Hewlett Packard Enterprise Co

Previous wording

The financial discussion and analysis in the following MD&A compares the three and six months ended April 30, 2024 to the comparable prior-year period and where appropriate, as of April 30, 2024, unless otherwise noted.

Current wording

The financial discussion and analysis in the following MD&A compares the three and nine months ended July 31, 2024 to the comparable prior-year period and where appropriate, as of July 31, 2024, unless otherwise noted.

Previous wording

During the first six months of fiscal 2024, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted the environment in which we operate. Such developments, and their impact on our operations, were as follows:

Current wording

During the first nine months of fiscal 2024, the effects of the evolving macroeconomic environment on demand persisted and certain significant developments impacted the environment in which we operate. Such developments, and their impact on our operations, were as follows:

Previous wording

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards AI, hybrid cloud, edge computing, data security capabilities, and related offerings. The volume of data at the edge continues to grow, driven by the proliferation of more devices. The need for a unified cloud experience everywhere has grown, as well, in order to manage the growth of data at the edge. With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data. We expect these market dynamics and trends to continue in the longer term.

Current wording

Technological Advancements: We have observed market trends and demand (of customers of various segments and sizes) gravitating towards Artificial Intelligence ("AI"), hybrid cloud, edge computing, data security capabilities, and related offerings. The volume of data at the edge continues to grow, driven by the proliferation of more devices. The need for a unified cloud experience everywhere has grown, as well, in order to manage the growth of data at the edge. With the abundance of data, there are opportunities to develop AI tools with powerful computational abilities to extract insights and value from the captured data. We expect these market dynamics and trends to continue in the longer term.

Previous wording

Macroeconomic Uncertainty: The effect of the evolving macroeconomic environment continued to impact industry-wide demand, as customers take longer to work through prior orders and have been adopting a more conservative approach to discretionary IT spending. This has resulted in demand softening unevenly across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own. We expect such mixed macroeconomic environment to continue to limit our revenue growth in the near term.

Current wording

Macroeconomic Uncertainty: The effect of the evolving macroeconomic environment continued to impact industry-wide demand, as customers take longer to work through prior orders and have been adopting a more conservative approach to discretionary IT spending. This has resulted in uneven demand across our portfolio and geographies, particularly for certain of our hardware offerings, as customers have focused investments on modernizing infrastructure, such as migrating to cloud-based offerings, including our own. We expect such mixed macroeconomic environment to continue and possibly limit revenue growth in the near term.

Previous wording

Supply Chain: We have seen supply chain constraints for certain components, including graphics processing units, ease (though challenges still remain). Mild improvements to industry-wide supply constraints have helped to ease certain supply chain challenges we encountered in the recent past, including the increased availability of supply and lower material and logistics costs. Logistics costs continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network. We have experienced, and expect to continue experiencing, rising input component costs, principally driven by inflation. While we have been able to pass on such increased costs to customers, the pricing environment has been, and we believe will continue to remain, competitive, which may impact our financial results. We plan to mitigate the impact of these dynamics through continued disciplined cost management. Furthermore, during fiscal 2024, we have been experiencing higher-than-normal inventory levels, primarily due to longer cycle times for us to deliver (and/or for customers to accept) certain AI-related orders; we expect this trend to continue.

Current wording

Supply Chain: We have seen supply chain constraints for certain components, including graphics processing units, ease (though challenges still remain). Mild improvements to industry-wide supply constraints have helped to ease certain supply chain challenges we encountered in the recent past, including the increased availability of supply and lower material and logistics costs. Logistics costs continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network. We have experienced, and expect to continue experiencing, rising input component costs, principally driven by inflation. While we have been able to pass on such increased costs to customers, the pricing environment has been, and we believe will continue to remain, competitive, which may impact our financial results. We plan to mitigate the impact of these dynamics through continued disciplined cost management. Furthermore, during fiscal 2024, we have been experiencing higher-than-normal inventory levels, primarily due to longer than anticipated customer acceptance timelines on certain AI-related orders; we expect this trend to continue.

