Hewlett Packard Enterprise Company (HPE) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome. I'm Jeff Kvaal, and I'm part of the Investor Relations team here at Hewlett Packard Enterprise. I'd like to welcome you to the 2022 HPE Securities Analyst Meeting. Thank you. I'm happy to say that we're hosting this event, obviously, from our beautiful new headquarters here outside Houston. It's good to see so many of my analyst friends in the audience. I will tell you the view is also very nice up here. Just nice. For those of you tuning in virtually, thank you very much for attending as well. Before we start our executive presentations, I'd like to run through the agenda. First, Antonio will kick us off. He will discuss how HPE's edge-to-cloud strategy and leading position in the growing hybrid cloud market will deliver shareholder value. Then Tarek will provide details about our financial progress in 2022 and our transition towards a software-rich as-a-Service model. He will then delineate fiscal '23 and long-term guidance for our key financial metrics. Following their remarks, we'll have about 45 minutes to answer all of your questions. Once the webcast concludes, we'll issue a press release and a complete set of presentation materials. Those will, of course, be available on our IR website at hpe.com. Also, we'll have a replay of the webcast uploaded shortly after the meeting concludes. Lastly, let's get to the disclosures. This event may include forward-looking statements that involve risks, estimates and assumptions. HPE assumes no obligation to update such statements. With that, it is now my pleasure to welcome to the stage HPE's President and CEO, Antonio Neri.

