The paragraph is an introduction to the Hewlett Packard Enterprise (HPE) Fourth Quarter Fiscal 2024 Earnings Conference Call. Paul Glaser, the Head of Investor Relations, welcomes participants and introduces key speakers, Antonio Neri (CEO) and Marie Myers (CFO). He mentions that the call is being webcast and recorded, with a replay and accompanying materials available on HPE's Investor Relations webpage. Glaser notes that financial information shared during the call is forward-looking, based on current estimates, and may differ from actual results in future reports. He emphasizes the risks and uncertainties related to these statements and directs listeners to HPE's SEC filings for more information.

The paragraph discusses the company's earnings call, where Antonio Neri provides updates on the Juniper Networks acquisition, which has received approvals from several key global regions. The review in the United States is ongoing, with an expected deal closure in early 2025. The acquisition aims to enhance the company's networking solutions and improve industry competition. Additionally, the company reported a strong fourth quarter with a record revenue of $8.5 billion, marking a 15% year-over-year increase.

The paragraph reports strong financial results for HPE, highlighting significant growth in the company's AI and traditional server revenues, as well as their hybrid cloud offerings. Notably, HPE's AI systems and traditional server businesses have shown consecutive quarters of double-digit growth, with AI systems backlog exceeding $3.5 billion. The hybrid cloud sector saw an 18% year-over-year revenue increase, driven by customer interest in HPE's private cloud and storage solutions. Examples of HPE's client successes include Lupin Limited and Miami-Dade County, illustrating the company's expanding customer base and adoption of HPE Alletra Storage MP solutions to enhance data security and operational efficiency.

In the fourth quarter, HPE achieved its third consecutive quarter of order growth, especially in data center networking. HPE Financial Services financing volumes hit a record high, driven by demand for HPE GreenLake and AI Financing. The company reported record-breaking revenue and profitability, with a non-GAAP operating profit of $938 million and an 11% operating margin. Fiscal year 2024 revenue exceeded $30 billion, with over 9,000 new customers and a free cash flow of $2.3 billion. Exceeding its annual commitments, HPE credits its success to its strategy and broad solutions portfolio, which strengthen its position in AI, networking, and hybrid cloud markets. Investments in innovation continue to enhance its offerings and market share.

HPE is leading in AI innovation, introducing a fanless liquid cooling architecture for GPUs and CPUs, and the 400 gigabits HPE Slingshot networking fabric, which enhance AI and supercomputing performance. They delivered the world's fastest supercomputer, El Capitan, to the U.S. Department of Energy, making HPE responsible for seven of the top 10 fastest supercomputers globally. To accelerate AI adoption, HPE expanded its partnership with Deloitte, launched the Unleash AI Partner Program, and is seeing strong interest from customers in deploying industry-specific AI solutions.

In the paragraph, HPE discusses its recent achievements and product launches. HPE secured key deals in Q4, including a partnership with RWE for weather data analysis using HPE Private Cloud AI. The company introduced HPE VM Essentials to enhance virtualization management, offering up to 5 times lower total cost of ownership and enterprise-grade KVM virtualization. HPE also focuses on storage innovations with the Alletra Storage MP platform, emphasizing AI-driven, cloud-native solutions. Their new Alletra Storage MP X 10000 offers high-performance object storage optimized for AI and data reduction. Additionally, advances in HPE Aruba Networking with AIOps copilot capabilities are highlighted as part of the HPE GreenLake cloud offerings.

During the quarter, the company announced two new solutions to enhance network operators' experiences and customer security. They integrated with HPE OpsRamp for monitoring third-party devices and introduced an AI-based network detection and response capability for IoT device monitoring. The company is a market leader in technology innovation and is pleased with its exceptional fourth-quarter results, outperforming several full-year commitments. The strategy aligns with trends in networking, hybrid cloud, and AI, with a well-positioned product portfolio. They anticipate that acquiring Juniper Networks will enhance their portfolio with edge-to-cloud solutions. Looking ahead, there is optimism for increased shareholder value. Marie Myers reports record quarterly revenue, solid profitability, and free cash flow above guidance, driven by investments in AI and infrastructure refreshes, with disciplined cost management and improved non-GAAP operating profit.

