HPE’s Aruba Business Is Accelerating With Triple-Digit Growth In Edge As A Service

“We are very bullish about this business,” said HPE CEO Antonio Neri. “We expect this business to continue to grow double digits for the balance of the year. And as we add more functionality to our cloud platform, particularly with edge computing and 5G, we are going to accelerate that momentum.”

Hewlett Packard Enterprise’s intelligent edge business is accelerating, with its edge-as-a-service business growing in the triple digits for the most recent quarter.

The Aruba Edge Service Platform—which includes SD-WAN from the recent HPE Silver Peak acquisition—is coming into its own as a “meaningful contributor” to HPE’s overall annualized revenue run rate, said HPE CEO Antonio Neri.

It now supports more than 100,000 customers with 150 new clients added everyday, said Neri.

[Related: 5 Signs HPE’s GreenLake-As -A -Service Bet Is Paying Off: HPE CEO Antonio Neri ]

“We are very bullish about this business,” said Neri in a conference call Tuesday with analysts after HPE reported better-than-expected results for its second fiscal quarter, ended April 30. “We expect this business to continue to grow double digits for the balance of the year. And as we add more functionality to our cloud platform, particularly with edge computing and 5G, we are going to accelerate that momentum.”

For the quarter, HPE reported intelligent edge sales growth of 17 percent year over year to $799 million with operating profits up 320 basis points year over year.

The intelligent edge sales results marked the third consecutive quarter of year-over-year revenue growth for the business and the sixth consecutive quarter of operating profit expansion for the business.

The strong HPE Aruba performance comes as Neri announced that Keerti Melkote, who founded Aruba Networks and built it into a powerful cloud-first alternative to Cisco Systems, has stepped aside as president of the HPE’s intelligent edge business as of June 1.

Melkote is being replaced by HPE Senior Vice President of the Communications Group Phil Mottram, a seasoned 30-year telecommunications veteran who has worked at Vodafone, AT&T, Sprint, British Telecom, and Telstra. Before joining HPE two years ago, Mottram was Chief Revenue Officer for the Zayo Group, a mission -critical fiber bandwidth provider

Aruba’s Q2 showing is a testament to customers and partners who “love the Aruba experience,” said Neri. “They absolutely love the simplicity. They love the fact that it improves the experience for their own business and powers a new way to work.”

With 90-plus percent of the Aruba business going through the channel, the results also show that partners understand the Aruba experience is “unique,” said Neri.

“This business is at scale,” said Neri. “We have 100,000 customers, adding 150 customers everyday. Aruba Central already has more than a million devices, whether it is access points, switches or gateways, which are managed by Aruba Central. These devices connect over 16 million edge clients daily, whether it is cell phones, computers, cash register or IoT devices. Ultimately each device generates 1,000 messages. So we manage per hour more than a billion messages. We have petabytes of data that we manage on behalf of customers.”

HPE’s Aruba AI powered cloud platforms combined with HPE’s high performance compute business—which was up 11 percent in the most recent quarter to $685 million—now make up 22 percent of HPE’s business, said Neri.

The Aruba platform is emerging as the foundation of HPE’s edge-to-cloud platform-as-a-service underpinnings, said Neri. In fact, HPE Aruba is emerging as a critical factor in HPE’s data services strategy, with the company’s storage and compute backbone now running the same “back-end” that Aruba originally created, said Neri. “That’s why we have a true edge-to-cloud platform,” he said.

Aruba’s identity network security is also unique in the market, providing the “ideal foundation for building a zero trust, secure access service edge,” said Neri.

“Our comprehensive portfolio and AI-powered cloud-driven platforms like Aruba ESP and Aruba Central will continue to accelerate security deployments, advance cloud and IoT adoption and fast-track digital transformation,” said Neri.

Another high point for the quarter was 30 percent year-over-year growth in HPE’s annualized revenue run rate—a critical measure of HPE GreenLake cloud service pay per use sales—to $678 million. HPE’s total GreenLake-as-a-service order growth was up 41 percent, with more than 900 partners now actively selling HPE GreenLake.

HPE GreenLake captured 90 new customers during the quarter, including a three-year, multimillion dollar deal with Carestream Health, a pioneer of AI-based X-ray imaging systems

HPE is averaging a 95 percent renewal rate on the GreenLake business, with a 124 percent usage of the original on-premises cloud services commitment, said Neri. “We will continue to invest aggressively in HPE GreenLake cloud services to provide a true cloud experience and operating model whether at the edge, on premises or across multiple clouds,” said Neri.

HPE partners, for their part, said they are seeing a marked increase in HPE GreenLake sales and pipeline. They said HPE has an everything-as-a-service lead that is starting to pay big dividends. They said that their managed services offerings are fueling the everything-as-a-service sales activity along with a robust demand for IT solutions as the economy opens up after 15 months of the global pandemic.