Well, thanks, Jeff, and good afternoon. Thank you for joining us today. We are pleased to welcome you to HP's new headquarters here in Texas. You can see it's beautiful. We designed this for our customers, our partners and our employees. We will be hosting this meeting, believe it or not, after 3 years. Time has flown since we met last in person in New York. We also welcome those who are joining us virtually via our webcast. In our update today, Tarek and I will demonstrate how our strategy is creating value for HPE shareholders. I'm also joined by the way, by Executive Committee, which is -- which sits in probably row 3 and 4 in the back of the room. And they will be available later on to answer any questions you have during the Q&A section. Let's start. So over the last few years, new megatrends around edge, cloud and data have emerged to shape customer expectations for the enterprise technology market. Knowing these changes, which will be long-standing -- long-lasting, in 2016, we declared the world will be hybrid. Think about it, more than 6 years ago. And in 2019, HPE committed to make all of our solutions available as a service through our differentiated edge-to-cloud experience. Our management team has deployed a strategy that capitalizes on those megatrends and enable HPE to deliver what we call a data-first modernization approach to our customers. And as organizations around the world continue to adapt to the post-pandemic world and accelerate their own business transformations, we are really focused on being their technology provider of choice. We have shifted both our product and services mix as well as how we deliver that mix to our customers. And personally, I'm incredibly proud that we have taken decisive and important actions to transform HPE. Our evolution to a platform-based model, fueled by a software- and services-rich portfolio is already delivering strong results that translate value for our shareholders. Let's talk about that. Our total HPE orders, including as-a-Service bookings are the highest ever this year. demonstrating enduring demand for a differentiated edge-to-cloud portfolio. We are on track to deliver the largest annualized revenue run rate ever. And at the midpoint of our non-GAAP earnings per share guidance that we provided at the end of Q3, we will achieve the highest annual EPS since we became an independent company in 2015, based on continuing operations. And I believe this is impressive given our severe ongoing supply constraints that we all live in the industry, our forced exit from Russia and Belarus, obviously, as well as a very challenging foreign exchange and inflationary environment. And when you think about that and putting that in the context of profitability, our profitability through the third quarter, as measured by both gross and operating margin, was amongst the highest since 2019, proving that our strategy is working. We have delivered all of this in a very tight supply environment. And by the way, we have a very long tail, which we call the backlog. So through productive measures like guiding the specific demand to specific products, component engineering design, by the way, hidden in this building who have amazing engineering. And also multi-sourcing with our indirect procurement team in the supply chain, we have translated all that enduring customer demand into profitable growth for the company. One thing I'm really proud of it is our distinctive innovation. Our distinctive innovation, combined with our strong execution, continues to drive customer demand across our entire portfolio, which will deliver higher recurring revenues, expanded gross and operating margins and increased free cash flow for the years to come. As we work with our customers across different sectors, we continue to see growth in what we call the hybrid multi-cloud market. Think about this. 50% of customers today prefer open hybrid multi-cloud to other proprietary models. And that share is expected to grow according to a Bain study. Approximately 70% of customers will operate a hybrid multi-cloud model in the next 3 years. Hybrid multi-cloud adoption for the most demanding workloads, and this is important, understand that workload dynamics is accelerating across many industry verticals. And while the world is already hybrid, there is no discussion about that, and it's getting more so, we know the cloud experience is not yet everywhere. And according to IDC, and we have here Crawford and Matt, approximately 70% of the workloads and data today reside outside the public cloud. And by the way, those workloads do not share the same cloud experience. And what are the reasons for that? Factors like application entitlement, locality, data gravity, sovereignty and compliance restrict those organizations from achieving the cloud experience they need. And what is the result? The result is a fragmented operating model with data silos and disconnected data sets. What customers are looking for is a way to unify what we call the multigenerational IT strategy and journey they're on with a consistent cloud experience across all their applications of data. And these are exactly the challenges HP's edge-to-cloud strategy is designed to solve. And our HPE GreenLake edge-to-cloud platform is at the center of how we implement that strategy. It provides a foundation for customers to drive that data-first digital transformation to simplify, simplify, simplify and to modernize their infrastructure with one unified hybrid cloud services experience. It empowers customers to access, analyze and extract value from their data across the public cloud, data centers, whatever they have, more and more in colocations, by the way. And as we think about the future, more and more at the edge. The edge is the next frontier. From the time we first predicted, the future will be hybrid. Remember, I said that in 2016. We were the first to bring that to market, differentiated innovation to our customers. Some of you actually joined us at HPE Discover in June. And we showcased the power of our HPE GreenLake platform. And I hope during the waiting time, you saw some of the stats there, right? HPE GreenLake is a unified and automated cloud experience offered through one secure platform integrated across the edge, customers' data centers, colocations and the public cloud. And it delivers the consistent cloud operating model for all the workloads and data. And importantly, our HPE GreenLake platform is open, because customers can take advantage of the cloud architectures of their choice. HPE GreenLake manages today workloads across the entire customer IT estates, including the public cloud. This means they can get a unified cloud experience. It is fully automated, self-service cloud operations that makes it easy for enterprises to manage, optimize the performance, the cost, the security and the compliance. What we have heard from customers, too, is that they need built-in data services like data protection and disaster recovery services, which we provide as a part of our HPE GreenLake platform. We also offer what we call unified analytics, including an edge-to-cloud data fabric for access and control. One of the biggest challenges customers have is that, "Where is all my data? How to access that data? What type of analytics I can run to extract every bit of insights?" Also, what they appreciate about our platform is that we have built what we call a security framework in the platform with a zero trust-enabled architecture from infrastructure -- from the application layer down to infrastructure and from edge-to-cloud. HPE was first to deliver pay-as-you-go on-premises. We did that many years ago. And one of the key advantages that allow us to do that was in 2017, we made an acquisition called Cloud Cruiser. It gave us true cloud-metering capability, which is a huge difference from our competitors' traditional fixed leasing business model. It is a true metering. It's actually, even I argue, is even better than the public cloud because when you go to the public cloud, you tend to overprovision resources. In our case, we actually can scale that resource exactly to the need of that application, and meter that and charge for that. So now customers can have capacity on demand but [ re-leases the only ] times and only pay for the resources and services consumed. Another important advantage of HPE GreenLake is they can benefit from the proven cost advantages HPE GreenLake provides compared to other cloud models. Our platform actually offers the lowest cost per workload. And that is actually especially true when application requires significant data egress and ingress, which is the majority of the cost -- it's not the cost of compute, or in cases where workloads are large and predictable, which means they don't have to scale up and down all the time, or if data protection services are needed. So that's sort of the big advantages we have with our platform today. Now another big advantage is our partner ecosystem, which is core to our strategy. We have great interest from our partners, many of who wants to build their entire business and business solutions on our HPE GreenLake platform. And this includes distributors, value-add resellers, system integrators, ISVs and service providers. Through the end of the third quarter here in 2022, we saw a 75% year-over-year growth in the number of partners that they are actively building and selling with HPE GreenLake. Why is that? Because our platform provides open cloud APIs to our partners. These APIs include security, hybrid orchestration, metering, billing services and also a marketplace where they can offer their unique solutions. By the way, we have partners of all sizes. But one of them I want to highlight is a unique special case. It's called Green Tea Technology. This partner is just a 2-year-old partner, which was born in the cloud, that sells our HPE GreenLake solutions to start-ups and small and medium businesses. These companies, what do they need? They need the flexibility and the scalability of IT resources but they don't want to manage their own IT. And Green Tea actually reflects a new breed of channel partners that are embracing hybrid selling because they see the demand, not just across the large enterprises, but from organizations from all sizes. I personally spent probably more than 50% of my time talking to customers and partners. And I often hear another important reason they're attracted to HPE GreenLake, our platform, and it is sustainability. Because customers can flexibly scale their IT to meet their business demands, the platform actually reduces IT inefficiencies, which