The company reported strong financial results for 2024, with significant growth in various sectors. AI systems revenue increased by over 150% to $4.1 billion, and they achieved their target for server non-GAAP operating margins. The transition to software-defined storage boosted higher-margin recurring revenue, while Intelligent Edge adjusted its cost structure effectively. Overall revenue grew 3% to $30.1 billion, surpassing expectations. Non-GAAP EPS was $1.99, and free cash flow was $2.3 billion. They returned $826 million to shareholders. Quarterly revenue hit a record $8.5 billion, with a 15% year-over-year and 9% quarter-over-quarter increase, driven by AI, compute, hybrid cloud, and networking. Non-GAAP EPS was $0.58, exceeding guidance despite dilution from convertible securities. Annual recurring revenue grew 48% to $1.9 billion, largely due to HPE GreenLake, which added around 2,000 new customers, totaling 39,000 by year-end.

The paragraph reports strong growth for the company's AI system offerings, resulting in a record $1.5 billion in revenue and contributing to a decline in gross margin due to a lower mix of Intelligent Edge. Non-GAAP operating expenses decreased, improving operating margin and leading to higher free cash flow of $1.5 billion for the quarter and $2.3 billion for the fiscal year—an all-time high. Both GAAP and non-GAAP EPS surpassed guidance, with GAAP EPS benefiting from lower tax expenses and non-GAAP EPS excluding gains from H3C investment sales. The segment results highlight the server business as a significant contributor, achieving record revenue of $4.7 billion and posting strong year-over-year and quarter-over-quarter growth, driven by an increase in AI systems and traditional server sales, alongside the continuing success of Gen11 server products.

In the fourth quarter, adoption has been strongest in North America and Europe, with significant investments in new workloads. Gen11 contributed to core compute revenue and AUP growth, while AI systems showed growth despite a net order decrease to $500 million due to an order cancellation. The backlog now exceeds $3.5 billion, though AI orders can be inconsistent. The server operating margin improved to 11.6%. Hybrid Cloud revenue grew significantly, surpassing guidance, with strong performances in Private Cloud and Alletra MP. Private Cloud AI interest is increasing, and internal deployments are moving from public to private cloud for cost and compliance benefits. Storage investments focus on owned IP products, and Alletra MP is the fastest-growing storage product, offering long-term margin benefits. Hybrid Cloud operating margin improved to 7.7% due to better OpEx controls.

The paragraph discusses the performance of the Intelligent Edge and Financial Services business segments. Intelligent Edge revenue was $1.1 billion, down 20% year-over-year but flat quarter-over-quarter, with growth in services, WLAN products, and software. Operating margin improved quarter-over-quarter due to reduced operational expenses. Financial Services reported $893 million revenue, with a 2% year-over-year increase and a significant rise in financing volumes. Operating margin for Financial Services increased both year-over-year and quarter-over-quarter. The company generated strong cash flow, exceeding expectations, with a record free cash flow of $2.3 billion for the year. Inventory increased due to the AI systems business, but there are plans to reduce it in fiscal 2025. In Q4, the company returned $219 million to shareholders through dividends and share repurchases.

The company returned $826 million in the past year and anticipates closing a transaction with Juniper in early 2025, which will influence fiscal guidance. For fiscal Q1 2025, they expect increased IT spending with revenue growth supported by traditional compute recovery and AI system adoption. Hybrid Cloud projects are accelerating, though server revenue may decrease sequentially, with margins around 10-11%. Hybrid Cloud margins are expected in the mid-single digits, while networking remains stable. Gross margin is expected to improve, with a slight decrease in operating expenses.

The paragraph discusses financial expectations and strategies for an upcoming quarter. The company anticipates an increase in net interest income will offset costs from Juniper Financing, leading to an estimated Q1 GAAP diluted net EPS of $0.31 to $0.36, and non-GAAP diluted net EPS of $0.47 to $0.52. They plan to consume cash in Q1, primarily to acquire components for AI systems and manage inventory, while maintaining a steady pace of stock buybacks. The company remains committed to its balanced capital allocation, dividends, and investment-grade rating. They concluded fiscal 2025 positively, aiming for profitable growth and shareholder returns. The paragraph ends with a transition to a Q&A session, where Wamsi Mohan from Bank of America asks about the AI business pipeline, given changes in backlog levels.

