Hewlett Packard Enterprise (HPE) has reported its Q4 and full-year results for fiscal year 2023, with a total revenue of $29.1 billion.

Of that, Q4 represents $7.4 billion, down seven percent Year-over-Year (YoY), though the full year's revenue is up two percent YoY.

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The company's 2023 gross margins saw a GAAP of 35.1 percent, up 170 basis points YoY and a non-GAAP of 35.3 percent, up 140 points.

Cash flow for the full year from operations was $4.4bn, down $165m YoY, while free cash flow was $2.2bn, up $444m.

"In fiscal year 2023, HPE clearly demonstrated that our strategic investments and extraordinary innovation across the growth areas of Edge, hybrid cloud, and AI are resonating with customers,” said Antonio Neri, HPE president and CEO.

“We delivered record performance against key financial metrics this year. Our steady execution resulted in higher revenue, further margin expansion, larger operating profit, and record-breaking non-GAAP diluted net earnings per share and free cash flow. As we continue to capitalize on growing market opportunities - particularly as customer interest in AI continues to explode - I am confident in our ability to deliver substantial returns to our shareholders, hence why we are raising the dividend in FY 2024."

The company predicts a Q1 2024 revenue of between $6.9bn and $7.2bn, representing a revenue growth of two to four percent.

For the fourth quarter results, HPE saw $1.4bn in revenue from its "Intelligent Edge" segment (up 41 percent YoY), $1.2bn for the high performance computing and AI segment (up 37 percent YoY), $2.6bn from compute (down 31 percent YoY), $1.1bn from storage (down 13 percent YoY), and $876m from the financial services segment (up two percent YoY).

“The progress we’re making aligned to our Edge-to-cloud strategy is evident in our top and bottom-line results,” said Jeremy Cox, senior vice president and interim CFO of HPE.

“Given our disciplined execution and focus, we closed Q4 and fiscal year 2023 strong within an uneven IT market. We see promising indicators of continued demand in the areas of the market we are prioritizing, especially in AI.”

The HPE Greenlake Edge-to-cloud offering added artificial intelligence and high-performance computing capabilities to its portfolio in June of this year.

While the company's Edge-to-cloud segment is performing well, there has been a dramatic drop in its compute revenues - 31 percent YoY - which is notably HPE's largest division.

Similarly, the company's storage segment experienced its third consecutive quarter of shrinkage, with Q4 seeing a 13 percent decline.

Cox claimed that the dip in server sales is because of "de-elongation and customer digestion."

He added: "Declining average unit prices from a record high in Q1 '23 was also a meaningful driver." The Next Platform hypothesized that companies are reducing their server spending to free up budgets for AI investment on the cloud, and also speculated that low server sales are partly impacted by HPE's lack of GPU allocations from Nvidia.

Neri suggested that “the compute segment is going through a cyclical period where customers are consuming prior investments, making this a price competitive market for now. As we prepare to capture a greater share of AI-linked inferencing opportunities, we saw overall demand improved moderately in the second half and are encouraged in our outlook for this segment.”

The HPC and AI segment for HPE is performing well - with a 37 percent increase YoY, of which AI contributes a "modest" amount of revenue. According to HPE CEO Neri, the majority of its orders for machines with "accelerated processing units" were for HPC systems sold under the Cray brand name.

HPE signed $600 million in incremental AI system orders in the last 12 days of Q4, and the entire year saw $3.6bn in cumulative orders for the segment.