are a significant source of cost and environmental impact for many organizations. And this is important because our customers are actually increasingly linking digital transformation with sustainable business transformation. And let me give you an example. A multinational chemical company is transitioning to an HPE GreenLake solution that is actually expected to reduce a carbon reduction of over 2,000 tons of carbon dioxide per year. How that's going to happen is because our solution only uses half of the rack space with 17% less energy while reducing the number of maintenance contracts and cost of the customer because we offer them a complete solution. The other thing is that in a resource-constrained world, we also help customers sustainably optimize their technology life cycle from edge-to-cloud. For example, our HPE Financial Services transform and repurposes IT assets into new capabilities to our technology renewal centers around the world. And last year alone, of the 3 million IT assets we recovered, 85% got a second life, generating additional revenue stream for HPE, while reducing customer cost, waste and carbon footprint, feeding the circular economy. And by the way, this business return on a consistent basis, more than 80% of return on equity. Now with the integration of Aruba into our HPE GreenLake platform, we now have 65,000 customers and $7.7 billion in total contract value, which demonstrates scale matters. And today, HPE GreenLake enables more than 120,000 users, powers more than 2 million connected devices. And here is the trick. It actually manages more than 1 exabyte of data for our customers because I believe data is the most important part. They are receiving industry-leading operational support and managed services, which has resulted in a 96% customer retention rate. So not only they get all the benefits, but it brings great experience, they love it, they renew and expand. And one great example of our customer is Nokia, who turn now -- turned to us to leverage with the HPE GreenLake platform to help Nokia cloud and network services advance its 5G strategy. The HPE GreenLake platform today offers more than 10,000 Nokia developers, a flexible and elastic cloud platform, making them more agile. HPE's leadership and differentiation has translated into business success for a rapidly growing number of customers around the globe. Brands such the ones you see here on the page, span in all industries and geographies, are turning to HPE GreenLake to help them tackle their most pressing challenges. Our platform draws customers in and enhances the relevance of our entire HPE portfolio. Now looking at the markets that underpin our edge-to-cloud strategy. We see a totable addressable market opportunity growing 1.8x, which is going to go from about $150 billion to approximately more than $250 billion by 2025. As we continue to expand into our business into new segments of the IT market, let's start with the edge. The edge market encompasses connectivity, edge infrastructure, data center switching and security. We anticipate we can capture a larger portion of this market as we expand into these new segments, such as security and data center switching. Yes, we're going to be in the data center switching because we have an integrated experience now, which will nearly double our opportunity from about $48 billion. You see there in the chart, to approximately $91 billion. Our Edge portfolio is a major differentiator for HPE. I don't think anybody has the level of capabilities we do at the edge. And our HPE GreenLake edge offerings connect and power distributed cloud infrastructure and experiences for our customers to enable real-time processing and insights. We will capture an increased portion of the expanded edge market as we introduced new offers in private 5G, IoT and what we call SASE, Secure Access Service Edge. And as you know, we did a wonderful acquisition with Silver Peak, which gave us a tremendous entry point. Now cloud, obviously, is the largest market we play in, and we rise to $151 billion by 2025 is a major opportunity with hybrid cloud management, a new market for us, increasing at 7% CAGR. The cloud market also covers hybrid cloud infrastructure and traditional infrastructure, which is obviously what people know us for. But as the customers embrace hybrid, we anticipate the market for private cloud also will grow in the double digits. And this summer, at the HPE Discover, we launched our new offer, which we call HPE GreenLake for Private Cloud Enterprise, which is a modern private cloud experience for traditional and cloud-native workloads, designed specifically for enterprise needs in mind. Now let's talk about compute. Compute today, and we are in the house of compute, by the way, is for us a $54 billion market and underpins many of our cloud solutions. Everything has to compute. It is essential in accelerating the advancement of our HPE GreenLake platform. That's because in an edge-to-cloud platform, you require to really deliver and optimize the infrastructure for the different type of deployments and workloads across your hybrid -- entire hybrid IT estate. And this is where HPE has an advantage because we engineer our entire infrastructure portfolio to meet the unique requirements of a hybrid cloud. And starting fiscal year 2023, here just around the corner, we will roll out an aggressive road map of innovation across our core compute portfolio, expanding into new workloads to help customers accelerate their hybrid cloud transformations with HPE GreenLake because that experience gets delivered to HPE GreenLake. Now data, obviously, is a super critical market and is poised to grow at 1.6x to $116 billion by 2025. AI at scale solutions will lead the CAGR growth of the market we plan to enter. We define the broad data market as including data protection services, AI at scale, high-performance computing, mission-critical solutions and storage infrastructure. They're all geared to really process that data, to store that data. And customer recognizes today how critical it is to unlock the value of their data. I have said many times, and we have entered what I call the new edge of insights. And this is -- data is the new currency in this digital economy. And that's why it has become paramount for them to generate insights and convert quickly to action so they can build successful new compelling experiences for clients and most importantly, speed, critical decision-making. The HPC AI market is roughly accelerating. Our leadership in exascale supercomputing position us to play an essential role to power what we call AI at scale. And now what we see is the word exascale and HPE are 100% related. And we have introduced industry-first innovation like Frontier, the world's first exascale supercomputer built for -- by HPE for the Department Energy, the Oak Ridge National Laboratory. With Frontier's performance of 1.1 exaflops, the fastest in the world. When you add even the next 7, it's still the fastest. Now the laboratory, we have this amazing capability to solve some of the wide range challenges we all live in a societal word, whether it's to advance modeling and simulation, high-performance data analytics and AI, weather forecast and -- you name it. Now the issue is that how we make that available to enterprises of all sizes. Now we can make that available because now we can not only provide that to, call it, government agencies or high research -- high-end research institutions, where we can make it available to any enterprise to our HPE GreenLake platform as a part of our as-a-Service offering. Now we also provide HPE systems to a lot of customers. So let me give you a great example. We just recently delivered an HPE Cray system to ExxonMobil. Actually, it's just around the corner. Probably you went by, and you can hear. And now this system will power the company's proprietary and patented algorithms to pioneer new ways to conduct high-resolution seismic exploration. This system is a 20-plus petaflops and we'll provide ExxonMobil an amazing capability to making decisions in production while also controlling costs. And with HPE GreenLake for HPC, any enterprise of any size gains actually now access to the most proven market-leading HPC technology through cloud services that can be ordered on demand, managed in one unified experience. In our storage business, we continue to drive transformation to our data services business, and that's super critical. Our IP portfolio of storage products has become entirely software-defined and cloud native and is now delivered to HPE GreenLake, which means customers have a true hybrid infrastructure to store and protect data across their entire hybrid multi-cloud estate. Early this year, we introduced the industry-first block storage as-a-Service to deliver 100% data availability guarantee, built in on a cloud operational model to help organizations transform faster. We have a tremendous exciting momentum across our business today, which position us really well for tomorrow. We have carefully designed a strategy that capitalizes on market trends with, I believe, an unmatched portfolio that anticipates customers grow with hybrid and multi-cloud needs. And one thing I'm really proud and I see people here watching us today with us, our 60,000 team members around the globe are executing that strategy extremely well, helping us realize our ambition to be the best cloud company. Our portfolio underpins our financial success. And pivoted to a richer mix of software and services and implementing a consumption-based business model, HPE is increasing both durable recurring revenues and higher gross margins, all of which will drive greater free cash flow. We are relentlessly focused on delivering customer-centric technology breakthroughs. And with the competitive advantages that our leadership position bring, HPE is poised to deliver on the commitments we have made and maximize shareholder value. I believe HPE's transformation over the last few years has been nothing short of remarkable. We have predicted customer expectations and lean into exceeding them in ways that only we can. We have a strategy that others strive to emulate. We see that every day. Everybody is trying to copy what we do. But the experiences we offer are distinctive, and we have created a performance culture that drive results. I often said HPE does not wait for the next big thing to happen, we accelerate what comes next for our customers, our company and our shareholders. But before I pass it to Tarek, let's take a look at a great example of how innovation is doing just that. [Presentation]