Previous wording

Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. To date, 29 countries have enacted portions, or all, of the OECD proposal and a further 23 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules. Where enacted, the rules begin to be effective for us in fiscal 2025. Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. As a result, no impact to our fiscal 2024 results is expected. The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes.

Current wording

Recent Tax Developments: The Organisation for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. To date, 38 countries have enacted portions, or all, of the OECD proposal and a further 22 countries have drafted, or have announced an intent to draft, legislation enacting the proposed rules. Where enacted, the rules begin to be effective for us in fiscal 2025. Under US GAAP, the OECD Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. As a result, no impact to our fiscal 2024 results is expected. The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes.

Previous wording

Net revenue of $7.2 billion represented an increase of 3.3% (increased 3.5% on a constant currency basis) primarily due to higher average unit prices (“AUPs”) in the Server segment, moderated by lower volume and product mix effect in the Intelligent Edge segment. The gross profit margin of 33.0% (or $2.4 billion), represents a decrease of 3.0 percentage points from the prior-year period primarily due to higher mix of lower margin products and services revenue in the Intelligent Edge and Server segments, partially offset by cost recoveries in connection with our exit from Russia and Belarus. The operating profit margin of 5.9% represents a decrease of 1.6 percentage points from the prior-year period primarily due to the aforementioned gross margin decline moderated by lower operating expenses.

Current wording

Net revenue of $7.7 billion represented an increase of 10.1% (increased 10.4% on a constant currency basis) primarily due to higher average unit prices ("AUPs") in the Server segment, moderated by lower volume and product mix effect in the Intelligent Edge segment. The gross profit margin of 31.6% (or $2.4 billion), represents a decrease of 4.2 percentage points from the prior-year period primarily due to a decline in revenue in the Intelligent Edge and Hybrid Cloud segments. The operating profit margin of 7.1% was relatively flat as compared to the prior-year period.

Previous wording

Net revenue of $14.0 billion represented a decrease of 5.6% (decreased 5.7% on a constant currency basis) primarily due to lower unit volume in the Server segment, lower AUPs in the Hybrid Cloud segment, and lower volume and product mix effect in the Intelligent Edge segment. This decrease was moderated by increase in AUPs in the Server segment. The gross profit margin of 34.6% (or $4.8 billion) represents a decrease of 0.4 percentage points from the prior-year period which was relatively flat. The operating profit margin of 6.8% represents a decrease of 0.7 percentage points from the prior-year period primarily due to lower gross profit moderated by lower operating expenses.

Current wording

Net revenue of $21.7 billion represented a decrease of 0.5% in actual dollars and constant currency primarily due to lower volume and product mix effect in the Intelligent Edge segment, lower AUPs in the Hybrid Cloud segment, and lower unit volume in the Server segment. This decrease was moderated by an increase in AUPs in the Server segment. The gross profit margin of 33.6% (or $7.3 billion) represents a decrease of 1.7 percentage points from the prior-year period primarily due to higher mix of lower margin products in the Server segment and decline in revenue in the Intelligent Edge segment. The operating profit margin of 6.9% was relatively flat as compared to the prior-year period.

Previous wording

The 37% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, and Intelligent Edge aaS activity.

Current wording

The 35% year-over year increase in ARR was primarily due to growth in our Hybrid Cloud, Server and Intelligent Edge segments, which was due to an expanding customer installed base, an expanded range of HPE GreenLake Flex Solutions, Server aaS and Intelligent Edge aaS activity.

Previous wording

Returning capital to our shareholders remains an important part of our capital allocation framework, which also consists of strategic investments. During the second quarter of fiscal 2024, we paid a quarterly dividend of $0.13 per share to our shareholders. On June 4, 2024, we declared a regular cash dividend of $0.13 per share on our common stock, payable on or about July 18, 2024, to our shareholders of record as of the close of business on June 19, 2024. As of April 30, 2024, we had a remaining authorization of approximately $0.9 billion for future share repurchases.

