HP Enterprise CEO Antonio Neri Talks Revenue, Memory Demand and Supply

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Shares of HPE modestly higher, up about six tenths of one percent. Been chopping around in the session, but the company gave us strong sales and revenue projection for the current quarter was striving it demand demand for AI hardware in particular, has discussed with hp CEO Antonio Neeri, and let's start with that. You know it clearly there is some staying power in that demand at rack scale, you know, crystallize it for us. What are you seeing in real time?

Yeah, good morning, Ed, and thanks for having me. We saw a tremendous demand throughout the quarter. I think the momentum in AI continues in the build out of the data center, but what I'm really pleased is the momentum we see in enterprise. In fact, most of our revenue in AI, we're recognizing Q one came from the enterprise segment, which shows you two key elements. One is the adoption of agenttic AI into the company's workflow, and second is

You know post Juniper networking is is upside for you, right? I think you have a lot of confidence that growth will come in networking. For the audience that doesn't understand what it is you do in that space. Why is networking on the rise in parallel with just kind of the broader AI hardware demand that you're seeing.

Well, I do believe ed, and this was the core tesis of the Juniper acquisation. The next inflection point in ternal disruption will come from the networking connectivity layer. Think about when you build a data center, you have to connect this data center to other data centers through the Internet, and that's what we call data center interconnect. Juniper has one of the most innovative products in the route in space. By the way, this passport that we grew meet twenty

I mean you actually said, look, you're not done raising prices. You talk about discipline and what is a very dynamic environment, Antonio, talk to us about well, how you're weathering the supply chain issue, in particularly the cost the memory costs at the moment. How do you navigate that?

Yeah, Carol, I mean, obviously the demand and supply has a huge mismatch.

And you actually need to go back all the.

Twenty two to twenty three time frame to understand how we got here. Accelerated by the hypercycle.

We see in the AI space.

But fundamentally, in our guidance, the new guidance, the new outlook that we raise for twenty twenty six, we included our ability to see the supply that we need to convert that into revenue profit. But the reality is that we do not have enough supply against the order intake and the backlog, because otherwise we'll have even a higher outlook. So what we're doing we have taken three very unique steps. Number one is securing as much supply as we can, but again we don't have all the supply that we

Seven, although we will hope that we will.

Reach some sort of elevated pricing stability in twenty twenty six. And number three, you know, my experience has taught me that ultimately need to have direct, transparent conversation both with customers and our partners. Last week I was in Europe. I met more than twenty customers the Mobile Congress in London, and they appreciate that level of transparency understanding the environment we're in.

I mean, you're actually forgoing supplying some equipment to mobiles service providers, so you're being choosy with who you work with at this time of geopolitical angst and when we question how much the Middle East is going to be able to build out the data center capacity as once thought, has the Iran conflict impacted your view on the world or indeed the supply of the world and chips.

Not on the supply side, Carol, And obviously our first priority because we have businesses in that region, whether it's ue Qatar, bar In, Sauda Arabia, Israel, right is the well being the safety of our employees. We have approximately one thousand employees in that region and the good news all are doing well at.

This point in time.

But from a supply perspective, no, But obviously as the conflict may gets elongated, may have other implications, particularly on the.

Logistics side of the equation.

You know, look, air freight routes are a little bit more complicated. We don't use boats of ships for transporting our equipments. But over time we have to assess if there is a revenue impact, what I can tell you right now there is even more demand then we saw, particularly three four months ago. So we have to navigate that together, and we have to be smart about it.

Antonio, you have never let me tear apart an HPE server, and that's okay. But if I've got my hands in the compute trae, you'd have the high bandwidth memory around the GPU wherever it comes from. You'd have the ddrs around the CPU, and somewhere you'd have the SSDs and flash memory. Be very very specific. Of those three, what's the biggest impact to you right now in constraining your sales and your outlook.

Very simple, is the dr and land or the SSDs. Hbm's less constrained, but obviously a lot of the allocation on the capacity has moved there. And as you know, there is also a transition from the prior generation of hbms to the new generation of HBM because you need or memory channels. But it's really the DDR four and which now nobody almost use it, but DDR five and the nand part which is SSDs.

You said just earlier. Look, one of your three key steps you took was to get as much supply as you could to ensure that that was locked in. You wish you could have more Who is it that you need.

To push more? Who is it do.

You need to have more security for? How can you perhaps get hands on further supply going forward?

We have a long standing relationship with the three core suppliers that provide DDR memory and hbms, and there is a little bit a larger ecosystem for the nand space, but we're having weekly engagements with them. We are looking to swap components driving different configurations, but the reality all of them are significantly constrained.

Caroly Antonio, just twenty seconds, what's the dollar figure dollar terms, and of what was left on the table, how much better the outlook could have been.

Yeah, it's pretty sizable. I will say, you know, we guided five pennies on the midpoint of the range and then we raise our outlook for free cash flow by almost two hundred million at the midpoint. But the backlog is very very large at this point in time. If you think about the II system, backlog is over five billion. We raise again the networking for networks for AI goal for then a year, so it's a very sizeable backlog.

Anthony Narisi of HPA. Thanks to the kind of conversation, we appreciate it