That was quite something. Hopefully, you would agree. Well, good afternoon, everyone, and thank you for joining us today for our SAM 2022. I look forward to providing my insight into how the vision and strategy that Antonio laid out will translate into a financial profile that will maximize value for our shareholders. At our SAM presentation last year, I took you through how our edge-to-cloud as-a-Service strategy is delivering revenue and free cash flow growth that is increasingly recurring at higher margins. At SAM 2022 today, I'm very pleased to say our financial thesis remains intact and HPE is well positioned for even broader value creation. Today, I will provide an update on our fiscal year '22 progress versus our SAM 2021 targets. We will then offer a segment-by-segment view of how we are shifting our portfolio mix to accelerate growth while delivering solid and consistent financial performance. I will also share our fiscal year '23 outlook, 3-year long-term financial targets and the capital allocation framework we stand by, all of which are designed to maximize shareholder value. We have been pleased year-to-date with our performance in fiscal year '22 in what has proven to be another very dynamic year given supply constraints, our forced Russia, Belarus exit and rising foreign exchange headwinds. As stated during our Q3 earnings call, we continue to see sustained demand and solid momentum. This gives us confidence in achieving our original SAM 2021 guidance for fiscal year '22. And this in spite of Russia and FX fluctuations, now at 300 basis points since the beginning of fiscal year '22. To put things in perspective, FX and Russia have impacted our revenue growth, EPS and free cash flow, approximately by $700 million, $0.16 and $250 million, respectively. Yet today, we are very pleased to confirm our fiscal year '22 outlook of 3% to 4% revenue growth adjusted for currency. GAAP EPS guidance of $1.20 to $1.28, non-GAAP EPS guidance of $1.96 to $2.04 and free cash flow in the range of $1.7 billion to $1.9 billion, which attests to the resilience of our business. Specifically for Q4, we are tracking to our Q4 guidance of revenue growth of at least 5% sequentially and non-GAAP EPS in line with guidance of $0.52 to $0.60. In summary, as [ one billing ] analyst put it during the Q3 earnings call, maintaining SAM '21 guidance for FY '22 in spite of these headwinds, equates to taking up guidance. In terms of capital returns for fiscal year '22, we expect to pay dividends of roughly $625 million to shareholders, which represents the yield near 4% at the current market price. We're also on track to repurchase at least $500 million in shares. I'd also like to note that our cost optimization and prioritization plan announced in fiscal year 2020, because of the global COVID-19 pandemic, is nearing completion. We're very happy to be able to report that despite unforeseen inflationary pressure, we have achieved annual cost reductions of approximately $1.1 billion on the last 12-month basis, of which we can attribute $820 million to the fiscal year 2020 plan. We have over-delivered on our pandemic restructuring target of $800 million and expect to attain savings well above our target by the end of our fiscal year '22. Now let me walk you through the math. Starting from fiscal year '19, our last 12-month reported cost of sales through Q3 of fiscal year '22, excluding material costs, is down roughly $705 million, of which $390 million is attributable to the cost optimization and prioritization plan. Equally, the non-GAAP OpEx savings attributable to the plan totaled $430 million when adjusting for the consolidation of the costs related to 4 acquisitions such as Cray, Determined AI, Zerto and Silver Peak, which together added nearly $550 million in OpEx. So in summary, our cost optimization and prioritization plan has already delivered a total of approximately $820 million of annual savings. And again, by the time we cross year-end fiscal year '22, we will exceed this figure. Please refer to the detailed calculation reconciliation in the appendix for further details. And to achieve these savings, we will have spent slightly above the $1.3 billion budget that we announced back in fiscal year '20. The conclusion is that we have executed well our cost optimization and prioritization plan following the pandemic. And Antonio and I now consider the business to be rightsized. Our message to investors and the team members is the same. We will remain disciplined and we will maintain our productivity focus moving forward. And given that we do not anticipate further restructuring programs going forward from now on, we can expect our non-GAAP EPS and free cash flow per share to converge as cash restructuring costs diminish rapidly. More on that later, I'll cover that with you. Let's now discuss the key tenets of our strategy. Please let me remind you of our long-term value creation drivers. First, we are improving our growth and margin profile through our mix shift to higher growth and higher margin segments across our portfolio; second, our accelerating as-a-Service momentum is driving ARR growth and further lifting our gross margins through software-rich offerings; and third, our capital allocation priorities, balance investments to drive further longer-term revenue and free cash flow growth while consistently returning capital to shareholders. Customers find great value in the richness and breadth of the HPE portfolio. We believe our edge, cloud and data end markets in the hybrid world are particularly receptive to new high-margin, software-intensive offerings delivered as a service through our HPE GreenLake cloud platform. We intend to continue to drive adoption of our HPE GreenLake cloud platform for years to come. As in parallel, we extend our market leadership and expand into profitable market segments with each of our BU segments, such as Edge, Compute, HPC AI, Storage and Financial Services. Let us first discuss our cloud business, HPE GreenLake. Our pivot into as-a-Service model is gathering momentum, with HPE GreenLake being the foundation of our as-a-Service strategy. Customers have spoken. Their view is that the world is hybrid. And in this hybrid world, they envisage their infrastructure to be distributed with multiple edges to multiple clouds connected to their private and colo data centers. This is precisely why Antonio said nearly 4 years ago, the enterprise of the future will be edge-centric, cloud-enabled and data-driven. As you've seen from Antonio's presentation, the hybrid cloud market is large. We estimate it to be growing 9% from $78 billion today to $101 billion in 2025. And we are capturing that growth through our HPE GreenLake edge-to-cloud platform, which permeates across all our business segments. It is worth noting that our estimates in the hybrid cloud market include consumption of solutions as-a-Service for hybrid cloud infrastructure, such as server, storage and support as well as cloud management software and services. This is because more and more customers prefer to consume hybrid infrastructure as-a-Service with a robust partner on a service level agreement basis as opposed to managing that infrastructure by themselves. This is why we're seeing substantial growth in hybrid cloud. Our as-a-Service order levels has shown a growth of 86% year-to-date. This above market trend growth attests to the lead our HPE GreenLake platform has today over the competition. And we have every expectation this will continue as we strengthen and scale the services we offer. This includes operationalizing these services through not only our direct sales force but also our indirect partners. We are expanding our TAM into hybrid cloud management software and managed services and expect our ARR growth to be a 35% to 45% CAGR over the fiscal year '22 to fiscal year '25 period. Most importantly, our ARR gross margins are already well in excess of the corporate average of 35%. And we expect our HPE GreenLake business to drive further margin expansion as we continue to build and deliver greater mix of software-rich solutions. I