Bloomberg Audio Studios, Podcasts, radio News. Welcome back to Bloomberg Tech. Let's get straight to earnings now, because shares of HPE they are training higher throughout this morning. The company reporting fiscal third quarter earnings, but did show operating margin in the server unit had narrowed. But the CEO an Tonio and Neery on the call telling investors, look, it's going to return to roughly ten percent by the end of the current period. Well, now we've got him here to
explain a little bit more. HPE CEO Antonio Niry. We get into how you're building out this business, how Juniper adds to the networking side, but for now, the AI systems, this server unit, Howard, is profitability to improve.
Well, good morning calleran, thanks for having me. We are very pleased with our quarter. It turned out to be very solid with record breaking performance on revenue and we expand the profitability sequentially. And to your around the service segment, we deliver what we say we will do. But most importantly,
our traditional server business returning to a historical level. And so when I think about you four, we're going to see a return to approximately ten percent for the quarter because of the momentum in traditional servers, which by the way, group double digits here over here, and the balance of AI mix between sovere and an enterprise which now represents more than fifty percent of our orders compared to the service providers.
So the AI serve a bit is that set to improve? How well broadly is the AI system's profitability improving as we see this monumental buildout of infrastructure.
Well, as I think about the AI servers, I think it is important character to think about different customer types and how we participate in each of the segments. Should we think about the service providers and the hyperscals and the model buildings where a lot of the capital expenses are taking in place. To your point, we are now going to lead with networking for AI. We are extremely
pleased we close the Juniper transaction. Junior is already a reference in many of those buildouts, and that's where how we're going to lead in that particular segment of the market. And we're going to sell the server compute platforms with our partner. What makes sense from a profitability perspective, But what we saw in the last couple of quarters in particular discorders sovereign and neo clouds and enterprise now represent
more than sixty percent of the market. There, we participate in a slightly different approach which the market profile is different. We lead with a rack scale integrated architecture for the sovereign space, and we lead with an integrated solution for enterprise enterprise group for the seventh consecutive quorder, and we double the number of logos. And then in sovereign we grew more than two hundred and fifty percent, and we want some marquete deals in the Middle.
East, Antonio, that might be the answer. Actually, I study the traditional server business and the storage business, and you're doing better than your peers Dell NetApp. But why are the dynamics better for you when you have these analogous businesses with those other names I mentioned.
Is multiple things. At first, in the enterprise traditional server, we see a refreshed cycle taking place for age infrastructure with more richly configured servers. And we have two phenomenal platforms which is hppro I and JEN eleven and Gene twelve. We did a fantastic job in really hitting the sweet spot to the market with better performance per core, lower energy consumption, better security, quantum proof for them other and
through WORLDD optimization. And so now as we go to the June twelve that AOP continues to growth and the ability to attach services is much higher. As I go to the storage business, we really transform the entire industry in my mind by deploying a consistent architecture, whether it is structural data block storage, or whether it's our structural data which you need for AI. And that's what we call the object data with file ingestion, so the customer can do one one investment with a peace of mind
as they grow their data needs for AI. So I think that's what's resonating in the market. Butten we have a fantastic go to market. We play in one hundred and seventy two countries and that reach together where the partner is a major differentiation. In addition to the fact that green Lake provides through AI dream and life cycle management serviability.
Those are the things specific to you, Antony, would you give me an outlook for enterprise IT spending And because we have a lot of macro uncertainty right now, and you must see in the pipeline how that uncertainty is really manifesting.
I was based on our pipeline, first of all, is solid across the three segments we participate in networking, server, and hybrid cloud. It is uniform across the three geos. There was another question in another interview that how North America versus orders are doing. North America did very very well for us this quarter, and so I think the demand will continue to be there. Every enterprise have to modernize and deploy AI. We as a company of deploying
very extensively. We see the productivity improvements across many functions and many businesses, so that will continue. But at the same time, there is a way to modernize the legacy by freeing up space, power and cooling so you can
deploy this new technology. So we are very confident about the outlook and with Juniper, that outlook becomes even stronger because now we have a complete portfolio networking that makes us unique as we want to build the best networking business in a modern, secure, cloud, native and AI driven portfolio.
And you're expecting to cut costs. I think with seeing six hundred million dollars in cost savings are expected by that combination. Antonio cost savings are necessary for many businesses right now, as you think about some of the pressure from tariffs, your bird's eye perspective on how much that's implicating your business.