Paul Cohen, vice president of sales for New York-based PKA Technologies, one of HPE’s top Platinum partners, credited Neri’s everything as a service leadership for the increased GreenLake momentum.

“Being an HPE Platinum Partner, we have had a big head start on the as a service model,” he said. “You have got to give it up for Antonio, who put an everything-as-a-service stake in the ground as far back as three years ago. That has been a big game-changer for the HPE channel and for our PKASolveIT solutions.”

PKA’s consultative sales efforts with its PKASolveIT set of managed services are helping drive GreenLake sales activity, said Cohen.“We are currently closing two active [GreenLake] opportunities with a very strong pipeline, with expected additional GreenLake deals to close by the end of the summer,” he said.

A number of GreenLake deals are being driven in part by customers’ frustration with the high cost of public cloud, said Cohen. “A number of these customers are realizing that the cost of public cloud is actually prohibitive,” he said. “The control and security of on-premises is resonating with customers. Being able to actively manage consumption and usage and contain costs is extremely attractive to our clients. Customers realize that we always have their best interest at heart. Because we are not a public cloud provider, we can provide like services for less with the flexibility to adapt to customers’ ever changing requirements in real time.”

PKA is also seeing a sharp increase in HPE Aruba wireless and wired networking sales as higher education institutions prepare to welcome back students and faculty in the fall. “We saw big growth with our HPE Aruba edge solutions,” said Cohen. “Higher education institutions want to make sure their wired/wireless infrastructure will be able to support the demand for students and faculty coming back.”

Overall, PKA has seen the highest revenue growth in three years for the first four months of this year, said Cohen. “There is pent up demand to get projects done, and we are there to help,” he said. “Last year organizations had money but they didn’t spend it. Now they have last year’s budget and this year’s budget. The general mood is optimism and momentum. Things are opening up. Our PKASolveIT family of solutions, which includes consulting, managed services and as a service, are up double digits this year.”

ACP CreativIT, No 119 on the 2021 CRN Solution Provider 500 and one of HPE’s top partners, is also seeing strong sales growth and pent-up demand with the economy opening up, said CEO Scott Dunsire.

“We have got the largest backlog we have ever had in the company’s 37-year history, said Dunsire. “There is two years of pent up demand. A lot of people are getting back in the office and realize they need to modernize their workforces and telecommunications with [Microsoft] Teams Rooms ,etc. Our [audio visual/meeting rooms] business is booming. A lot of companies are upgrading their infrastructure focused on Teams or Zoom.”

ACP CreativIT is also seeing a breakthrough in its GreenLake-as-a-service business. In fact, ACP CreativIT is finalizing a multimillion-dollar GreenLake deal that took two years to close, said Dunsire.

“We’re looking forward to replicating this GreenLake model across a number of other customers,” said Dunsire. “I think HPE has a major head start in as a service. HPE has done enough deals where they are able to help channel partners navigate more complex environments. These deals are not easy to get done. Our local team has been extremely helpful in working with us to navigate a very complex environment. Ultimately that is going to help us broaden our reach to go after other GreenLake deals.”

ACP CreativIT is seeing strong demand for its NetAssist managed services offering centered around infrastructure as a service, cloud consulting and security, said Dunsire. “We are very focused on growing out the services business while continuing to grow our core hardware business,” he said. “A lot of our customers want us to manage their entire environment, from backup and recovery to security and email monitoring. We are building out our NetAssist platform for higher midmarket customers with a consultative sales approach.”

Overall, HPE posted better than expected non-GAAP diluted earnings of 46 cents per share on a 9 percent increase in sales to $6.7 billion. The Zacks Wall Street consensus was 42 cents per share on sales of $6.6 billion. In the same period a year ago, HPE reported non-GAAP diluted net earnings per share of 27 cents on sales of $6 billion.

The results were up dramatically from the same quarter a year ago when HPE was hit hard by the pandemic outbreak.

As a result of the strong results, HPE raised its fiscal year 2021 GAAP diluted net earnings per share guidance to $1.82 to $1.94, up from $1.70 to $1.88.

HPE also raised its free cash flow guidance to $1.2 billion to $1.5 billion, up from $1.1 billion to $1.4 billion

The new guidance marks the third time over the last year that HPE has raised earnings per share and free cash flow expectations.

HPE’s edge-to-cloud platform-as-a-service strategy is resonating with customers, said Neri.

“I’m very pleased with the HPE Q2 results. They are marked by strong revenue momentum, profitability and free cash flow,” said Neri. “The overall demand is improving, but our execution and innovation is perfectly timed to the customer needs we see in the marketplace.”

Neri said he remains convinced that the future is edge to cloud with a consumption-based model. “HPE has a unique value propostion and a set of offerings,” he said. “That is why I believe this is a very exciting time for HPE. We have worked really hard despite the pandemic. Our team has been incredibly resilient.”