would like to accentuate the point that our mix of software and services was 61% at this point last year and was 64% in Q3 this year. We expect a mix improvement to continue at a healthy pace as we expand our HPE GreenLake cloud platform and anticipate software and services to reach 74% of the ARR mix by fiscal year '25. The key takeaway is that our as-a-Service products are resonating and gaining traction in the market. With that now, let us transition and deep dive into each of our BU segments, their total addressable market, their operating priorities and fiscal year '22 to '25 outlook, starting with our Edge business, Aruba. As we transition to the next slide, I would like to highlight that in order to facilitate your analysis of the market opportunity, we have included in the appendix to this presentation that will be posted online, a detailed reconciliation of market estimates. Our Edge business, Aruba, continues to perform very well. Our Q3 revenue growth accelerated to 12% year-over-year in constant currency, and our margins improved to 16.5%. We're extending our share gains in switching, Wi-Fi at scale and SD-WAN and pushing further into automation, security and network as-a-Service. We have great confidence about the growth run rate for Aruba, and we will continue to invest behind this growth. Aruba operates today in a $48 billion market that is growing at a 9% CAGR. We are pushing further into adjacent markets such as data center switching, private 5G, together with our CMS units as Wi-Fi and 5G converge and SASE, Secure Access Service Edge. This is to target a greater TAM that today totals $69 billion, growing at 10% per year to $91 billion by fiscal year '25. In parallel, we are continuing to take market share aggressively by executing on our extensive order book. In summary, we believe Aruba is poised to become a Rule of 40 business over the next 3 years with mid-teen sales growth and mid-20s operating margins. This will bring the segment's revenue to a 15% to 20% of the corporate total revenue by fiscal year '25. Let's now discuss our Data BU segments, more specifically Storage and HPC/AI. In Storage, the TAM, which includes storage infrastructure and data protection, is a $64 billion market growing at 4%. We are continuing to shift our portfolio to our margin-rich owned IP offerings. The growth in our own IP offerings and revenue was above 10% in the most recent quarter. Even within our owned IP offerings, we are migrating our portfolio to more software-intensive as-a-Service products. This gives us increasing confidence in our mid-teens operating margin with top line growth at or above market over the next 3 years with our own IP products growing faster than market. Our HPC and AI business plays in a $10 billion market, which includes HPC solutions, mission-critical systems and AI at scale. That market is growing at 5%. And the trends are in our favor, and we are uniquely positioned. Demand is rising for AI machine learning workloads and big data analytics. We had nearly $3 billion in backlog exiting Q3, which gives us confidence our share gains will continue in fiscal year '23. Let me reiterate the key takeaways for HPC/AI. First, this is a business with very high barriers to entry; second, we are the only company on the planet with these set of capabilities. Over time, we intend to make HPC more accessible to enterprise customers by offering it as a service. We expect this business to grow faster than the market and to deliver double-digit operating margins. With respect to our Compute segments, we estimate the compute TAM to be a $54 billion market. For consistency's sake, we present the market, including China, but not Tier 1 hyperscale customers. We captured tremendous value from China far beyond our peers through our unique joint venture structure, H3C. We shall return to H3C in a moment. I know you have questions. But please note that our Compute segment does not consolidate H3C. IDC considers the 3-year world market CAGR outside of China to be 2%. We expect to grow in line with that view and in doing so to capture the majority of the value share in the most profitable segments of the market. The Compute segment is a critical component of our bridge to the future as it enables our businesses in edge compute, GreenLake cloud and data storage. At SAM 2021, we lifted our operating margin target for Compute from 10% to 12% to 11% to 13%. We are pleased to note that we have operated above this range for much of the year as our flexible pricing has allowed us to respond rapidly to input and freight cost shifts. Despite the outperformance thus far in fiscal year '22, we consider it prudent to maintain our 3-year operating profit margin target at 11% to 13% to reflect the cyclical nature of this business. Having said so, there is plenty of margin to allow both reinvestments in Compute and enable investments in businesses we expect to grow at faster rates in the future. Let's discuss now our HPFS business. Our captive Financial Services business, HPFS, is an incredibly well-run business, delivering a consistent return on equity even in adverse macroeconomic cycles and high interest rates environments. Furthermore, it facilitates our as-a-Service pivot in multiple ways. HPFS creates investment capacity that allows customers to accelerate their digital transformations. It is particularly critical in providing financial capabilities in support of our GreenLake as-a-Service offerings. Again, HPFS also plays a major role in accelerating our pivot as-a-Service with its best-in-class asset management business by creating that investment capacity that our customers need. And in doing so, it is also promoting the circular economy. HPFS' track record in managing the entire life cycle of infrastructure assets from certified preowned down to recycling is second to none. This opportunity is large because according to a 2021 Capgemini survey, nearly 90% of enterprises are only recycling less than 10% of their IT hardware today. Many of you are likely to have questions about the performance of the Financial Services business in a rising rate environment and an economic downturn. The answer is that we price on a spread. So when the cost of money rises, we adjust our lending rates to preserve our gross profit dollar. Most importantly, our historical loss ratio in this business and where we are now is just over 50 basis points on our total portfolio value in the amount of approximately $13 billion. During the height of the pandemic, the loss ratio hit 94 basis points, which attests to the solidity of this business, for which we continue to see a long-term return on equity of at least 18%. Let's now discuss our H3C business in China in which we own a 49% stake. China remains at the top of the list of the largest and fastest-growing IT markets in the world. We are participating in that through our H3C joint venture. H3C is a very strong player in a fragmented market. In fact, as we show on this slide, H3C has expanded its share in the China market by 6 percentage points in just the past 4 years and delivered substantial profits to its shareholders, such as ourselves. This contrasts with the performance we have seen in China from any other multinational firm in our sector. I would like to emphasize that we are not passive partners in this structure. We consult regularly with management on material issues and are actively involved in setting H3C's strategic course, including review and approval of budgets, product road maps through Board oversight. I would like to remind you that we have appointed the Board Chair and the CFO. We are very pleased with this structure as it has contributed a substantial amount of earnings through our commercial contracts with H3C and equity interest to our EPS and free cash flow. As previously disclosed, we expanded our existing put option that is struck at 15x trailing 12-month earnings through October 31, which is just a few days away. We have been negotiating with our new partners, JAC Capital and Wise Road Capital for the past few month and potential extension of our put option and the