Current wording

Returning capital to our shareholders remains an important part of our capital allocation framework, which also consists of strategic investments. During the third quarter of fiscal 2024, we paid a quarterly dividend of $0.13 per share to our shareholders. On September 4, 2024, we declared a regular cash dividend of $0.13 per share on our common stock, payable on or about October 18, 2024, to our shareholders of record as of the close of business on September 19, 2024. As of July 31, 2024, we had a remaining authorization of approximately $0.9 billion for future share repurchases.

Previous wording

Three and six months ended April 30, 2024 compared with the three and six months ended April 30, 2023

Current wording

Three and nine months ended July 31, 2024 compared with the three and nine months ended July 31, 2023

Previous wording

For the three months ended April 30, 2024, total net revenue of $7.2 billion represented an increase of $231 million, or 3.3% (increased 3.5% on a constant currency basis). U.S. net revenue increased by $189 million, or 7.9%, to $2.6 billion, and net revenue from outside of the U.S. increased by $42 million, or 0.9%, to $4.6 billion.

Current wording

For the three months ended July 31, 2024, total net revenue of $7.7 billion represented an increase of $708 million, or 10.1% (increased 10.4% on a constant currency basis). U.S. net revenue increased by $449 million, or 18.5%, to $2.9 billion, and net revenue from outside of the U.S. increased by $259 million, or 5.7%, to $4.8 billion.

Previous wording

For the six months ended April 30, 2024, total net revenue of $14.0 billion represented a decrease of $823 million, or 5.6% (decreased 5.7% on a constant currency basis). U.S. net revenue decreased by $402 million, or 7.6%, to $4.9 billion, and net revenue from outside of the U.S. decreased by $421 million, or 4.4%, to $9.1 billion.

Current wording

For the nine months ended July 31, 2024, total net revenue of $21.7 billion represented a decrease of $115 million, or 0.5% in actual dollars and constant currency. U.S. net revenue increased by $47 million, or 0.6%, to $7.8 billion, and net revenue from outside of the U.S. decreased by $162 million, or 1.2%, to $13.9 billion.

Previous wording

•Corporate Investments and Other net revenue increased $10 million, or 4.1%, primarily due to revenue growth from Advisory and Professional Services (“A&PS”)

Current wording

•Corporate Investments and Other net revenue increased $16 million, or 6.5%, primarily due to revenue growth from Advisory and Professional Services (“A&PS”)

Previous wording

•Hybrid Cloud net revenue decreased $115 million, or 8.4%, primarily due to lower AUPs

Current wording

•Hybrid Cloud net revenue decreased $348 million, or 8.4%, primarily due to lower AUPs

Previous wording

For the three and six months ended April 30, 2024, the total gross profit margin of 33.0% and 34.6%, respectively, represents a decrease of 3.0 and 0.4 percentage points, respectively, as compared to the respective prior year periods. The decrease for the three months ended April 30, 2024, was due to higher mix of lower margin products and services revenue in the Intelligent Edge and Server segments, partially offset by cost recoveries in connection with our exit from Russia and Belarus. For the six months ended April 30, 2024, the change in gross profit margin was relatively flat.

Current wording

For the three and nine months ended July 31, 2024, the total gross profit margin of 31.6% and 33.6%, respectively, represents a decrease of 4.2 and 1.7 percentage points, respectively, as compared to the respective prior year periods. The decrease for the three months ended July 31, 2024, was primarily due to a decline in revenue in the Intelligent Edge and Hybrid Cloud segments. The decrease for the nine months ended July 31, 2024, was primarily due to higher mix of lower margin products in the Server segment and decline in revenue in the Intelligent Edge segment.

Previous wording

For thethree months ended April 30, 2024, R&D expense increased by $20 million, or 3.5%. The increase was primarily due to higher employee costs driven by higher planned investments in R&D, which contributed 3.8 percentage points to the change.

Current wording

For thethree months ended July 31, 2024, R&D expense decreased by $31 million, or 5.4%, primarily due to capitalization of software development costs and lower employee costs, which contributed 3.6 and 2.3 percentage points, respectively, to the change.

