HPE - Earnings call transcript Q3 2024 | Hewlett Packard Enterprise Company

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Operator

Good afternoon, and welcome to the Third Quarter Fiscal 2024 Hewlett Packard Enterprise Earnings Conference Call. My name is Gary, and I'll be your conference moderator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Paul Glaser, Head of Investor Relations. Please proceed.

Paul Glaser

afternoon. Good Head for Glaser, Packard Investor of Paul Hewlett Relations Enterprise. I'm and to like with XXXX President and to Officer. would Chief our Myers, Antonio Executive HPE's Marie welcome HPE's call I conference you fiscal Financial Officer; earnings third Neri, Chief quarter

Before be let remind available the concludes. this to shortly you replay of Antonio, webcast. is after being A call the handing that the me call webcast will call

Investor the any posted this release release and web and presentation the slide of the see not HPE and call are on press to the on based best accompanying forward-looking financial our obligation and world does intend them on as We the such our Relations forward-looking referenced we Elements statements. HPE page. today. our no update have information of businesses view are assumes

We call that fiscal report this from July this XXXX. HPE's reported information reflects available quarter XX, discussed and in estimates the could also on at the for the information materially Form XX-Q differ ultimately time on note ended financial amounts on based quarterly

see SEC information, of risks. earnings Please more uncertainties to assumptions. materials with that involve the forward-looking discussion please disclaimers risks, and on detailed refer filings HPE's relating for For a to the the statements these

basis conference a information adjusted details. for presented this website call, revenue impact to refer the reconciliations year-over-year on our financial Throughout noted, on the GAAP For of to unless and release are growth we all have our earnings have presentation website. on Please tables today's a non-GAAP exclude currency. rates, otherwise provided information accompanying we basis, expressed to slide on the comparable and

Antonio. remarks. me over their earnings turn presentation and Antonio reference to Marie that, let Finally, prepared With it in will our

Antonio Neri

per rose quarter. generated ago to new the QX, Net flow of and $X.XX free $XXX will guidance. per Thank dividend pay us up high We our for billion, GAAP year net revenue you, year-to-date and and operating third the Paul, our of end guidance. earnings as revenue XX% systems margin you, HPE thank welcome at $X.XX remarks. year of growth conversion at $X.XX was all, year-over-year our HPE, share prior well performance, share. Based per revenue quarter today. delivered from joining generated higher We performance. million of your diluted impressive are with strong the above role leading more of notable her cash a Non-GAAP as a earnings share $X.XX Relations our provide and to Investor $X.X will AI acceleration from on guidance. full end than high in we Marie details in non-GAAP a further raising and

payment environment we're our demand lagged. improved. while has Demand saw North in part Middle first pleased position some the year-over-year in to $X.X East sale We billion Lastly, and have India, but and equity also of the Europe of and America, from quarter variation. geographic was this of the proceeds Pacific, the sequential Overall, HXC. in received Japan, orders Asia with growth strong

dynamic better our competitive momentum. which progress the proud years, we by are have conditions presented the opportunities a market is well in we the after going aggressively performance delivering made positioned very several vision of generating environment fiscal are our in and am I We on last over and year. close as Edge-to-Cloud this

segment. cloud estate, growth. cloud The We rate which leader data more foundation revenue XX,XXX as we portfolio. Intelligent to annualized HPE center networking customers a platform. Today, market AI-driven Networking requires through and delivered Aruba and networking, a core and our modern market hybrid networking in recognized have AI-driven hybrid In industry-leading of cloud-native efficient AI almost is computing. our branch manage HPE part a a deliver infrastructure drives Edge, a building of accelerated an our world AI our HPE in cloud innovation strategy: GreenLake GreenLake unique fabric the to the across subscription have run as unified high-performing invested a as pillars their use accelerated Cloud experience campus all transitions to IT

software are significantly the with IP Edge-to-Cloud expand business cloud-native will We excited in Juniper and the system of infrastructure our pending stack and with operating full Networks. to business accelerate to of this a our security networking silicon networking The acquisition to from approach. to AI-driven vision acquisition high-margin to services a

compelling by redefine begin expect we post deliver will an proposition close. In with the of cloud core in shareholders that We hybrid our year by strategy. Hybrid value at experience HPE our design space delivering the our Cloud, GreenLake the to returns is to Lake

We our cloud-native platform. software-defined HPE to storage server and our unique solutions Cloud and products adding while have transitioned GreenLake and HPE software services to HPE

experience. while across Our Hybrid types in customers colos all innovation edges gives their and managing X unified choice flexibility public operations and Cloud on-prem

including built expertise, large service like and direct cooling is case our for builders, of the powering supercomputing systems technologies are AI large-scale business AI model users. largest Our on infrastructure providers, that language liquid

stages higher our strategy diversified portfolio, the Cloud adoption. of parts HPE we customers, for still Pursuing engineered expansion introduction the rapidly market enterprise margins. portfolio of has expanded the specifically have with with are market including AI of as expectation to AI We Private this in the the of significant HPE early