discussions are progressing well. We now have an agreement in principle with our partners to further extend our put option until December 31, 2022, subject to final approval in China to allow our partners to finalize their engagements with their own stakeholders and make our final decision regarding our stake in H3C. We will obviously keep you up to date. Let me now turn to our outlook for fiscal year 2023. We are guiding for revenue growth of 2% to 4% adjusted for currency. This is in line with our long-term revenue growth expectation. Our view remains one of enduring market demand given the megatrends of digital transformation and the explosion of data. We also believe our own portfolio differentiation will allow market share gains. Our guidance incorporates current thinking on the macroeconomic picture and FX risks and also assumes that our backlog will contribute to our revenue growth in fiscal year 2023. We expect our operating profit growth to exceed revenue growth again. We are guiding to 4% to 5% growth in operating profit, which translates to GAAP EPS from $1.38 to $1.46 and non-GAAP EPS from $1.96 to $2.04. This is flat year-on-year at the midpoint, which we consider an achievement given headwinds such as FX that I will discuss in the next slide. For modeling purposes, you can consider OI&E to be a $20 million to $40 million headwind for the full year. We also currently expect a non-GAAP tax rate of 14%, which is consistent with prior years. We expect rising operating profit and declining restructuring charges to allow us to increase our free cash flow generation again in fiscal year '23. We're guiding to $1.9 billion to $2.1 billion in free cash flow. We expect free cash flow to follow our typical seasonal pattern, which I will remind you, is the use of cash in the first half of the year and a significant free cash flow generation in the second half. Let's now deep dive on our EPS guidance for fiscal year '23. Please let me illustrate some of the moving pieces in our FY '23 guidance. At the midpoint of our FY '22 range, we will deliver $2 in earnings per share. This includes $0.03 that we earned from Russia in Q1 prior to our exit from the country. And thus, this will be a headwind to EPS in 2023. It also includes a return to our standard levels of OI&E after a strong year of gains for our Pathfinder investment portfolio. With more than 50% of our revenue denominated in foreign currencies, we also are facing significant currency headwinds. The U.S. dollar has strengthened materially against our primary international currencies such as the euro, the yen and the pound sterling. We expect currency to be at least a $0.30 headwind in fiscal year '23. We have a plan in place to offset these headwinds through portfolio mix shifts, our as-a-Service pivot, pricing and operational execution as long as FX rates in FY '23 do not deviate significantly from current FX spot rates. Let's now pivot to discuss our free cash flow outlook for the next 2 to 3 years. Further expanding our free cash flow and by extension, our free cash flow conversion ratio is a top priority of the company. We're very pleased with the free cash flow growth that we have shown in recent years, and we are on track for free cash flow growth in fiscal year '22 to our guidance range of $1.7 billion to $1.9 billion despite challenges such as supply constraints, currency and Russia. The free cash flow we generated from Russia is now out of our numbers for the future, and we are facing FX headwinds, which we believe will take a good couple of years to subside. Despite these headwinds, we are still forecasting our fiscal year '22 to fiscal year '24 free cash flow guidance to attain at least $6.5 billion for the same period instead of 6.5 to 7 previously communicated at SAM 2021. Let me break down for you the key drivers of free cash flow for the next 2 to 3 years. One key driver is expanding earnings. We expect sales growth, and earnings to grow faster than sales growth through 2024. A second driver is our declining cash restructuring costs. We have substantially finished our next restructuring program announced in fiscal year '17 and our cost for optimization and prioritization plan announcing fiscal year '20 as a result of the global COVID-19 pandemic. Our cash restructuring costs related to these programs are declining materially and will represent an immaterial amount by fiscal year '24 and fiscal year '25. As we work through our substantial backlog, we expect a reduction in inventory levels over the next 2 years, which will drive an improvement in cash flow over the same period. This is why with the cash impact of our restructuring programs receiving, we expect that in the next 2 years, we will finally see the conversions of non-GAAP EPS and free cash flow per share. It's now time to recap our investment thesis. We believe HPE is well positioned to maximize shareholder value. First, we have the right portfolio of assets to capitalize on the mega trends of edge cloud and data with our differentiated Edge-to-Cloud strategy, and we're driving strong performance across the portfolio. Second, we are pivoting our business towards HPE GreenLake and higher margin as-a-Service revenue. And along the way, we are winning customers as we help them bridge multigenerational IT environment. All of this translates into an attractive long-term financial profile. We expect sustainable long-term growth of 2% to 4% led by healthy growth in Aruba and HPC AI. These businesses are 20% to 25% of our revenue this year and will be 30% to 35% of our revenue by fiscal year '25. We expect now after a major transformation of our offering our storage business performance to improve, and we are forecasting revenue in line or above the market overall growth for storage with our own IP products growing faster than the market. In addition, we continue to expect our ARR to grow at a CAGR of 35% to 45%. We'll also have a better margin profile driven the mix shift towards more software content throughout our offerings. All of this is supported by a transformed go-to-market engine with better resource allocation, optimized to drive superior levels of productivity as is tested by order growth at 10% as of Q3 of fiscal year '22 year-to-date. We are driving sustainable, profitable growth with our unique assets and strategic investments. This will deliver EPS growth of 3% to 5% and at least, again, $6.5 billion of cumulative free cash flow between fiscal year '22 and fiscal year '24. With that, let's now discuss our capital allocation moving forward. We plan to deploy cash within our capital allocation framework to maximize shareholder value. To do this, we always follow a disciplined, return-based capital allocation framework. We have a rigorous investment evaluation process that balances investments for growth with capital returns to shareholders. Our top priority remains investing in high ROIC growth areas to capture the Edge-to-Cloud opportunity as much as possible while remaining committed to dividends and opportunistically repurchasing a significant amount of shares. We have invested both organically and inorganically to fuel innovation, drive revenue growth and expand free cash flow. We will continue to prioritize our higher growth, higher margin businesses and you will see further internal investments in our as-a-Service business, next-generation storage with cloud data services and the edge. On the inorganic side, we have built a very successful track record of our acquisitions going back to Aruba and more recent examples like Cray, Silver Peak, determined AI or Zerto. Our acquisitions have followed a disciplined ROI-based framework, and we intend to stick with the discipline even though valuations are more attractive today. Beyond investments, returning consistent capital back to our shareholders remains a critically important element of focus in maximizing value. To conclude, we have the right strategy, we are aligned to dominant market trends, and we have the right financial architecture that will maximize value for our shareholders. Now with that, I'll turn it back over to Jeff. Jeff?

