80 basis points sequentially, reflecting near-term impacts from higher deferred revenue associated with the ramp-up of Alletra MP. Nonetheless, the transition to this platform is expected to drive long-term profitability as more owned IP is pulled through.
Looking Ahead: HPE’s AI-Driven Cloud Future
HPE’s Q1 2025 earnings reveal a company that is capitalizing on the AI revolution while strengthening its hybrid cloud ecosystem. As enterprise AI adoption scales and more workloads transition to hybrid cloud models, HPE’s strategic investments in AI infrastructure, GreenLake, and next-generation cloud solutions position it for sustained growth in the coming years.
With increasing enterprise demand for AI-driven solutions and the expansion of its hybrid cloud offerings, HPE is well-poised to lead the next phase of enterprise digital transformation.