few Our results. customers growth highly QX performance key differentiation I us partners our shareholders. more will that segments a relevant let I have drives in our And to fully for and but also observations share. only then Marie makes about I detailed will profitable not review

from billion in expectations systems orders We revenue revenue. a system an an improvement sequentially year-over-year, Our the $X.X QX. Revenue to Server reflecting server segment traditional quarter, in market for climbed a product traditional compute. AI to XX% in orders and increase our this about also in from converted outperformed double-digit AI acceleration converting QX, both increase thanks business in again with

the demand momentum enterprise customers to to in it $X.X stability quarter clouds profile. In more over operating stages, verticals Customers across for explore business from sovereign opportunities billion is are increasing margin us both that multiple the cumulative AI QX our billion they with We year. underscoring billion AI use continue possibilities approximately in Customers HPE sequentially to our the profit system services in to care new ways generative the and $X.X rose system is while Customer exploring tell within an last $X.X a deals the our more cases. cases initial range, are of AI pipeline We AI AI, XXXX, still and to health to in orders is as pursue use increase see clear. very profitable interest use since climbed high, server target adding for building and robust even see broad adoption AI, accelerating. AI cases. in creating and manufacturing. already our our runway offerings. Enterprise financial is

be build has services water large a large implementation the As opportunity powerful footprints that over came guide key The its the and NREL's IT. Direct the more for direct AI AI This by enable to will sustainable business, language be the fully latest advancing use expertise world. In continues systems not efficiency, and significant in Energy HPE-built renewable just their announced HPE will differentiator a the cooling previous space creates and innovation the run to model, cooling liquid energy day X of cases liquid and the required system liquid day online the operations. manufacturing just sovereign Laboratory research largest large-scale expertise the XXX% recently, of Castrol across in with mature, enterprise Castro summer. Xx margin day National supercomputer, including driver U.S. direct and Energy X, help supercomputer customers. one Department they and Eagle, energy need cooled IP is than cooled. leveraging energy X, modeling simulation. range system to main in and Renewable transportation, services integration,

with that You enable our is NVIDIA to In we AI. Computing saw HPE codeveloped that adoption and portfolio announced integrations solutions a jointly partnership joint HPE, accelerate of of HPE go-to-market AI at enterprises by generative June, NVIDIA. deepening Discover AI strong

makes in NVIDIA generation Grace on start needs those with inferencing These Private NVIDIA applications. To turnkey cases, HPE model just for easy extra AI that configurations. language a Cloud retrievable solution flexible fine-tuning. that and solutions, deploying XXXs sizes to and an is for augmentation fast adoption, modular on AI, model available developing One small for energy-efficient, Private large of a AI small up Hopper configuration available run X LXX sustainably and large multiple HPE gain enterprises generally be inferencing and all will use an option for became which scale allows to Cloud this of it generative yesterday, for

of AI Private partnership computer-aided for pretrained time meter and clicks business data ops, responses. discovery, Cloud deploy [indiscernible] environments. to operating a enterprise NIM multiple their aspects customizable fully than We a expense. With workflow simplifies generative cycle purchase customer expanded are accurate workflow data and Cloud AI workflows human them managed dramatically HPE for choice or Blueprints as-a-service This Cloud includes into our customers, their then Cloud HPE as to enterprise for for life extraction cases all RAG capital and week, X allowing use by catalog Private a virtual Private customers with that Private self-managed points: AI uses NVIDIA key AI of use applications deploy, observe AI customers of to X vast drug service HPE ITOps system. And manage infrastructure for seconds Agent to digital screening value. stack XX ability and the generative an or a offering model this expenditure more and through workflow their adding important FinOps their AI to PDF Integrating quantity last just to easily we NVIDIA AI and further enables our service, for cases. easily to establish accelerate less

serve about interest we the to series than enterprise positioned less announcements Private X ago, exceeding are expectations. customer months AI, seen very Since with With demos customer announcement requests high our of our the well have HPE we proof-of-concept Cloud for needs.

enabling business, our an Cloud Cloud are and Private increasing HPE accelerator is We recognized for be growth is leadership well driver the an demands our for are to resources high Cloud Cloud important is Hybrid HPE AI ensure AI Hybrid demos. and interest ecosystem our innovation patents for positions partner we as Hybrid going to meet We sales to numerous believe protected. This solutions. filing and customer and

in work more trajectory that returns We are to object do train to orders, protocols but quarter-over-quarter. Customers ongoing motions. improved applications. to we is specialized and realize revenue are our There to AI data our our are from new sales and data manage product file store both and and require we pleased and with profitability portfolio investment in an both positive a beginning on

software of and storage that protocols services portfolio. data expect HPE software-defined will extending in new our our lead related these proportion We to a to Alletra offerings higher

We we our customers in are GreenLake Cloud in in HPE seeing GreenLake X,XXX just offerings. year. and began storage orders the Hybrid added HPE SaaS last Cloud, months, using and last growth X HPL new double-digit XX,XXX the almost more customers In almost

are GreenLake. HPE We are pleased who are the with customers to we seeing momentum turning with

to agreement proud AI announce the computing. help to GreenLake Deloitte's includes transform which HPE are new and infrastructure, We a to Cloud Deloitte with IT utilize centralize

profitable We more and our mix introduce adding at XX%. continue to reflected ARR in clearly which new now by services, is offerings Hybrid Cloud software

