Dividend Stocks

This Week’s AI Earnings – Is It Time to Buy?

Right now, Corporate America is thinking about how to take existing products, services and business models and add an incredible new “super intelligence” component to them. So, it’s not surprising that artificial intelligence (AI) as a technology will disrupt entire industries.

Two such companies are Hewlett Packard Enterprise Company (HPE) and C3.ai (AI). Both announced their earnings results this week.

In today’s Market 360, let’s review their results and see if they’re still betting big on AI. I’ll also share my favorite AI company.

Let’s take a look…

Hewlett Packard Enterprise Company (HPE)

On Tuesday, Hewlett Packard Enterprise Company (HPE) reported that second-quarter fiscal 2023 earnings grew 18% year-over-year to $0.52 per share. Analysts were expecting earnings of $0.47 per share, so the company topped earnings estimates by 10.6%.

Revenue rose 4% year-over-year to $7 billion but below estimates for revenue of $7.28 billion. This was also below Hewlett Packard’s own guidance for revenue between $7.1 billion and $7.5 billion. For the third quarter, the company anticipates revenue to range between $6.7 billion and $7.2 billion, which was also short of analysts’ expectations. For the full year, it projects revenue to grow between 4% and 6%, which was down from previous projects for revenue to increase between 5% and 7%.

On a more positive note, the company upped its GAAP and non-GAAP earnings outlook for the full year. Specifically, it projects GAAP earnings in a range between $1.42 and $1.50 per share and non-GAAP earnings in the range between $2.06 and $2.14 per share. This is up from the previous guidance of GAAP earnings between $1.40 and $1.48 per share and non-GAAP earnings between $2.02 and $2.10 per share.

During the earnings call, HPE company management stated that it continued to witness increased demand for its products and services. In addition, supply chain improvements helped the company deliver customer orders boosting the overall quarterly performance.

The company also noted that it experienced growth in areas of the business that support customers building out AI.

“Our shift to a higher-margin portfolio mix led by the Intelligent Edge segment, and the strong demand for our AI offering, further strengthen the investment opportunity for our shareholders,” Antonio Neri, president and CEO of Hewlett Packard Enterprise, said.

CFO Tarek Robiatti also commented:

The emergence of large language models and generative AI has prompted many inquiries from our customer base during the past quarter, which are turning into pipeline and orders.

In the past few months, we have had multiple large enterprise AI wins totaling more than $800m and counting. This includes large AI-as-a-service deals under the GreenLake model.

We believe building and operating large AI models requires unique computational capabilities, including silicon and software that our great supercomputers and HPC and AI solutions are extremely well-positioned to enable. We expect the AI demand to drive healthy revenue growth in the future and intend to invest organically and inorganically to fully grasp this opportunity.

Given the mixed earnings report, the stock gapped down almost 9% Wednesday morning.

C3.ai, Inc. (AI)

Yesterday after market close, AI software developer C3.ai reported fourth-quarter results for its fiscal year 2023.

C3.ai reported revenue of $72.4 million, beating analysts’ estimates for revenue of $71 million. Non-GAAP net loss per share was $0.13, compared to the $0.17 loss analysts had expected. Fiscal 2023 revenue increased 5.6% to $266.7 million.

CEO Thomas M. Siebel said:

As we began the fiscal year on May 1, the company has never been better positioned.

I believe we now have broad consensus that the addressable market for Enterprise AI is extraordinarily large and rapidly growing…

We are well positioned to accelerate growth, gain market share, attain sustainable non-GAAP profitability, and establish a market-leading position globally in enterprise AI. Fiscal year 2024 will be exciting.

For its full year fiscal 2023, revenue is expected to be between $295 million and $320 million. This is below analyst expectations, which had revenues closer to $321 million for the full year.

C3.ai stock opened 18% lower this morning following its disappointing revenue outlook.

My Favorite AI Play

As I always say, your best bet is to invest in fundamentally superior companies that grow their earnings and increase revenue. And while both C3.ai and Hewlett Packard are still growing, their quarterly results indicate that their growth is slowing. So, NVIDIA Corporation (NVDA) remains my AI favorite play.

And based on its strength earlier this week, the rest of Wall Street agrees: NVIDIA briefly surpassed the $1 trillion market capitulation mark on Tuesday – joining the ranks of Apple Inc. (AAPL), Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN). This is coming off an impressive runup last week following a stellar earnings report.

(For a full review of NVDA’s earnings, you can check out my coverage here.)

While NVIDIA remains my favorite AI play, it isn’t the only one I am bullish on. Since AI and technology stocks currently lead the overall stock market, I am strategically investing in fundamentally strong companies in this space.

Last Friday in the Growth Investor Monthly Issue for June, I recommended a company that is helping make cloud computing “smarter,” thanks to AI.

I also recommended three other companies I believe are well-positioned to profit in their respective markets.

To learn more about Growth Investor – and how you can access my most recent Monthly Issue with those four new recommendations – simply go here.

(If you are already a Growth Investor subscriber, you can log in here to view the most recent issue.)


Louis Navellier

P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Alphabet Inc. (GOOG), and Amazon.com, Inc. (AMZN)