Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: HPE stock.
Speaker 1: Can we just look at it skyrocketing this morning as
Speaker 1: we see it surge after second quarter results beat expectations.
Speaker 1: It raised it's fully of forecast where sales could jump
Speaker 1: by an entire one third after thirty three percent. That
Speaker 1: growth is being fueled, you know why, by massive demand
Speaker 1: for AI infrastructure joining us. Now, HPU presidentco Antonio and Ery,
Speaker 1: you're up twenty one percent.
Speaker 2: You have let to a record high on the stock.
Speaker 1: It is a record move for the stock and you've
Speaker 1: added thirteen billion dollars in market cap. Just reflect for
Speaker 1: a moment on what people are calling a blowout quarter.
Speaker 3: Yeah, well, good morning, Caroline. Was an exceptional quarter. I
Speaker 3: just said, right, we achieve a record break results a
Speaker 3: number of key metrics. We have tremendous demand across our
Speaker 3: portfolio or portfolio is an intersectional networking, cloud and AI
Speaker 3: and the demand is durable. And therefore, you know, thanks
Speaker 3: to the results of the first half, the tremendous record
Speaker 3: breaking backlog that we have the pipeline which remains multiples
Speaker 3: of that backlog allow us to raise their twenty six
Speaker 3: guide and to provide twenty twenty seven guide six months
Speaker 3: ahead because of that durability. So we're very, very proud of.
Speaker 4: This moment, Antonio. This is a story about demand right
Speaker 4: an outlook and it's through HPES lens a revenue figure.
Speaker 4: But I think there's a lot of value if you
Speaker 4: could talk us through whether that outlook for twenty six
Speaker 4: and then the twenty seven outlook, which you say is
Speaker 4: evidence of durability, is a volume story or it's a
Speaker 4: pricing story. In other words, no great volume of servers
Speaker 4: more than you normally do, you can just charge a
Speaker 4: lot more for them.
Speaker 3: Well, first of all, when we talk about the outlook,
Speaker 3: we are actually pulling by two years the twenty eight
Speaker 3: outlook that we provided last October, and the security anitor
Speaker 3: is meet in intra twenty twenty six. And to give
Speaker 3: us sense, you saw that our armies per share at
Speaker 3: the midpoint will be three dollars and forty cents, which
Speaker 3: is a dollar higher than the previous guidance. And at
Speaker 3: the core of that is our networking story and the
Speaker 3: improvements we have made across the entire portfolio, a combination
Speaker 3: of course of volume in the key products emits, whether
Speaker 3: it's campus and branch which is up almost thirty percent
Speaker 3: in orders, so the routing business, so the data center
Speaker 3: switching business orders which is our close to twenty percent.
Speaker 3: And then on the server side of the equation, we
Speaker 3: are up triple digits in demand storage for the six
Speaker 3: consecutive quarter triple digits. And our private cloud portfolio, which
Speaker 3: obviously has the AI factory for enterprise, continues to growth.
Speaker 3: So it is a volume story with very discipline prency
Speaker 3: in execute.
Speaker 1: I mean talking about discipline the father operating profit you
Speaker 1: see going to eighty to eighty five percent growth for
Speaker 1: the fiscal full year. And this in the context of
Speaker 1: memory prices, just going through the roof, how are you
Speaker 1: able to navigate what could be a significant pricing pressure bottlenecks. Still,
Speaker 1: there's a lot still to give me a little bit
Speaker 1: anxious about Antonio.
Speaker 2: What could disrupt this?
Speaker 3: Well, we need to go underneath the portfolio and look
Speaker 3: at the mixed cattle and because now with an eleven
Speaker 3: billion dollar business in networking clearly drives a different mix
Speaker 3: in a gross margin which was record thirty six point
Speaker 3: nine percent. Let's not forget that we are ahead of
Speaker 3: plan in the Juniper and Catalyst initiatives Bob Milestone says,
Speaker 3: synergy that fuels costal seals improvements and opics improvements. And
Speaker 3: then you have, of course you have the cost increases
Speaker 3: in d RAM and A nand But fundamentally there is
Speaker 3: all about the demand. I have to tell you and
Speaker 3: A this yesterday. Customers need access to this technology. You
Speaker 3: guys have covered extremely well the AI momentum involve in
Speaker 3: the buildout, but we were very pleased to see the
Speaker 3: acceleration and enterprise which is driven by that option, especially
Speaker 3: in AI infanancy.