Morpheus look GreenLake orders of and all digesting Data. position recovery For we orchestration software and Momentum Edge, full this forward the market on Intelligent we as a the organic of is Cloud capabilities strength as acquisition multi-cloud across HPE acquisition complement our multi-cloud integrate multi-vendor Revenue hybrid particular leadership are HPE's with believe example, the gains We of with a and services finish August, in to improved AI-driven in SASE. believe previous into end saw own vendor we and capabilities sequential regions to we America. observability acquisition OpsRamp HPE's We orders COVID. our at the our North automation post innovation. In first building and in suite platform customers cloud from closed solidifies Data stack. Morpheus beginning sequentially increase

Zero center data recover. Last products month, to the IoT was HPE and vulnerable AI and campus-based solution The and in wireless switching slower Cyber and to from with Aruba telemetry growth activity Aruba by models we AI-powered mission-critical train new led campus On products. a unusual detection access. Defenses been network to support data LAN, business products Conversely, helping networking reinforced to orders Network response leverages have in network network orders front, HPE lake processes. monitor devices, deploy and detect Trust SASE

ClearPath Central concierge Our of platform will the seamless solutions Trust to Noble to security guest Network implement like Networking and strategy. This including leveraging attractive AI-powered experiences, is global Hotels, across provide and Noble's hyper-personalized are a an Aruba customers a AI which in installation Aruba HPE network, luxury hotels. HPE secure help secure, combining Zero footprint

Networks we for comes with and are We acquisition will comprehensive what excited pending create. Juniper the next our networking profile

As The deal that other be Union, to will jurisdictions, ensure are XXXX. early expect successful our have Plans calendar in we late our conclude, X. and performance. close recently and underway in on calendar regulatory third European in before, accretive margin U.K., we I XXXX year approvals to quarter India, year remain and the non-GAAP profile Juniper said track pleased to integration I am several EPS very with or received well post-close. To year

customers a their is of for this innovations growth across our customers our the AI role adopt and newest in Cloud. reflects playing helping network HPE revenue and business. have impressive technology strength across Our excitement portfolio growing crucial transformative the Hybrid

innovate, manage our in growth way for environment. in and and structure. a also delivered we competitive QX, stay As to cost we we continue the our dynamic business In we disciplined profitable shareholders

direct Next AI the there a hope conversion month, facility we to opportunity our some many look liquid I forward will take where industry-leading do key experience in transition systems. direct saw of liquid-cooled build we quarter. the to revenue manufacturing Wisconsin you The AI this this of will we our and work of at advantage systems plays cooled to incredible driving role it. you hosting successful we

in the hand greater over to Now Marie segment I it go will Marie? detail. to results through

Marie Myers

good afternoon. Antonio, and you, Thank

grew quarter per that segment, managed what earnings net said did improved we this the and revenues, profitability prudently end and sequentially strong exceeded high We delivered range. do. with we are We guidance delivered would line we our revenue performance in top share of non-GAAP sequentially, pleased diluted our each costs,

equity to macro environment. sale in results the ability said, partial highlight $X.X of position. Today's from dynamic amidst the As we billion HXC are have Antonio pleased to received deliver our proceeds the a

modest mission-critical by customers remain position some well about hybrid and demand North encouraged by in enterprise projects, is remain across other prioritize the improvement the the While seeing cloud We AI positioned excited are AI, cautious are and in networking. HPE across recovery opportunity. geographies. for followed we HPE's we America,

we This quarter, revenues our systems AI AI and systems backlog sequentially. approximately increased grew XX%

servers, enterprise recovery as to win led continue to builders sequentially. Cloud, and increased for see drive demand seeing demand. In improvement deals we the of and both our are We and we and with positioned AI by NP revenue model signs address storage sovereigns are strong a traditional well HPE ARR demand an growth. In to in offering, Hybrid Alletra we continue both

to by strong AI enterprise. the Discover, AI Private response encouraged we that offering expect are customer We announced Cloud to at our the early drive in which we adoption and

fourth keeps center Lastly, switching results the quarter. with demand data in were into in and along networking, sequential solid continued in improving WLAN, growth and security services optimistic networking heading us

to our continue We progress make strategic towards goals.

our XXXX Juniper am excellent acquisition year Cloud calendar carrying our QX in the in calendar of our that confidence year. momentum year the end acquisition Data or Hybrid of closing look are XXXX recently early forward expands I by and capabilities examples. our fiscal with announced Overall, through of our end Our performance Morpheus pleased to and the

range let year-over-year through currency the high and of for grew Now details X% our $X.X me guidance constant quarter. to XX% in end the quarter-over-quarter go quarter. of near billion, the Revenue the

in continued enterprise than for this grow flexibility early constant are well led we though workloads, investment a $X.X as-a-service as currency grew consumption is and subscriptions. to alleviate AI to year-over-year through still a noticing HPE both this days. Our to as appetite networking quarter. AI model, customers, storage retain and by ARR pressures strong billion, more momentum We GreenLake XX% to With

