(Bloomberg) — Hewlett Packard Enterprise Co. declined about 6% in extended trading after lowering its full-year profit forecast, citing unfavorable currency movements, supply chain disruptions and the impact of exiting the Russian market.
Profit, excluding some items, will be as much as $2.10 a share in the fiscal year, which is seven cents a share less than the previous guidance issued in March.
Earnings in the current period, which ends in July, will be 44 cents to 54 cents a share, the Spring, Texas-based company said Wednesday in a statement.
While earnings were affected by supply chain challenges and the costs of pulling out of Russia in the aftermath of the invasion of Ukraine, customer demand remains strong, Chief Executive Office Antonio Neri said in an interview.
“We have an amazing high-quality backlog that is firm,” Neri said.
HPE is trying to reduce its reliance on sales of hardware such as data-center servers by encouraging customers to pay for additional services with subscriptions.
The company said its annualized revenue run-rate, which reflects future payments under the subscription software-as-a-service model, jumped 25% to $829 million. Revenue from HPE’s Intelligent Edge service grew 8% to $867 million, about half the growth rate during the same quarter last year and less than analysts anticipated.
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.
Profit, excluding some items, 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 during the quarter a year earlier.
The unit, which is a key part of HPE’s transformation, covers products that let companies gather and process data where it is generated instead of sending it to an external storage center.
In February, HPE said it stopped all shipments and sales to Russia and Belarus, which cost $126 million in the second quarter.
The company said it now has decided to end all operations in the countries, which will result in non-material charges in the current period.
Supply chains continued to restrict the company’s ability to meet demand, particularly with lockdowns in the Chinese cities of Shenzen and Shanghai, Neri said.
He estimates that China’s lockdowns combined with the impact from Russia cost the firm $250 million during the quarter.
Neri added that a strong U.S. dollar weighed on earnings, since a majority of HPE’s business is generated by international sales.
Earlier this month, the Bloomberg dollar index hit its highest point since the early days of the pandemic, and remains elevated.
The stock fell as low as $14.50 in extended trading after closing at $15.78 in New York.
The shares gained just less than 1% this year.
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