The paragraph discusses the current and future performance of a company's business pipeline, which totals over $3.5 billion. It highlights four key market segments, with model builders and hyperscalers being the largest drivers. Notably, the enterprise AI segment is steadily growing, with numerous customers and some significant deals underway. The company's recent co-engineered solution with NVIDIA, launched on September 9, has already garnered orders and closed deals, with anticipated growth driven by a partnership with Deloitte. The transition to new GPUs is expected in the coming quarters. The paragraph concludes with a prompt for the next question from Meta Marshall at Morgan Stanley.

In the paragraph, Marie Myers discusses the company's approach to operating margins, particularly in the server segment. She notes that the segment achieved an operating margin of 11.6% for the quarter, driven by strong performance in AI server revenue, which reached $1.5 billion. El Capitan was included in the quarter, with final acceptances completed. About two-thirds of the server mix came from traditional compute, specifically Gen11, leading to higher configurations, Average Unit Prices (AUPs), and structural margins. Successful management of commodity costs and prudent cost control measures have further bolstered margins. Antonio Neri adds that traditional servers experienced a third consecutive quarter of double-digit year-over-year orders growth.

The paragraph discusses HPE's opportunity to refresh their installed base of 0.5 million units due to high energy consumption and reaching depreciation cycles. This upgrade is necessary for enterprises to accommodate AI deployment, requiring more space, power, and cooling. The new Gen11 units come with different configurations and associated services. Tim Long from Barclays inquires about a $700 million de-booking from the backlog, questioning if it resulted from a competitive loss or double-ordering. Antonio Neri clarifies that the de-booking was due to concerns with a specific customer, emphasizing HPE's vigilant risk management.

The paragraph discusses the company's decision to de-book a risky customer, leading to a backlog exceeding $3.5 billion. Marie Myers emphasizes their disciplined pricing framework to maintain profitability, balancing gross margin pressures with cost control and strategic purchases. Improving profitability is anticipated as the market shifts towards sovereign and enterprise sectors. Amit Daryanani then asks about the noticeable decline in gross margins year-over-year, questioning the driving factors behind it while acknowledging the company's effective operational expense (OpEx) control.

Marie Myers discusses the reasons behind the decline in gross margin, noting a lower contribution from Intelligent Edge revenue as a significant factor, alongside a shift in product mix, particularly with AI systems in servers. Despite this, gross profit dollars grew both year-over-year and quarter-over-quarter. Looking ahead, Myers anticipates a modest improvement in gross margin due to a better business mix, especially with an increased focus on Intelligent Edge. The acquisition of Juniper is expected to significantly bolster both gross and operating profits, contributing to 50% of operating profit in the future. On expenses, the company has diligently managed discretionary costs and is focusing on productivity improvements, including leveraging GenAI for efficiency in finance as they look towards 2025.

The paragraph features a discussion during an HPE earnings call where Simon Leopold from Raymond James inquires about the outlook for traditional servers, noting that the forecast defies typical seasonality by being flat to slightly up in the January quarter. Marie Myers confirms this outlook, explaining that while the server business can be inconsistent, there is ongoing momentum with two-thirds of the server mix at Gen11. She emphasizes the competitive market environment and justifies the guidance of 10% to 11% growth based on current backlogs. Antonio Neri adds that traditional seasonality trends are returning post-COVID, and notes that over a third of the AI backlog is related to Blackwell.

The paragraph discusses the anticipation and planning around the Blackwell platform's upcoming product cycle. It specifically highlights that HPE expects to ship the new GB200 NVL rack scale system in volume during the first half of 2025, with initial demand primarily from service providers, hyperscalers, and model builders. It notes that while these groups will adopt the latest technology, the sovereign and enterprise spaces will have more varied configurations and be less focused on cutting-edge technology. The conversation indicates a positive outlook for revenue growth as the transition to new silicon takes place.

The paragraph is a transcript from a Q&A session discussing HPE's performance and strategy related to AI and Hybrid Cloud. It describes the simplicity and effectiveness of HPE's Private Cloud AI, which is based on H100 technology. While the company anticipates those building and training AI models will adopt the latest technology first, enterprises typically lag by 1-2 generations due to computing power needs. Toni Sacconaghi from Bernstein inquires about the growth of HPE's AI pipeline and significant sequential growth in Hybrid Cloud, asking if it included unusually large deals. Marie Myers responds, highlighting strong growth in Hybrid Cloud, driven by Private Cloud and the adoption of HPE Alletra MP Storage.

