WEBVTT - HPE CEO Antonio Neri Talks AI Revenue Forecast, Prices and Strategy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>HPE stock.

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<v Speaker 1>Can we just look at it skyrocketing this morning as

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<v Speaker 1>we see it surge after second quarter results beat expectations.

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<v Speaker 1>It raised it's fully of forecast where sales could jump

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<v Speaker 1>by an entire one third after thirty three percent. That

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<v Speaker 1>growth is being fueled, you know why, by massive demand

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<v Speaker 1>for AI infrastructure joining us. Now, HPU presidentco Antonio and Ery,

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<v Speaker 1>you're up twenty one percent.

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<v Speaker 2>You have let to a record high on the stock.

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<v Speaker 1>It is a record move for the stock and you've

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<v Speaker 1>added thirteen billion dollars in market cap. Just reflect for

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<v Speaker 1>a moment on what people are calling a blowout quarter.

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<v Speaker 3>Yeah, well, good morning, Caroline. Was an exceptional quarter. I

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<v Speaker 3>just said, right, we achieve a record break results a

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<v Speaker 3>number of key metrics. We have tremendous demand across our

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<v Speaker 3>portfolio or portfolio is an intersectional networking, cloud and AI

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<v Speaker 3>and the demand is durable. And therefore, you know, thanks

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<v Speaker 3>to the results of the first half, the tremendous record

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<v Speaker 3>breaking backlog that we have the pipeline which remains multiples

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<v Speaker 3>of that backlog allow us to raise their twenty six

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<v Speaker 3>guide and to provide twenty twenty seven guide six months

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<v Speaker 3>ahead because of that durability. So we're very, very proud of.

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<v Speaker 4>This moment, Antonio. This is a story about demand right

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<v Speaker 4>an outlook and it's through HPES lens a revenue figure.

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<v Speaker 4>But I think there's a lot of value if you

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<v Speaker 4>could talk us through whether that outlook for twenty six

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<v Speaker 4>and then the twenty seven outlook, which you say is

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<v Speaker 4>evidence of durability, is a volume story or it's a

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<v Speaker 4>pricing story. In other words, no great volume of servers

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<v Speaker 4>more than you normally do, you can just charge a

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<v Speaker 4>lot more for them.

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<v Speaker 3>Well, first of all, when we talk about the outlook,

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<v Speaker 3>we are actually pulling by two years the twenty eight

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<v Speaker 3>outlook that we provided last October, and the security anitor

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<v Speaker 3>is meet in intra twenty twenty six. And to give

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<v Speaker 3>us sense, you saw that our armies per share at

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<v Speaker 3>the midpoint will be three dollars and forty cents, which

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<v Speaker 3>is a dollar higher than the previous guidance. And at

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<v Speaker 3>the core of that is our networking story and the

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<v Speaker 3>improvements we have made across the entire portfolio, a combination

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<v Speaker 3>of course of volume in the key products emits, whether

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<v Speaker 3>it's campus and branch which is up almost thirty percent

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<v Speaker 3>in orders, so the routing business, so the data center

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<v Speaker 3>switching business orders which is our close to twenty percent.

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<v Speaker 3>And then on the server side of the equation, we

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<v Speaker 3>are up triple digits in demand storage for the six

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<v Speaker 3>consecutive quarter triple digits. And our private cloud portfolio, which

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<v Speaker 3>obviously has the AI factory for enterprise, continues to growth.

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<v Speaker 3>So it is a volume story with very discipline prency

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<v Speaker 3>in execute.

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<v Speaker 1>I mean talking about discipline the father operating profit you

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<v Speaker 1>see going to eighty to eighty five percent growth for

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<v Speaker 1>the fiscal full year. And this in the context of

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<v Speaker 1>memory prices, just going through the roof, how are you

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<v Speaker 1>able to navigate what could be a significant pricing pressure bottlenecks. Still,

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<v Speaker 1>there's a lot still to give me a little bit

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<v Speaker 1>anxious about Antonio.

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<v Speaker 2>What could disrupt this?

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<v Speaker 3>Well, we need to go underneath the portfolio and look

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<v Speaker 3>at the mixed cattle and because now with an eleven

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<v Speaker 3>billion dollar business in networking clearly drives a different mix

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<v Speaker 3>in a gross margin which was record thirty six point

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<v Speaker 3>nine percent. Let's not forget that we are ahead of

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<v Speaker 3>plan in the Juniper and Catalyst initiatives Bob Milestone says,

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<v Speaker 3>synergy that fuels costal seals improvements and opics improvements. And

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<v Speaker 3>then you have, of course you have the cost increases

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<v Speaker 3>in d RAM and A nand But fundamentally there is

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<v Speaker 3>all about the demand. I have to tell you and

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<v Speaker 3>A this yesterday. Customers need access to this technology. You

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<v Speaker 3>guys have covered extremely well the AI momentum involve in

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<v Speaker 3>the buildout, but we were very pleased to see the

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<v Speaker 3>acceleration and enterprise which is driven by that option, especially

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<v Speaker 3>in AI infanancy.