GreenLake's continue We of value an increasing proposition lift software to mix with services revenue. HPE higher-margin and

XXX quarter, Aruba platform of we basis and subscriptions. services to software mix year-over-year the expanded sales the XX% Central stronger to services approximately sales and due This ARR to points tied AI of hardware

down by was a was AI which sequential XX.X%, of basis XXX AI mix higher was driven decline basis margin higher a year-over-year, server driven the Edge mix revenue points and revenue point mix. Intelligent revenue. gross server non-GAAP The Our lower XXX by of

cost by pricing discipline have on market. gross strong balanced server by competitive margin and AI controls We pressures executing a maintaining and

year. expenses CFO, non-GAAP our increase in a improvement marketing sequential offsetting saw second seasonal despite gross of margin, of as in with streamlining expenses already benefits our Our XX the the rigorous event. Since at in a And I approximately year-over-year programmatic operating evident line. the non-GAAP margin point basis have see quarter-over-quarter is operating to decreased associated to our drove to we we improvements. operating in half as annual expect these X% results joining pressures X% structure we cost and our Discover taken This expense drive the approach a actions

OI&E both our stable per and GAAP ranges. better-than-expected EPS Our EPS $X.XX non-GAAP non-GAAP guidance high of of our the diluted share, of net net above margin operating XX%. Profitability improvements at was and per end $X.XX drove share diluted

primarily million net net of and charges. diluted related from compensation stock-based EPS other expense, intangibles, non-GAAP excludes $XXX and costs Our in amortization acquisition

let's Now the America, stable of steady to segment drove starting $X.X both spend. We results, billion evaluate continue EMEA traditional we installed and more, and up and and systems XX% where is Strength saw traditional operating Server AI signs healthy spending our quarter, XX% seeing saw growth to are customers with servers, were in a sequentially. in In the revenue base revenues APJ growth and recovery. though North strength year-over-year servers. in margins. turn servers

pricing sequentially, systems, dynamic GenXX now 'XX QX proportion able product to AI total expectations systems and environment inflationary product since a manage $X.X ahead through been large have Our our cumulative of represents server we by continue And to to orders growing orders billion leveraging revenue. strong lumpy. AI deals remains of continues relationships. to though and strong component ramp billion. rose services $X.X be driving supplier In demand an

systems increased $X.X to We are current pleased billion. which AI Demand quarter-over-quarter model with builders. remains our has backlog, from the healthy

are deals a profits. this and winning and to We in risks framework space manage following

customers. days, see continue early signs enterprise we to still from While positive

than XX% trend that of of enterprises continue view with In more AI supports customers experimenting fact, our gen the favorably. number to will are which initiatives,

pipeline AI enterprise sequentially. doubled our quarter, This than more

market HPE sovereign AI an our in for is beside right supercomputing. And adjacency leadership

sovereign this builders see We AI, growing a to cooling. AI. Within is who liquid set are demand increasing from and customers of continue embracing customers desire for model

on expertise, intellectual conversion. multi-decade view up dedicated adoption portfolio, AI for patent $X.X from and center manufacturing in quarter, property, prior HPE's global approximately clear AI revenue was design system However, XX% as data market were readiness. as direction. QX quarter. in and services moves strong We this revenues billion quarter relies again a and the system reach the differentiators the

We within our of are the operating our with margins Server pleased business. stability

XX Our a QX make basis This QX focus Server but year-over-year XX sequentially. market. was up revenue 'XX FY was operating X ago, in year our basis points XX% on underscores XX.X%. down share a versus disciplined competitive profitability margin this of our total and AI to This higher up points server quarter. XX% systems compared AI server

Our performance operating with was line in expectations. margin

XX% we For margins Server expect our of to target range of at the end be the to low full our year, XX%. continue to

cost in will disciplined profitable we We growth. pursue price remain as and

year-over-year to moving profitability of Cloud. sequentially. but Segment X% were Now revenue $X.X down improved X% billion Both quarter-over-quarter. Hybrid and up revenues

sales business. discussed, transition are a we have and previously both storage transition within we the managing model As product

a comprehensive and services, storage revenues ratable is to deferred because cloud hybrid future of into is mix storage transition a preferences cloud-native with the architecture, analytics which for to model. Translating periods. aligns model a Alletra, which will growth of HPE offers software customer and and more cross-stack to platform higher the time software-defined product AIOps, Our take unified

offering, sequential see in go-to-market. We our strength improvement continued continue Alletra for to MP transformation our led by business with particularly efforts,

our file, on Cloud We we are improving block commodity Discover, demand. In having be the closely which At constructive to announced for early Private edition virtualization are demand available of impacts seeing business business, signs are Private within solution. costs Cloud virtualization our conversations with traction strategy. and their develop we storage our and monitoring of and to our customers evaluate will efforts we capabilities,

reacting and value Lastly, positively into which AI data, Cloud recently X architecture, are to to and unifies our customers skills, journeys. announced begin to for enterprises Private solutions accelerates AI time with platform their and NVIDIA, looking fully offering managed AI partnership

demos to in And traction We of both Private order. available yesterday, Cloud our offering AI is are and pipeline. seeing as customer globally

sequentially, Our controls. but better Hybrid down Cloud operating up to margin X.X%, XX basis points was predominantly points year-over-year, due basis XXX OpEx