Previous wording

•Corporate Investments and Other net revenue increased $14 million, or 2.9%, primarily due to revenue growth from A&PS

Current wording

For the nine months ended July 31, 2024, R&D expense decreased by $52 million, or 2.9%, primarily due to lower employee costs and capitalization of software development costs, which contributed 1.3 and 1.1 percentage points, respectively, to the change.

Previous wording

For the six months ended April 30, 2024, SG&A expense decreased by $95 million, or 3.8%, primarily due to lower employee costs by 2.3 percentage points, lower consulting costs and lower marketing expenses, both of which contributed 0.7 percentage points to the change.

Current wording

For the three months ended July 31, 2024, SG&A expense decreased by $73 million, or 5.6%, primarily due to lower employee costs, which contributed 4.7 percentage points, lower travel and marketing expenses and consulting costs, both of which contributed 1.6 percentage points to the change.

Previous wording

For the three months ended April 30, 2024, SG&A expense decreased by $54 million, or 4.3%, primarily due to lower employee costs, and lower travel and marketing expenses, which contributed 2.1 and 1.3 percentage points, respectively, to the change.

Current wording

For the nine months ended July 31, 2024, SG&A expense decreased by $168 million, or 4.4%, primarily due to lower employee costs, which contributed 2.9 percentage points, lower consulting costs and travel and marketing expenses, both of which contributed 1.1 percentage points to the change.

Previous wording

For the three and six months ended April 30, 2024, transformation costs decreased by $27 million, or 45.0%, and $109 million, or 67.3%, respectively, due to lower charges incurred in the current period as the primary elements of these plans have been substantially completed by the end of fiscal 2023. For a further discussion, refer to Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Current wording

For the three and nine months ended July 31, 2024, transformation costs decreased by $51 million, or 78.5%, and $160 million, or 70.5%, respectively, due to lower charges incurred in the current period as the primary elements of these plans have been substantially completed by the end of fiscal 2023. For a further discussion, refer to Note 3, "Transformation Programs" to the Condensed Consolidated Financial Statements in Item 1 of Part I.

Previous wording

For the three and six months ended April 30, 2024, acquisition, disposition and other related charges increased by $27 million or 142.1%, and $59 million, or 196.7%, respectively, primarily due to costs incurred in relation to the pending acquisition of Juniper Networks.

Current wording

For the three and nine months ended July 31, 2024, acquisition, disposition and other related charges increased by $16 million or 76.2%, and $75 million, or 147.1%, respectively, primarily due to costs incurred in connection with the pending acquisition of Juniper Networks.

Previous wording

For the three months ended April 30, 2024, interest and other, net expense decreased by $25 million, primarily due to a gain from the sale of certain investments.

Current wording

For the three months ended July 31, 2024, interest and other, net expense was relatively flat as compared to the prior-year period.

Previous wording

For the six months ended April 30, 2024, interest and other, net expense increased by $37 million, primarily due to increase in loss on equity investments and unfavorable currency fluctuations. The increase was partially offset by a decrease in net interest expense and gain from the sale of certain investments.

Current wording

For the nine months ended July 31, 2024, interest and other, net expense increased by $41 million, or 50.6%, primarily due to an increase in loss on equity investments and unfavorable currency fluctuations in the current period and the previous year containing tax indemnification income due to an audit settlement. The increase was partially offset by a decrease in net interest expense and higher gains from sale of certain investments in the current period.

Previous wording

Earnings from equity interests primarily represents our 49% interest in H3C Technologies Co., Limited ("H3C") and the amortization of our basis difference. For thethree and six months ended April 30, 2024, earnings from equity interests decreased by $7 million and $19 million primarily due to lower net income earned by H3C partially offset by lower amortization expense from basis difference in the current period.