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<v Speaker 4>There are lots of things happening on premise back hybrid cloud.

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<v Speaker 4>As we just discussed with perplexity, is becoming increasingly important

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<v Speaker 4>in your outlook or even in the court of gone.

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<v Speaker 4>Was this a story about one big customer that changed

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<v Speaker 4>the trajectory for you or are you seeing new types

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<v Speaker 4>of customer? It's not just a hyperscaleer story anymore.

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<v Speaker 2>Now.

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<v Speaker 3>We have been very selectively playing in the AI at

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<v Speaker 3>scale in terms of profitability as well as working capital.

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<v Speaker 3>Because we need a lot of working capital. We have

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<v Speaker 3>prioritized pain down the debt and making sure we drive

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<v Speaker 3>the profitable growth tour networking cloud NAI in enterprise and

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<v Speaker 3>sovereign and influencing. So this is not one customer, this

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<v Speaker 3>is a number of many, many customers. I spoke yesterday

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<v Speaker 3>about some of the customers that we are winning that

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<v Speaker 3>are bringing that infrastructure on premise because for compliance reasons,

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<v Speaker 3>governance reasons, data privacy reasons, security reasons, they need to

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<v Speaker 3>do on premise. And I give an example of my

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<v Speaker 3>own use case. We inside HP we have twelve hundred

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<v Speaker 3>AI use cases, of which two hundred and fifty are

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<v Speaker 3>in production. We actually use a combination of proprietary or

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<v Speaker 3>close models and open models, and we have very stringent governance,

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<v Speaker 3>and we do it on premise, and we see that

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<v Speaker 3>trend happening across the enterprise more and more.

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<v Speaker 4>I'm going to be very dry and very specific with you, Antonio.

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<v Speaker 4>Is this an enterprise supercycle or is this something different

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<v Speaker 4>where agentic ai leads to a complete structural shift on

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<v Speaker 4>how all kinds of companies chang in their spending habits.

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<v Speaker 4>What do you see is.

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<v Speaker 3>The ladder And I think you know AI enterprise will accelerate,

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<v Speaker 3>But the reality is that agentic AI is transforming the

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<v Speaker 3>way we do business, is transforming business processes, workflows, and

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<v Speaker 3>is making companies more agile and efficient. So that's what

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<v Speaker 3>we see today and I think we are early in

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<v Speaker 3>the enterprise adoption and I think, you know, customers now

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<v Speaker 3>want to make sure they are not left behind. We

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<v Speaker 3>have a say inside the company, and the future belongs

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<v Speaker 3>to the fast and so you got to move really fast.

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<v Speaker 3>And we learn a lot through the COVID right through

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<v Speaker 3>the own ramp to digital. So is the ladder and

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<v Speaker 3>I'm enthusiastic about this because it really helped customers to

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<v Speaker 3>be more competitive in the market, which ultimately is the

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<v Speaker 3>teas is about the productivity.

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<v Speaker 1>It's about productivity and many worry that means few jobs.

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<v Speaker 2>That means change in labor.

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<v Speaker 1>Have you seen any changes the way in which you're hiring,

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<v Speaker 1>Maybe you don't need as many employees. What do you

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<v Speaker 1>think about the narrative?

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<v Speaker 3>Well, definitely, the type of roles you're hiring is different.

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<v Speaker 3>But inside the company, we have a very aggressive talent

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<v Speaker 3>development succession plan. In fact, this afternoon, I'm going to

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<v Speaker 3>have a session with my entire team about that. But

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<v Speaker 3>the skill sets of the future have to evolve, and

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<v Speaker 3>you know, I always remind our sixty five thousand employees

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<v Speaker 3>to use this technology in their favor to become more productive.

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<v Speaker 3>And I believe everyone everyone including yourselves as anchors. To

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<v Speaker 3>be you have to have a minor in AI, have

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<v Speaker 3>to use the technology is going to be a competitive

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<v Speaker 3>advantage in every role across an enterprise.

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<v Speaker 4>Were using the technology. HPE President and CEO Antony and

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<v Speaker 4>Area back on Bloomberg Tech. Thank you very much