Intelligent past quarter-over-quarter. Edge. inventory were we billion, Moving compares we was X% at Demand up that the remains normal and levels. down Channel Backlog year-over-year remains but have sequentially. to XX% $X.X on trough. steady Revenues tough moved healthy, believe

a On our industry side, are we seeing line is the order recovery in that peers. with

is we data mid- We improvements saw EMEA center order to each campus. GreenLake saw services growth the SASE we grew that order Central excited led For sequential of by digits geographies, and part networking modest single in second high customers quarter, HPE improvements platform strength America by and offering. about APJ. By orders in of in consecutive our at followed North and our product, year-over-year both Aruba remain as in

SASE switching annual year-over-year the networking, side, difficult campus we services, declines compares. data center revenue strength due and our in On to saw and though, in drove

X%, OpEx with would of slightly was margin the a XXX rate. a by approximately trough. be XX.X% QX margin. consistent by operating revenue But points year-over-year basis grew the margin driven in point sequential our offset was compares, year-over-year year-over-year our basis revenue for expectation that segment sequential gross Our primary tough down reason operating XX improvement The better

Our range OpEx margins plan the to in us put operating by achieve has mid-XX% path QX. on

Now turning to Services. Financial

margin points billion points Our across year-to-date. billion XX customers, volume million, Operating that year-over-year portfolio. basis down financing volumes million wins demand AI up XX illustrates driving with in HPE and revenue cloud Financial which is $XXX enterprise to went both $X.X basis sequentially. year-over-year financing $XXX Services and $X.X AI up of X% X% our and were of were was

to continue mix. healthy the improve we and investment Our portfolio grade remains

ratio return equity X.X%, on XX.X%. steady our at loss QX solid is a remains and below Our

capital flow and free We in and Turning now flow operations cash to million generated $X.X billion in from $XXX allocation. cash cash flow.

cash track on strategic pursue in for given cost $X.X remain rising buys environment. flow generate strong to even free are ability we We We our flow. component the in confident cash free as ongoing billion

is positive Our a of XX days, 'XX. days reduction which from X QX cash QX conversion a cycle was

Our days of for inventory revenue were systems higher days server and both payables outpaced and that conversion our purchases of orders AI our on strategic business. on

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received to million and sale the sheet equity pleased in in in shareholders HXC are maintaining our We to framework remain managing We capital $XXX balanced committed our capital position. have balance from on and focused billion are the We our dividend. partial $X.X allocation proceeds year-to-date. $XXX and to the returned million of QX,

Now guidance. to let's turn

regulatory necessary making As required for by acquisition the forward securing progress Juniper year 'XX early pending calendar the closing our or and on we 'XX. calendar of steady are Antonio approvals to end mentioned, look year

diluted $X.X For the billion EPS and $X.XX. of between revenues the be quarter, GAAP diluted and to in $X.XX, net and $X.XX our $X.X be we between EPS fourth range to to $X.XX expect net billion, non-GAAP

with to revenue couple For see revenue, sequential remain we of last server. expect similar the quarters to towards growth to

expenses operating Server, to systems strong We our for On segment to basis, we the the expect expect at manage following: we EPS operating income in business in therefore deliver level revenue decline order sequential to pace. a to a at continue expect targets. AI convert the and a

large mentioned, market As remains and deals lumpy. remain the competitive

We AIST in HXXX the forward shipping for continue to market GPUs looking timed QX. to are be supercomputer to chips and for

traditional GenXX in also higher and continued We expect adoption demand units. by driven a service

are XX% our operating our maintaining margin the end range low of full year. We of the achieving for expectation to XX%

HPE Hybrid expect to though subscription continue to ships we our trend favorably SSDs, ARR and at we Cloud, expect increase rising accelerates storage And from should under growth operating to commodity a the mid-single-digit to margins expect close the as to pressures costs, particularly slight range. revenue business GreenLake. For continue year,

reduction we expect range. in supporting sequential the revenue the in cost business, strength quarter networking. materialized data in outlook Edge and trend margin center the our on a campus we fourth similar from as fourth as for WLAN Intelligent the slight efforts quarter, For a in year operating a third full anticipate recovery quarter our mid-XX% results, well and increase in Benefits our for the

towards of full year, our we growth end the to are high guidance in currency. of For tracking X% the revenue constant X%

our We balance higher profit margin at pressures in a from gross to operating to continued a million to with our guidance be X% end of AI $XXX low expect expect the headwind. systems versus growth to expect million and of discipline $XXX come to now operating We expectation OI&E of prior headwind mix of X%. $XX million

$X.XX We have tightened our to to non-GAAP year diluted net EPS full expectations for $X.XX. the

the with to at are our $X.XX. now we EPS, now transaction seeing costs expectations increased Juniper $X.XX GAAP related to For

at in to our and Lastly, investment-grade expect transaction framework, term, we line with to to repurchases we our continue To In strong rating. long in turn allocation near balanced the a it results pace the closing. ahead Juniper term dividend, our capital remain committed QX sequential our were that, the our good summarize, as prudently manage we balance for revenue demonstrated and With of over sheet I'll Q&A. share QX growth.

