HPE CEO Antonio Neri Talks HPE Shares Trading | Bloomberg Talks

Well, good morning Ed and Caroline, great to be here with you today. I completely agree with you that HPE is not getting the due credit for the potential of what we do for AI and the results we have been delivering, including in this past quarter. When we think about our quarter's numbers, number one, we beat revenue and we beat EPS non-GAAP EPS, and that was all driven by the AI system revenue conversion. To your point, Caroline, we almost made a billion dollars, we exceeded $900 million, and we have a terrific pipeline which is multiples of the current backlog. And now we start seeing the uptake in Enterprise, which obviously HPE has a significant presence. But the reality is that we have unique capabilities. When I think about the capabilities HPE has in this particular inflection point of AI, number one, we know how to run AI at scale. We have done it for decades, it has been more than the supercomputer, now in generative AI, and that comes on the back of our unique expertise in IP, intellectual property. So we know how to build the systems, how to cool it, and then we have a unique manufacturing footprint for water cooling. As we think about the next generation of silicon, it will require 100% liquid cooling. HPE is one of those companies that can do it all. And then last but not least is the services piece. When you talk about profitability of AI, we think about it as a complete pull-through, not just the infrastructure side, it's also the services side. And we had a very solid margin performance in our AI systems, which is part of the server segment, where we delivered 18% growth year-over-year and we delivered an 11% operating profit. In the guidance we provide 11 to 13.

I think it's a combination of three unique things, Caroline. Number one is prudent business discipline. We have been on that journey for a long time. We pursue deals that we can add value, that we see a path to profitability, and that we can drive pull-through. That's number one. Number two is our complete portfolio. One of the key areas that I think the market doesn't understand is that we don't just ship servers. We actually ship the server, we install it, and in many cases we run it as a part of our HPE GreenLake platform. And that includes an enormous amount of services. That's why you see HPE GreenLake also growing rapidly, and the fastest growing area of HPE GreenLake this past quarter, which grew 39% year-over-year, is actually AI. And last but not least is our ongoing brutal management of cost across the company. And also we are now deploying AI in our own company.

Well, I think about AI in three unique segments. Number one, obviously, is what I call the model builders. These are the people who are building the models. They need an enormous amount of accelerated compute to train the models for hundreds of billions of parameters, to now obviously a trillion plus parameters. And in that, we also mentioned yesterday that Microsoft is extending the Azure AI cloud to HPE infrastructure to serve the clients, and one of the clients just happened to be OpenAI. So that's a great example of it. But there's also other service providers like Skell Inf France and many others we support. That's one segment, and obviously that's where a lot of the demand has been. The second segment, which is growing now, is actually sovereign cloud. And the third is Enterprise.

Yeah, and we have obviously decades of experience in doing so. I think it's multiple things. Number one, obviously we work with them to make sure their IP with our IP deliver a better experience and a better performance. And so we co-engineer a lot of things, and you're going to see here with Nvidia in particular at HPE Discover in Las Vegas an enormous amount of innovation we bring to the market. So I hope you can join us and take a look at that. But also with AMD, obviously we have a long-standing relationship. In fact, some of the large supercomputers with the Department of Energy have been built together with AMD. But what we bring is the infrastructure expertise. So it's not just the silicon built in a server. And you and I, we were chatting before the call, is actually about the whole infrastructure. And in that, now we have unique IP when it comes down to air mix cooling and direct liquid cooling that's very hard to do. Second piece, you need the manufacturing capability to do so. HPE today has one of the largest water cooling manufacturing footprints in the world. And as you follow the roadmap, that will be necessary. And last but not least, obviously, is the services piece, because these systems require a lot of maintenance and a lot of TLC, if you will, and HPE knows how to do that at scale.

No, I think what's going to happen is Jensen and I are super excited to announce solutions together that will advance the adoption of these amazing technologies. And obviously that's where the two companies come together. But also doing it in a spectacular venue, which will be at the Sphere. And so the way we're going to showcase all that innovation is going to be very engaging, and I think you know, the first of a kind. It's been spending some time in Las Vegas.