The paragraph discusses the success and growth trajectory of GreenLake and Alletra MP Storage at Hewlett Packard Enterprise (HPE). GreenLake has secured 39,000 customers, and Alletra MP Storage has seen rapid adoption, with 3,000 new systems sold and reaching a $1 billion annualized basis. The company's focus on Hybrid Cloud, driven by GreenLake, storage, and additional services, is yielding positive results, including a 48% increase in [AAR]. HPE expects stable margins into Q1 and acknowledges a potential modest revenue decrease aligned with expectations in Hybrid Cloud. They added over 9,000 new customers to HPE in the past year, reflecting strong momentum. Antonio Neri emphasizes the impact of long-term efforts and the importance of the new Storage MP X 10000 to address AI needs at an exabyte scale.

The article discusses significant developments in the hybrid cloud and AI space, particularly highlighting the growth driven by GreenLake's hybrid design and the contributions of Morpheus Data, OpsRamp, and Zerto. It also mentions the substantial AI pipeline growth and shifts in its composition. Additionally, the conversation shifts to concerns about the Intelligent Edge sector, noting modest revenue performance despite strong order patterns. Samik Chatterjee from JPMorgan inquires about future expectations, auto trends, and how enterprises are prioritizing their IT budgets, to which Antonio Neri responds, emphasizing the continued growth in Intelligent Edge orders.

The paragraph discusses HPE's recent business performance and future growth areas. Subscription-based services like SD-WAN with SSE have shown strong results, although revenues remain flat due to long-term subscription models. Growth is expected with Wi-Fi 7 orders and necessary upgrades in campus switching infrastructure. Data center networking, powered by advanced CNX platform features, has experienced double-digit growth. HPE's partnership with Juniper Networks is highlighted for enhancing interconnectivity within data centers, utilizing Juniper's leading router platform, and the recently launched HPE Slingshot 400-gig for high-performance connectivity.

The paragraph involves a discussion between executives about the market recovery and the company's control environment. Samik believes that the market is recovering with three quarters of growth, highlighting networking as a significant opportunity for HPE in 2025 and 2026. David Vogt from UBS asks Antonio Neri about the risks associated with de-platforming orders related to AI, seeking specifics on the definition of risk. Antonio explains that they assess customers from various angles, including end-user verification and payment capacity, and deemed a particular order too risky to fulfill due to stringent controls. Marie Myers adds that HPE maintains tight control over orders, which are subject to pushouts and cancellations. Matt Niknam inquires about changes in the macroeconomic outlook affecting IT spending expectations leading into 2025.

In the paragraph, Antonio Neri discusses the improved macro environment post-election and highlights key areas where Hewlett Packard Enterprise (HPE) is focusing its efforts. These include a strong emphasis on AI and hybrid models, which are becoming increasingly important due to their intensive data workloads. Neri sees significant opportunities for HPE to innovate in these areas, alongside the ongoing importance of cybersecurity. He notes geographical variations in focus but emphasizes server modernization and sustainability as critical aspects, as shown by significant customer interest in these topics at a recent European conference. Networking is identified as a future priority, particularly in relation to AI demands, with strategic collaborations like HPE's with Juniper deemed crucial. Neri also points out that AI in enterprises focuses on enhancing productivity and reducing costs, with numerous practical use cases already implemented.

The paragraph discusses the growth and strategy of HPE's AI-related services, emphasizing an increase in service orders quarter-over-quarter. Antonio Neri highlights HPE's comprehensive approach in three phases: day 0 (defining use cases and ROI), day 1 (design and implementation), and day 2 (operation). HPE's partnerships, such as with Deloitte, are crucial to enhancing customer engagement and aligning business processes with AI practices. The strategy is innovation-driven, aiming to increase relevance, customer purchases, and shareholder value.

In the paragraph, the speaker discusses HPE's capabilities in designing, implementing, and running private cloud AI solutions, emphasizing that many enterprises lack the time and expertise in this area and need a partner like HPE. They mention that while many implementations won't be in the enterprises' data centers, HPE's solutions can be easily deployed in co-location facilities. This contributes to improved services and gross margins. The discussion shifts to a closing note, with Antonio Neri expressing satisfaction with Q4 results and optimism for 2025, highlighting an expected acquisition of Juniper and collaboration with the DOJ. The conference concludes with holiday wishes and a plan to reconvene in early 2025.

This summary was generated with AI and may contain some inaccuracies.