Operator

The is with Marshall Instructions] Stanley. Morgan from question first Meta [Operator

Meta Marshall

margins. the Server Maybe the Congrats on on just results.

better of the higher little the revenue discipline? of kind Just Better a more margins? ProLiant Cray you Just kind they just saw margin expected. better there. this than Could insight contribution, were Given into a bit AI margins? from break Is down? pricing proprietary little we bit strength

Marie Myers

question Server your on Thanks margins. sure. Yes, for

in the of I about said in $X.X ship as all, billion we fact, quarter. of prepared servers my remarks, First did, in AI

in of Server seen show we're first our were sequentially. you So passing what costs. despite think the in through itself, I was been that pretty at of then pretty our fact OpEx down we're GenXX. GPU you're And margin with successful frankly, would therefore constituted impact, a say revenue. So shift was I'd commodity driven that track the to on that it higher a has seeing have And discipline CPU And by? XX.X%. Meta. about and lastly, In And all, around OpEx on those well, at your point, and that to the well that, XX% as competitive of margins we've margins up profile. Also, comes environment. configurations GenXX both rich despite And the

Operator

from Samik The JPMorgan. next is question with Chatterjee

Samik Chatterjee

itself? And the your you're operating company discipline quarter, factors And be the into if next server out should add level most the ground, outside I that there think there's further I some gross was maintain apologize And more outlined on of that And quarter as and that can AI sort of the about a discipline that expecting you AI terms operating know at I the can if the we the hoping sort help the gross going flesh in mix to in of, but moderation margin the getting AI operating questions seeing. order gross outlook? the there just anything you've margin. impacted mix, more we Marie, margins there just bit on server background of of in margins in today terms

look orders the on we well terms customers. that those with for from? verticals deals of aggregate You in mentioned impacting forward as coming lumpy your as gross Is which thinking margins are company

Marie Myers

and So your I think up it most of got seen. in we've terms of so what hit I'll gross I margins questions

is the gross about step obviously, just I high that and So everybody From all, perspective, revenue think networking from margins say a remind our at would a first contribution lower. level. year-on-year just back of

obviously, from So gross basis. impacted a year-on-year that's margins

gross really servers, you pace. the And obviously, look margin we converted sequentially, mentioned the in driven of in AI that's much quarter. as remarks, Now when prepared I a at mix faster

Now offsetting with on point, OpEx. prudency would your it add we've to I been

to to You've continue going We're seen that. that. do

mentioned to my also, continue I we think very I as mindset comments. And guide that about in price growth. then profitable we pursue a being on cost and disciplined have

our talked So see you'll on you if I in fact we're our at selective deals. receivables, look you the see receivables. think frankly, of that, And the it we've about quality

sort bear as go mind Now to a forward. of of couple in things we

margin. gross favorable to As more have we momentum, see AI going enterprise on a gain that's impact

expect improving to mind Samik, the we're closer Juniper. profitability do in close we'll of to sort that see that direction. And of the that moves finally, just market getting then we bear as So in

significant at both 'XX. We operating more itself, that that and going transaction see operating that And XX% than expect from of networking. profit come the of a impact of we expect calendar have to will gross beginning end company's 'XX, margins. In to on is the

of I'd very to on managing as that's focus of continue So it terms we'll with being thinking leave about on we OpEx prudent And you sort margins. said, and how deals. in

Operator

from with next The Evercore. is question Amit Daryanani

Amit Daryanani

hoping a bit year. in full talk down fair was strategic the free for was billion seeing free ramps about cash related headwind just flow at I could cash about about way to downtick you AI the it those the flow. you what And the the guess number. talk to cash driving buckets about a think little I year-over-year. what prebuys, I is If from free think least a more versus Marie, can you're talk $X.X It last Maybe there's flow, the just was bit then are. quarter,

downtick, billion quarter that talk a do well? like flow cash it's free a so of overthinking as number could think it. how bit this you think seems I'm you maybe I about October just But time $X.X about

Marie Myers

sure. worries, Yes, No Amit.

of cash and go think flow, in QX then are we're I me hit you into I'll yes, let so -- probably QX. at And just terms where in

from couple a perspective, driven by So a it's QX of things. really

then QX, capital get working normal of Firstly, to just and see And capital. we benefits the some the expect of seasonality as some of see. into timing of working the we also we that do

So conversion stronger AI revenue. in and we're free cash of will that then that see reversal CCC obviously, see a going benefit flow. And to we'll

remarks the in prepared I see to I mentioned of going that we're revenue. in improvement a sequential shipment my think AI

So can you also impact have see will flow. on free that our cash an

full up billion. expectations, So say year, on the the of as QX I'd for can are in track year. still It's tightened QX, given for we're just where in into you we're we're getting we we just at imagine, $X.X the sort Amit, now,