Current wording

Earnings from equity interests primarily represents our 49% interest in H3C Technologies Co., Limited ("H3C") and the amortization of our basis difference. For the three months ended July 31, 2024, earnings from equity interests remained flat as compared to the prior-year period. For thenine months ended July 31, 2024, earnings from equity interests decreased $19 million, or 10.6%, primarily due to lower net income earned by H3C partially offset by lower amortization expense from basis difference in the current period.

Previous wording

For the three months ended April 30, 2024 and 2023, we recorded income tax expense of $131 million and $104 million, respectively, which reflects an effective tax rate of 29.4% and 19.9%, respectively. For the six months ended April 30, 2024 and 2023, we recorded income tax expense of $227 million and $226 million, respectively, which reflect an effective tax rate of 24.5% and 19.7%, respectively. For the three and six months ended April 30, 2024, our effective tax rate differed from the U.S. federal statutory rate of 21% due to our geographic mix of forecasted earnings and net unfavorable permanent differences from U.S. income tax on non-U.S. earnings. For the three and six months ended April 30, 2023, our effective tax rate differed from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from our operations in lower tax jurisdictions throughout the world but is also impacted by discrete tax adjustments during each fiscal period.

Current wording

For the three months ended July 31, 2024 and 2023, we recorded income tax expense of $96 million and $72 million, respectively, which reflects an effective tax rate of 15.8% and 13.4%, respectively. For the nine months ended July 31, 2024 and 2023, we recorded income tax expense of $323 million and $298 million, respectively, which reflects an effective tax rate of 21.0% and 17.7%, respectively. For the three months ended July 31, 2024 and the three and nine months ended July 31, 2023, our effective tax rate differed from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from our operations in lower tax jurisdictions throughout the world but is also impacted by discrete tax adjustments during each fiscal period.

Previous wording

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer ("CEO"), uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

Current wording

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, uses to evaluate, view, and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

Previous wording

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the six months ended April 30, 2024, as compared to the prior-year period:

Current wording

The following table and ensuing discussion provide an overview of our key financial metrics by segment for the nine months ended July 31, 2024, as compared to the prior-year period:

Previous wording

Server net revenue increased by $580 million, or 17.6% (increased 17.9% on a constant currency basis), primarily due to a $586 million, or 24.3%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $366 million, or 15.2%, and an increase in net unit volume of $218 million, or 9.0%.

Current wording

Server net revenue increased by $1,112 million, or 35.1% (increased 35.2% on a constant currency basis), primarily due to a $1,105 million, or 48.0%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $821 million, or 35.7%, and an increase in net unit volume of $282 million, or 12.3%.

Previous wording

Server earnings from operations as a percentage of net revenue decreased 3.9 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products and services revenue, partially offset by lower supply chain and employee costs. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

Current wording

Server earnings from operations as a percentage of net revenue increased 0.7 percentage points due to a decrease in operating expenses as a percentage of net revenue, moderated by an increase in costs of products and services as a percentage of net revenue. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures. The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products.

Previous wording

Server net revenue decreased by $400 million, or 5.3% (decreased 5.2% on a constant currency basis), primarily due to a $375 million, or 6.4%, decrease in product revenue. The decrease in product revenue was primarily due to lower net unit volume of $595 million, or 10.1%, as customers absorbed prior orders. This decrease was partially offset by higher net AUPs of $216 million, or 3.7%.

Current wording

Server net revenue increased by $712 million, or 6.6% (increased 6.7% on a constant currency basis), primarily due to a $730 million, or 8.9%, increase in product revenue. The increase in product revenue was primarily due to higher net AUPs of $1,038 million, or 12.7%. This increase was partially offset by lower net unit volume of $313 million, or 3.8%.

Previous wording

Server earnings from operations as a percentage of net revenue decreased 3.4 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products and services revenue, partially offset by lower supply chain costs. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

Current wording

Server earnings from operations as a percentage of net revenue decreased 2.5 percentage points due to an increase in costs of products and services as a percentage of net revenue, moderated by a decrease in operating expenses as a percentage of net revenue. The increase in costs of products and services as a percentage of net revenue was primarily due to higher mix of lower margin products and competitive pricing pressure. The decrease in operating expenses as a percentage of net revenue was primarily due to lower total operating expenses as a result of cost containment measures.