Speaker 4: There are lots of things happening on premise back hybrid cloud.
Speaker 4: As we just discussed with perplexity, is becoming increasingly important
Speaker 4: in your outlook or even in the court of gone.
Speaker 4: Was this a story about one big customer that changed
Speaker 4: the trajectory for you or are you seeing new types
Speaker 4: of customer? It's not just a hyperscaleer story anymore.
Speaker 2: Now.
Speaker 3: We have been very selectively playing in the AI at
Speaker 3: scale in terms of profitability as well as working capital.
Speaker 3: Because we need a lot of working capital. We have
Speaker 3: prioritized pain down the debt and making sure we drive
Speaker 3: the profitable growth tour networking cloud NAI in enterprise and
Speaker 3: sovereign and influencing. So this is not one customer, this
Speaker 3: is a number of many, many customers. I spoke yesterday
Speaker 3: about some of the customers that we are winning that
Speaker 3: are bringing that infrastructure on premise because for compliance reasons,
Speaker 3: governance reasons, data privacy reasons, security reasons, they need to
Speaker 3: do on premise. And I give an example of my
Speaker 3: own use case. We inside HP we have twelve hundred
Speaker 3: AI use cases, of which two hundred and fifty are
Speaker 3: in production. We actually use a combination of proprietary or
Speaker 3: close models and open models, and we have very stringent governance,
Speaker 3: and we do it on premise, and we see that
Speaker 3: trend happening across the enterprise more and more.
Speaker 4: I'm going to be very dry and very specific with you, Antonio.
Speaker 4: Is this an enterprise supercycle or is this something different
Speaker 4: where agentic ai leads to a complete structural shift on
Speaker 4: how all kinds of companies chang in their spending habits.
Speaker 4: What do you see is.
Speaker 3: The ladder And I think you know AI enterprise will accelerate,
Speaker 3: But the reality is that agentic AI is transforming the
Speaker 3: way we do business, is transforming business processes, workflows, and
Speaker 3: is making companies more agile and efficient. So that's what
Speaker 3: we see today and I think we are early in
Speaker 3: the enterprise adoption and I think, you know, customers now
Speaker 3: want to make sure they are not left behind. We
Speaker 3: have a say inside the company, and the future belongs
Speaker 3: to the fast and so you got to move really fast.
Speaker 3: And we learn a lot through the COVID right through
Speaker 3: the own ramp to digital. So is the ladder and
Speaker 3: I'm enthusiastic about this because it really helped customers to
Speaker 3: be more competitive in the market, which ultimately is the
Speaker 3: teas is about the productivity.
Speaker 1: It's about productivity and many worry that means few jobs.
Speaker 2: That means change in labor.
Speaker 1: Have you seen any changes the way in which you're hiring,
Speaker 1: Maybe you don't need as many employees. What do you
Speaker 1: think about the narrative?
Speaker 3: Well, definitely, the type of roles you're hiring is different.
Speaker 3: But inside the company, we have a very aggressive talent
Speaker 3: development succession plan. In fact, this afternoon, I'm going to
Speaker 3: have a session with my entire team about that. But
Speaker 3: the skill sets of the future have to evolve, and
Speaker 3: you know, I always remind our sixty five thousand employees
Speaker 3: to use this technology in their favor to become more productive.
Speaker 3: And I believe everyone everyone including yourselves as anchors. To
Speaker 3: be you have to have a minor in AI, have
Speaker 3: to use the technology is going to be a competitive
Speaker 3: advantage in every role across an enterprise.
Speaker 4: Were using the technology. HPE President and CEO Antony and
Speaker 4: Area back on Bloomberg Tech. Thank you very much