So Amit. still $X.X on for track billion,

Operator

Sacconaghi Toni with question is next Bernstein. The from

Toni Sacconaghi

whether You be That's about to in I'm deals. wondering free QX. your flow billion cash realization. in QX AI Marie. cash lumpiness server or to large XX% flow, any about the on to significantly $X.X be AI billion. be just then did of mention if different unusually $X.X was bookings about billion. you're And repeatedly Net $X.X income is deals anticipating Free And the to going going there is

even will free HPE I that forward? about we free cash flow to integration the since net year less maybe cash income where think off, lower Or ] pathway free even being than split next the following of year been presume than think I is and flow flow because see has can realization be Juniper to actually [ charges. for How positive? realization we where that. X going do cash

Antonio Neri

Antonio. in talk the is the no, provider Toni. quick enterprise take billion in deals relative obviously $X.X space. bookings very or mix lumpy is The have the was percentage more more been deals. service on there large the answer about Yes. first the and across It's because going -- uniform Thank we this, been very, to of to you, was not I'm side, part. And This mid-teens. the as a spread

consistent with prior very So quarter. the

dollars obviously, much larger, the we Because are this right? billion. $X.X booked now However, quarter,

the So in based free do good significant a flow? is And a call super visibility I QX thing. have what this about the Marie, QX. what cash I talk saw continuation expect we don't want but large we it, deals, on in you argue of pipeline more we actually to in

Marie Myers

no. Yes,

benefits. and mean, employee working year, the from the for of normal I I puts mean, cash net flow, free so I terms and in of sort capital, Toni, earnings 'XX an on of takes terms flow, your Just comments in FY to CapEx, cetera, think cash perspective, et it's bridging free

year So there net no the there our of terms flow. capital sort specific of to in earnings -- for is working in our charges free cash

do In terms earnings 'XX we of the And we'll look, Toni, in the call. transaction said, stays next be when honestly, same. our what 'XX, we guiding think I

we more into call. cash as next flow I'll for the around color get 'XX free So provide

Operator

Mike is next Ng from The question with Goldman Sachs.

Michael Ng

mix I and just AI on the products orders of Slide and revenues had guys a systems that services for disclosed question XX. you about the

think things. I was by struck I X

orders. the services with to more Should growing very that of key revenue some system to over services we as of First, date. that's systems. the continue expect percentage the being share to little AI recognized of And you're AI time? And second, selling then services a

recognize and Server and that services As the margins AI margins? that margins revenue how margins And you system systems, can AI much should that by? improve for improve

Antonio Neri

momentum our Mike. of the AI the we portion that enterprise which with I -- pleased very services Yes, we on segment of believe became rich day to X, systems comes attach listen, business, with and market continue like yesterday X we it the the Thanks, X, will market the as day we services services, are out was because Yes. Private of quite of that has Cloud and the of grow grow component AI, first segment call it. And day more services available with day a it. HPE bit

Marie providing And of last so her as as we in component but all one right saw quarter, of deferred. much much now, -- that, which in you slides, that pretty remarks, disclosing was is services started of the the

that time, and positive contributing that are of in segment that immediately, maintenance our of market. the the revenue, most that recognized over gets we Server contract. And unless over that therefore, of So the segment the the obviously be expect we to will is recognized the we installation that margin length recognize which gross an gets doing is

gross in HPE the both, and we as accretion more start enterprise but Private yes, we Cloud on So space. the the margin services revenue, I'm recognize positive selling as

Operator

Leopold The Simon is next Raymond from James. with question

Simon Leopold

see, but How and AI-accelerated risk growth eventually we wanted about good good maybe think with how seeing the happens? platforms we versus bit would AI? these trends are traditional thinking if cannibalize you that a could I cannibalization to about traditional really should arguments Or you the Antonio, traditional given patterns. that about hear that servers, talk little you're servers, order

Antonio Neri

Yes. Simon. Thank you,

We I'm have point the the cannibalization the trying view into segment always segments. right? segment you point of remember, server in have traditional X no view, seen signs And of to So a market. space, AI bring of

while you question will from And XXXX is model compute, need why are accelerated form procurement. going call terms and very government the it's the made in there of not because sovereign factor. And and the there but that, have traditional a participate the generally engagements decision the the per been applications. the service will the But the the servers And the up combination to in is you have now in on no we a it that enterprise, a view interest, service when, providers, less. has long the obviously and market. And inferencing. And speaking, focused sales for model architectures in and cycles use is of compute It's we either longer now cost workload, workload you there but no builders, which CPUs the legacy GPUs move have perspective, unique a last of se. traditional to And hyperscalers. space, there, that clear a include not we enterprise. that once second, You time is least, in growing, do much then sold to the like do or traditional A, to an AI which to fine-tune to customers have then TCO

we world from signs see when about segments, loads into so cannibalization workloads. I don't why the think customer the AI deployments traditional And that's and of

Operator

Merrill question next The Mohan from Lynch. is with Wamsi America Bank of

Wamsi Mohan

could if called Services. seeing share if was some verticals of demand I the maybe can portfolio on you what wondering Financial kind why know on being you And like just commentary provide could the some what composition color some strength share across versus -- backlog evaluated? you're more AI I you're Curious on calling Antonio, you within are where out your not? that out, color care well. you that is projects health the color some as on and enterprise