Previous wording

Hybrid Cloud net revenue decreased by $115 million, or 8.4% (decreased 8.5% on a constant currency basis), primarily due to a decrease in AUPs, partially offset by an increase in unit volume. Hybrid Cloud product revenue decreased by $171 million, or 20.5%, primarily due to a decrease in AUPs of $267 million, or 32.0%, partially offset by a unit volume increase of $86 million or 10.4%, both of which were led by private cloud and storage products. Hybrid Cloud services revenue increased by $56 million, or 10.4%, primarily due to a unit volume increase of $72 million, or 13.5%, led by private cloud and infrastructure software-as-a-service (“SaaS”). This increase was partially offset by lower AUPs of $18 million, or 3.3%.

Current wording

Hybrid Cloud net revenue decreased by $97 million, or 6.9% (decreased 6.7% on a constant currency basis), primarily due to a decrease in AUPs, partially offset by an increase in unit volume. Hybrid Cloud product revenue decreased by $113 million, or 13.5%, primarily due to a decrease in AUPs of $267 million, or 31.8%, led by private cloud and storage products. This decrease was partially offset by a unit volume increase of $148 million or 17.6%, led by storage and private cloud products. Hybrid Cloud services revenue increased by $16 million, or 2.9%, primarily due to a unit volume increase of $44 million, or 8.0%, led by private cloud. This increase was partially offset by lower AUPs of $25 million, or 4.5%.

Previous wording

Hybrid Cloud net revenue decreased by $251 million, or 9.1%, (decreased 9.3% on a constant currency basis), primarily due to a decrease in AUPs, partially offset by an increase in unit volume. Hybrid Cloud product revenue decreased by $344 million, or 20.3%, primarily due to a decrease in AUPs of $421 million, or 24.9%, led by storage and private cloud products, partially offset by a unit volume increase of $66 million or 3.9%, led by storage products. Hybrid Cloud services revenue increased by $93 million, or 8.7%, primarily due to a unit volume increase of $132 million, or 12.4%, led by private cloud and infrastructure software-as-a-service (“SaaS”). This increase was partially offset by lower AUPs of $43 million, or 4.0%.

Current wording

Hybrid Cloud net revenue decreased by $348 million, or 8.4%, in actual dollars and constant currency primarily due to a decrease in AUPs, partially offset by an increase in unit volume. Hybrid Cloud product revenue decreased by $457 million, or 18.0%, primarily due to a decrease in AUPs of $688 million, or 27.2%, led by storage and private cloud products, partially offset by a unit volume increase of $214 million or 8.5%, led by storage products. Hybrid Cloud services revenue increased by $109 million, or 6.7%, primarily due to a unit volume increase of $176 million, or 10.8%, led by private cloud and infrastructure software-as-a-service ("SaaS"). This increase was partially offset by lower AUPs of $68 million, or 4.2%.

Previous wording

Hybrid Cloud earnings from operations as a percentage of net revenue decreased 1.5 percentage points due to an increase in operating expenses as a percentage of net revenue, moderated by a decrease in cost of products and services as a percentage of net revenue. The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline and the related impact of fixed overhead costs. The decrease in cost of products and services as a percentage of net revenue was primarily due to higher margin GreenLake Flex Solutions deals and increase in storage subscription and infrastructure SaaS revenues. This was moderated by a decrease in AUPs for storage products.

Current wording

Hybrid Cloud earnings from operations as a percentage of net revenue decreased 1.2 percentage points due to an increase in operating expenses as a percentage of net revenue, moderated by a decrease in cost of products and services as a percentage of net revenue. The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline. The decrease in cost of products and services as a percentage of net revenue was primarily due to higher margin GreenLake Flex Solutions deals, increase in storage subscription and infrastructure SaaS revenues. This was moderated by a decrease in AUPs for storage products.