Right now, you have to have a mindset of continuously transform the company. That's a fact, and you know the future belongs to the fastest said all the time. But the at least six hundred million dollars in synergies is related just to the Juniper transaction, and I re iterated that yesterday, and then there is an incremental three hundred and fifty million dollars through three key strategic levers. Continue to optimize our portfolio, continue to optimize the workforce, and
aggressively deploy this set of technologies. Another quarter is not just acustic out is a way to improve experiences and become more efficient and agile in this market which you have to react with in the moment. So we are very encouraged about what we're seeing and Juniper actually give us an opportunity to rethink some of the processes we have had for a long time.
Here, Antonio, I ask you this every quarter, how is the relationship in partnership with Nvidia? But is Jensen one? We'd see it right for the supply chain and the partners. They give great visibility to future iteration as a product right, they commit to the annual cadence of new GPU. They're increasingly involved in the networking through Envy Link. Is anything changing for you because of the way that video operates generationally technology to technology every year.
We have a fantastic strong partnership at the company level and at the personal level. Jensen is available in the moment. If I need something, he picks the phone and we chatted. We solve it. But I will say the following I think from a collaboration perspective, from a co engineering perspective.
The proof of that is our AI factor for enterprise with a private cloud AI, we actually took a very different approach together with a video We integrated the entire Nvidia AI suite of software inside our green lay cloud. We took a software down into infrastructure and together we provide an integrated solution for our enterprise customers. That's a testament how you co engineer despite the fact a lot of the value is on the GPU, but reality is
the software and the experience that you deliver. On the other hand, now with networking, we have another set of opportunities because above the envy Link and the spectrum ACS you refer to. You need a full data center architecture, and Vidia does not participate into that. Our major competitors obviously our Cisco and Arista, but Juriper has become the
reference for many of these large AI deployments. But I do believe together with the Nvidia, we can do a better job in the way we deploy that copex and we run that infrastructure from an OPES perspective using AI technologies for that matter, in food manage the network. So
we are very excited about that. And look, you know, in the last quard we announced new innovation together with Nvidia, the RTX six thousand pro, the latest Ultra you know Blackwell, we are committed to be time to market with Jensen and team.
I'm interested by the adoption and generator of AI by the companies that are helping them become a reality. Of course, benefits your share price, which is near a record high, Antonio, But how is it benefiting your employees or indeed, how are the pilot's running because there's been a lot of questions about whether there's been efficacy there since the MIT report.
Yeah, I think it's fair to say Carol and from generative AI to agent KI, and I think about agent KI as the next evolution for what really enterprise needed. And my view is that agent KI will transform business processes by simplifying them, automating them and then bring intelligence to it. In our company, we are using agent ki
aggressively in our offers. So Green Lake Intelligence, which we announce it June, is one of the most comprehensive clouds that includes a gent ki observability in the way deploy and manage infrastructure and so forth. On the other hand, as a company, we are deploying agent KI across finance. Our CFO is incredible aggressive on this, so she is
on the leading edge on this. Our marketing team uses for demand generation and the brand campaigns and targeting segments where it makes sense, and our services team is used to provide better support experiences in our supply chain. We use it for forecasting and planning, and there is many other examples of that. And so I think this generation
generative I now became agentic AI. In the future of course will be the robotics part, but the productivity level we've see in is pretty significant and we are not put of a concept. We have deployed more than sixty use cases across the company and we have more than two hundred in testing as we speak. Some will fail, Carolund and that's fine, and the mentality there needs to be fell fast and improved and focus on our return and investor capital.
Antonio, you've been CEO since the start of twenty eighteen. Where does HPE sit today relative to your big vision for what HPE is can or should be against your peers.
When I became CEO, I had a vision to be at edge centric, cloud level and data driven company. We invested at the edge was the Ruba acquisition and we deliver tremendous value for our shaholders from seven hundred and fifty million dollar revenue all the way to over five billion. And obviously now the next move was the acquisition of Juniper to make this company a networking centric company, because I believe the next AI era here is the convergence
of networking cloud. And then obviously the business process that we will run as an enterprise, and that to me is the core foundation that have been envisioned for our company going forward, and on our core foundation, we deliver the best cloud and AI experiences so is continued to be shaped. I'm very pleased with the progress, but let's not forget it's not just the division itself. It's how you execute with a culture, and I said the values
that makes us unique. And HP has been recognized also along the way as one of the best places to come and work by many surveys and magazines and institutions. So my view is that we are are shipping the future, but ultimately is about delivering showholder value and we are going to be positioned for the next three years to accelerate that value. As you see today because our stock
price still undervalue intermal multiples. Our goal is to deliver the value accelerated for our shareholders and be relevant to our customers in this new environment we live in.
I should have just asked you if your stock price is undervalued. Antonni ANDERI President and CEO of HPE. Will leave it there, but a really robust conversation, Thank you very much,