Antonio Neri

Yes.

of have next pipeline is which current we the will momentum the all, that tells is of news the multiples positive first you quarters. So front of few backlog, the in in a continue us because

mid-teens Second I is enterprise said, as the space. service is and traditional the that is composition, rest the backlog the provider the in space

are what enterprise into on those in are there on sophistication are driving. or our capacity more very colos. obvious. sight customers from space call an their entire Obviously, comes that them some by are we interest. service that they type top, of type And that down segment return the of on models they then the, where the seeing And use them deployment. several why are cases provider to the little use targeting Private to Cloud maturity for the do that's focused the that of in now the use is other basically buy of And really of is and at see customers down cases I now of. And and because large obviously, offering the many the On a training line significant we space stack investment, hosting cases the verticals bit AI those for to all specifically designed with the clear the see is on AI, compute then sovereign for for They sized way a infrastructure. the models, verticals workflows trade

the a A in them systems bit ways actually obvious supercomputers of Union many one and going done for for many and them designed little opportunities. U.K. And language basically data. And AI are traditional And lot large We geos clouds supercomputing. for open are other both in some models. working to are are are a several we to to to do with very now AI, the want multiple do of basically like reasons across because of on European on the of that's deployments ones private those compliance have reasons we or the sovereign lot look

So is same. the infrastructure in the the end

goes an manufacturing, can you investment. finance, into opportunity customer the enterprise deploying systems IT traditional it systems and but other and areas, where in through marketing, upfront And expansion All really very much that cases a just on now they these bots return partner service liquid realize even that's define those think clear on we helping are because the I can side, ultimately from see beyond to us. But so are of value. for see to cooled ecosystem the business them use

Paul Glaser

Last Wamsi. please. you, Thank question,

Operator

Ananda is Capital. question The Baruah from Loop final with

Ananda Baruah

gen deployments more that's what around sweet me. see what's you evolving just Like how or for Antonio, Maybe next give X from right there, spot workloads? you I'd dovetailing it context now And in like can like or do want the do of over business that the well? love any And insight actually then for of years that you types or sort you how AI? changing as HPE see

Antonio Neri

is this is enterprise, -- are portion you in are host space. Day next underestimate getting several of is, security. need actually is expertise world, gets ease-of-use, needed to And Well, done. And how run. our footprint infrastructure why large I expertise big being build obviously, largest to That's all one AI. And And services this to I add the the you that remember, accretive we those is actually we deployment GreenLake we capabilities all the AI close all attached business full addition is you that's have gets where GreenLake expertise. way to done our this services to component, recognize enterprise when core But now offer. And the the certified an important key through of to manage we important are that HPE hybrid it hybrid unique the the are to server of inside and the now, then foundation about piece. all HPE for and where we are about should component for And attached network, a when then and IP AI of is data, specifically my solution it's fundamental value filing it. we're on-prem deploy then requires will actually And we simplicity. and in software to HPE again, spaces me, These storage, the the in of which of the of think and space another the in get right see which believe once in accelerator to like now run built to can And is which the AI, services that patents have going and ultimately, AI, these stack networking And the cross-sell, why capabilities it. ultimately, we spots Independent building areas comes we on then the transaction, the not in it's deploy and in services see offer down is in A, going and is unique but Juniper customers. automation, is across configurations. will view, HPE solution, very key we year, and customers to to that's think all as are that's enterprise optimized AI, and the That thing through traditional both strategy because the sweet have where the our a manufacturing how what to those our side, for lot a systems. assistants. the I you a GreenLake GreenLake. confidence next upsell, customers want the to control And an workload,

Paul Glaser

any Okay. Thank you comments? very much. Antonio,

Antonio Neri

because software ultimately, And about margin services, deliver a growth, on cash. of it's or when We Obviously, you are quarter our much side, so operating of lot I'm around you complex. And that for time. growth. an with strong that acquisition. about Server I'm think we XX% Juniper drove super did than the very where bottom very and of and work We then because pleased next content, the more we say, honestly, the also the to ultimately, after I it's profitable networking revenue I margins, about tranche our I what next consistently ability in And around it's we the that HXC Again, No, about more think both think there. quarter. we'll Yes. that's on I gross comes first about option. margins. stable, understand and is took closed we gross said what questions line. thank We as environment the will confident our deliver the all Hybrid mean, But margins. a Cloud margin the about very driving delivered said. strong we on way a

the to think competitive the there, we day which it's coming and strategy raised is a the again, we house. And what on EPS all guidance every together. did So execute dynamic of with side full this year have we our I But discipline, again for quarter. very

your forward much on you look Wisconsin time, very at of to you I thank So in facility for hosting and XX. our some October

Paul Glaser

good. for everyone, today. you, Very Thank joining

Operator

our this Ladies concludes gentlemen, today. you. call for and Thank

Hewlett Packard Enterprise (HPE) 4 Sep 242024 Q3 Earnings call transcript