Great. Thank you, Antonio and Tarek, both. We'll take a little pause and do a little tap dance to allow the crew here to reset the stage for Q&A. I'd like to remind you all that all the materials that we've shared today will be available on the website, if you wish to review them. You'll also see our press release where we've highlighted some of the major themes that we've discussed and messages from today. It looks like we're in business. So please, let me welcome back Antonio and Tarek. All right. Perfect. Let's sit over here.

Okay. So to get started with Q&A., we'll take some questions from guests in our live audience. We also have analysts listening virtually. If you are here in person and would like to ask a question, just raise your hand and we'll have a mic runner come over. If you're on the webcast, we'll submit it through the online platform. So please introduce yourself and hold yourself to a single question and a follow-up. And why don't we start with Tim? Right behind you, Tim.

Tim Long at Barclays. I was hoping you could talk a little bit about -- there were several areas in there, looks like more aggressive market entrants, data center switching, SASE, cloud management. Can you talk a little bit about how you see kind of investment to further into those businesses? And what type of ramp of revenues and market share you could achieve? Most of them seem pretty comparable to what your sales force and channel is selling now, so I'm assuming that's not a big part of it. But if you could just walk us through kind of cost and success outcomes in some of those newer areas.

Sure. And we have Phil Mottram here too, to answer some of those questions -- some aspects of that question. So for us, the data switching market is a natural extension of what we do today. Think about it, we provide a very comprehensive portfolio in the campus and branch with switching, WiFi. And as I think about the edge of the data center and then eventually the core of data center, we have architected this over the last few years, an operating system that allows us to bring those featuring capabilities and functionality into the same operating system, and that allows us to really build a modularized set of product offerings for the top of rack and eventually in the data center itself. So we believe we have the right to play there, and customers are asking us to manage that on a consistent experience. And that's where the Aruba experience really brings to table because the way we manage those [ reports ], whether it's in the branch, on the campus or in the top of rack, is the same thing. So that's one example. The other example, obviously, SASE, as we deploy SD-WAN in this massive distributed enterprise, customers want to deploy that with security built in the core. And SD-WAN and SASE are totally synergistic. And so we continue to invest in that market as well. But Phil, why don't you take it from here and add your thoughts, how we're doing that from the R&D perspective and how we are shifting the investments?

Yes, sure. So it's Phil Mottram. I look after the Aruba business. In terms of the data center area, that's not a big step from where we are today. So if you take the portfolio that we already have today, we're about 80% there from a starting perspective. So it's just adding more features and functionality that large enterprises would want in the data center space. Data center market is somewhat around enterprise customers and then also somewhat around hyperscale customers. I think we'll start more with the enterprise customers. But as I said, it's not a big step away from where we are today. It's probably about an 18-month investment. But when you get to the end of the product -- and we already have some products and business there today, by the way. But when you get to the end product, it leads to incremental sales, not only for Aruba, but also supports the storage and the Compute business as well. So I think from a company investment perspective, it's a good call. On SASE, as Antonio mentioned, there is a convergence in the market between networking and security. So the market is more heading towards secure connectivity. Today, we partner there and have some of our own products. We're evaluating whether we should invest further there. And then the other area that was mentioned in the presentation was private 5G. So when you see customers today deploying networks, they use most of our products such as Campus Switching, SD-WAN and WiFi for the deployments, but you still have to see some customers considering private 5G for outdoor use cases. Today, we have a partnership relationship supporting our activities in private 5G, and we're evaluating whether we should do more either on a build by or continued partner basis, so there'll be areas of expansion.

Okay. Next, I think Shelby has got Simon over there, and then you can go to other.

Simon Leopold with Raymond James over here on the right. So you talked about the foreign exchange headwind in terms of your revenue. Maybe you could help us a little bit by unpacking the impacts on your gross margin. And your operating expenses, I assume you've got a large number of employees outside the U.S., therefore, not paid in dollars, and maybe you've got some natural hedges. So anything you can offer to help us understand how to think about these assumptions beyond the sales line.

Okay. So it's obviously a complex question to answer, but let me try and dissect that for you. So first, Simon, I would say from a cost structure standpoint, we believe the company is rightsized, so you cannot fight any more FX headwinds through cost reductions. We can maintain the discipline and the productivity focus. We probably can be a little bit more efficient, but the vast majority of the EPS growth will come from the top line and also the portfolio mix shifts with higher gross margins. And having looked at what has happened to foreign exchange rates more recently, you can relate to that, too, better than I do. Look at the pound, look at the euro, look at the yen. And if you look at our geographic mix, we have to deliver the top line to be able to make up for the foreign exchange headwinds, and we're confident we can do so. And the reason why we're confident we can do so is that the demand, unlike other players who have talked about the demand in Q3, we see the demand to be enduring and sustained, number one. And number two, we have a substantial backlog that will contribute to the realization of revenue in fiscal year '23. In some cases, in some parts of our company, we don't think that the backlog will decline materially by the end of fiscal year '23. And this is why we're giving you guidance on a CAGR basis on revenue of 2% to 4%. No one can predict foreign exchange rates with great accuracy in the long run. That's why our view is that over the next 2 years, we're not going to see material appreciation. We may be wrong. And that's why I said in my speech, as long as the FX rates in fiscal year '23 do not deviate substantially from current FX spot rates, we feel comfortable with our guidance. Antonio, I don't know if you want to add something to that.

