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Shares of HPE are plunging today after the company said profits in the coming year would be hurt by tariffs, week margins on server sales, and execution issues. HPE also saying it will look to eliminate three thousand jobs. Antonio Nairy, HPE CEO, joins us now for more. Antonio, I know it's a tough day, but give us a little bit of clarity in terms of what you're seeing as the turnaround plan.
Here. Yes, good morning, Thanks for having me today. Obviously it's a disappointed day for me and for us as a company. We had a solid quarter. We delivered on our commitments. We grow our revenue double digits, up seventeen percent. We had double digit growth in our bookings, but we disappointed on one specific metric, which was the server operative margins. Several operative margin was impacted by three specific issues. Two in the traditional server business call it the X eighty six.
One was a very aggressive market, meaning a high discounting, and second was a specific issue with the evaluation of our inventory which caused us not to have the exact right cost in that pricing. In the end of the quarter, and those issues have been already fixed and we have
taken very aggressive action. On the AI side, we have a higher than normal inventory related to the GPU transition from the Copper of h one hundreds and two hundreds intro Blackwell and in the quarter we booked one point six billion dollars of new AI system orders, which was doubled the orders that we had in Q four, but seventy percent of that is on the black Bell side, so the working capital aspect of that had a negative
impact on our operating margins for the servers. The rest of the business is very, very strong, and inclusive of the networking business, which had again another recovery on sequential revenue double digit year over the year. Revenue growth our hybrid cloud was up eleven percent year over the year, and we had a very strong performance in our storage bookings. So it was all in the suburb margin. But I have to tell you because of the demand we selved.
It reinforced our strategies, right. We just need to execute better than a couple of things and return to that normal operating profit, which we are committed to do in the second half. And then what we guided was inclusive of that and the net impact of tariffs because now.
It's available on tarif Antonio, how much of a pain to the bottom line and tari's going to be? Do you have a clear guidance and number.
Yes, we did, Caroline. We guided that there would be sevenpennies net of the mitigation impacts that we have now put in place and will continue to execute throughout FIS career twenty twenty five.
So worst case star do you build in there though, Antonio, because at the moment, every day we get a different twer of headline.
Well, we decided to go all in based on the twenty five percent tariff in Mexico, the twenty five percent tatics in Canada, which we don't produce in Canada today, and the incremental ten percent meaning the twenty percent on China. So we factor all that in and obviously we have a mitigation strategy from a global supply chain and also the pricing. So we decided to put it all in at this part of time, and if some of that doesn't get done, then you know, we'll obviously we'll get
the benefit of it. But right now, because kind of what happened here is that because we did not guide the full year waiting for the Juniper deal to close. At the end of Q one, we decided to put a flag pole out there for an investor. So they have it all out there.
Can you give us an update there? Antonio, is where the Department of Justices case stands.
Yes, of course, First of all, we are incredibly disappointed the DOJ decide to file a lawsuit to try to block the transaction. Their market analysis completely flawed. The narrow the market to one sliver of the market called the wireless land, and they felt there would be only three vendors to play in the market. The reality are at least the eight vendors, and many of them had this
exact same share as Juniper today. In addition, you know, they don't consider that this is a great opporture for the United States to strengthen our US national security outside the country. So now the judge has been selected, the judge has established July ninth as the trial date, and we will defend this in court. So we expect to prevail because we have a very compelling case, and therefore we expect to close the transaction in twenty twenty five, obviously delayed from the regional time.
We have about thirty seve left. But are you prepared for the worst case scenario.
Meaning the deal doesn't close. We always have multiple options on the table. Our feeder street duty together with my board, is to drive the best return for our shareholders. We felt that the Juriper transaction is the best long term return that will shift the portfolio and create more earnings and free cash flow because we committed at least four hundred and fifty million dollars of synergies and so that's
where we're focused. However, there are different ways to create shareholder value and all those options out on the table, but right now we want.
To see this troup Antonio and nary Hpeco. Thanks so much for joining us today.