Previous wording

Intelligent Edge net revenue decreased by $258 million, or 19.2% (decreased 19.1% on a constant currency basis). Product revenue decreased by $309 million, or 28.0%, led by lower volume and product mix effect of $259 million, or 23.5%, and lower AUPs of $51 million, or 4.6%. The product revenue decrease was primarily led by switching products and wireless local area network products due to softened demand. Services net revenue increased $51 million, or 21.3%, primarily led by attached support service and our aaS offerings.

Current wording

Intelligent Edge net revenue decreased by $335 million, or 23.0% in actual dollars and constant currency. Product revenue decreased by $378 million, or 31.5%, led by lower volume and product mix effect of $324 million, or 27.0%, and lower AUPs of $54 million, or 4.5%. The product revenue decrease was primarily led by switching products and wireless local area network products due to softened demand. Services net revenue increased $43 million, or 16.8%, primarily led by our aaS offerings and attached support service.

Previous wording

Intelligent Edge earnings from operations as a percentage of net revenue decreased 2.9 percentage points primarily due to an increase in operating expenses as a percentage of net revenue, partially offset by a decrease in cost of products and services as a percentage of net revenue. The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and lower supply chain costs. Operating expenses as a percentage of net revenue increased primarily due to higher employee costs related to acquisitions.

Current wording

Intelligent Edge earnings from operations as a percentage of net revenue decreased 5.2 percentage points primarily due to an increase in operating expenses as a percentage of net revenue, partially offset by a decrease in cost of products and services as a percentage of net revenue. Operating expenses as a percentage of net revenue increased primarily due to scale of net revenue decline, higher employee costs related to acquisitions and investment to enhance Aruba offerings in GreenLake. The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and cost containment measures.

Previous wording

Intelligent Edge net revenue decreased by $226 million, or 9.0% (decreased 9.2% on a constant currency basis). Product revenue decreased by $333 million, or 16.3%, led by lower volume and product mix effect of $391 million, or 19.1%, moderated by higher AUPs of $50 million, or 2.4%, and favorable currency fluctuations of $8 million. The product revenue decrease was primarily led by wireless local area network products and switching products due to softened demand. Services net revenue increased $107 million, or 23.0%, primarily led by attached support service and our aaS offerings.

Current wording

Intelligent Edge net revenue decreased by $561 million, or 14.1% (decreased 14.3% on a constant currency basis). Product revenue decreased by $711 million, or 21.9%, led by lower volume and product mix effect of $715 million, or 22.0%, and lower AUPs of $4 million, or 0.1%, moderated by favorable currency fluctuations of $8 million. The product revenue decrease was primarily led by switching products and wireless local area network products due to softened demand. Services net revenue increased $150 million, or 20.8%, primarily led by attached support service and our aaS offerings.

Previous wording

Intelligent Edge earnings from operations as a percentage of net revenue increased 3.6 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue, partially offset by an increase in operating expenses as a percentage of net revenue. The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and lower supply chain costs. Operating expenses as a percentage of net revenue increased primarily due to higher employee costs related to acquisitions.

Current wording

Intelligent Edge earnings from operations as a percentage of net revenue increased 0.5 percentage points primarily due to decreases in cost of products and services as a percentage of net revenue, partially offset by an increase in operating expenses as a percentage of net revenue. The decrease in cost of product and services as a percentage of net revenue was primarily due to favorable revenue mix and cost containment measures. Operating expenses as a percentage of net revenue increased primarily due to scale of net revenue decline, higher employee costs related to acquisitions and investment to enhance Aruba offerings in GreenLake.

Previous wording

FS net revenue was increased by $9 million, or 0.5% (decreased 0.4% on a constant currency basis) due primarily to higher finance income on higher average finance leases in an increasing interest rate environment.

Current wording

FS net revenue increased by $6 million, or 0.7% (increased 1.4% on a constant currency basis) due primarily to higher finance income on higher average finance leases in a higher interest rate environment, partially offset by lower rental revenue on lower average operating leases, along with unfavorable currency impact.