No, I think he's asking the question about cost. We believe we are rightsized. Listen, we went, Simon, out in the first quarter of the pandemic with an aggressive plan to drive the optimization and the reallocation of resources. We have done that both at the R&D level in the capabilities and now in the go-to-market. This is a very important year for us in '23 to accelerate that journey. We have a big transactional business that's executing well. I argue the Compute business has done a remarkable job in our pricing, capturing profitable share. At the same time, when we think about the pivot to become the Edge-to-Cloud company, we are making also investments. And that investment is to drive the rich mix of software and services, which as Tarek said, is already above the corporate average of what we deliver. I think our global footprint gives us an advantage because you can actually distribute work where it makes sense. Ultimately, we continue to upscale and [indiscernible]. So we feel good. I mean the demand at this point in time continues to be there, is enduring. I think one point of differentiation we have against our competitors is the actually HPC GreenLake. Because if there is a recessionary environment of sorts, customers don't want to deploy CapEx but they can still continue with their digital transformation and do what they need to do and only pay for what they consume. And if you're already on GreenLake, that's a natural extension. There's nothing unnatural for them. While I was using GreenLake for that, and I'm going to use it for the other stuff that maybe require a CapEx expense that now they maybe don't want to do. So I feel that with the big backlog that we have, which is a long tail, and Tarek said it's elongated because even as we make progress on that, it's still big. The enduring demand we continue to see, HP GreenLake. And the fact that customers even in recessionary environments will need to continue with their digital transformation. We feel pretty good about that guidance we gave to you. Okay? I think it was Aaron that has been waiting.

Aaron Rakers at Wells Fargo. I just want to kind of unpack a little bit of Simon's question, in specific to the Compute segment. Can you talk about what you're seeing there from a backlog perspective given the constraints that you and everybody, the industry has operated under over the past couple of quarters? What do you think backlog peaks there? How are you thinking about that growth profile of that business as we look through fiscal '23? And I think in that same context, I'm curious because you brought it up, the flexibility of your pricing model. As we see some component pricing rolling over quite meaningfully, remind us again what gives you comfort of sustaining that operating margin. How do you flex that model in a down pricing environment?

Sure. So I'll start, and I'll certainly ask Antonio and my colleague, Neil MacDonald, who is in the room to elaborate on this. So we've done phenomenally well with Compute. There's no question about it. If you look at the profitability of our Compute business and our nearest competitor, Dell, we, from a margin standpoint, make more money in Compute than they do across Compute, storage and networking taken together. We are navigating carefully the supply chain constraints, and what we are starting to see from a supply environment is that some commodities are being redirected towards the B2B sector. The reason why we say that is because if you think about mobile phone industry globally is probably in a mid-single-digit decline. If you cover the PC industry, the decline that has been forecast, I think by IDC, and we have [ comfort ] at the team here, the PC industry is declining 15%. Some companies have announced for specific components such as RAM shrinkage of capacity, but the rest of the industry capacity hasn't shrunk. And therefore, that flow of goods and materials is being redirected, and we feel comfortable that we can resume our manufacturing and shipment and fill the demand that we have with the backlog that we have. We don't comment on the backlog of business unit by business unit. As you can imagine, it's not something we want to do. We're not a backlog company. And by the way, by next year, I'm going to stop giving you orders by BU and backlog because this isn't any more point. We need to focus on revenue and how we convert what we've got in orders to revenue moving forward. But I don't know, Antonio, if you want to add something or we can ask Neil. There he is.

Thanks. So demand has continued to be robust for our Compute solutions. Our customers are embracing Compute in companies of all sizes, for all kinds of workloads as they continue on their digital transformations wanting to have that cloud experience operationally, but with aspects of private cloud. So across many different workloads, many different data formats, many different use cases, we continue to see robust demand. And longer term, of course, you've heard how compute is central to what we're doing with HPE GreenLake, and it's also got a core role to play as customers continue to evolve their architectures to a modern Edge-to-Cloud approach. That's resulted for us in a very strong record backlog position, which consists of healthy increases both in AUP and in underlying units. Our revenue performance in fiscal '22 has been driven by strong AUPs and constrained units. And in FY '23, we expect to see more balance in those drivers of our growth in the following year. On the commodity side, we're very comfortable with the success of our dynamic pricing approach that we put in place through the whole pandemic and through FY '22 and the success that that's delivered for us. We are seeing some moves in commodity costs, as you highlighted in your question. Some of which are quite modest, some of which are little more significant. However, we continue to see other suppliers increasing costs, and inflationary pressures across the cost structure remain a pricing consideration for us. So as we move into the new year, we expect to continue the disciplined approach that we've had to a very dynamic approach to forward costing and pricing, which has yielded the financial results that you've seen. And as Tarek indicated earlier in his remarks, we maintain our guide moving forward on the operating margin range of 11% to 13%. We see that as prudent given both our recent history and trajectory here, but also some of those pressures moving forward.

Thank you, Neil. I think we've got Shelby with Wamsi on the side over here. We'll come back here.

Wamsi Mohan, Bank of America. Thanks for hosting us in your lovely headquarters. It's a beautiful, beautiful building. I was wondering if you could unpack maybe the revenue growth from a different way. We're seeing the various geos going through different types of challenges, whether it's FX or global issues. And I'm wondering when you think about the performance of the company, is it going to be similar to historical years? Or are we seeing a big divergence across the geos? And when you think about -- I know you said you're still expecting, Tarek, the backlog to remain fairly elevated. But are you talking about the non-HPC backlog specifically to remain elevated in this instance? And why should that be the case given that the global economy is seeing some material slowdown? What gives you the confidence? Are you not seeing any order cancellations yet? But are you -- as you look through the -- over the next 6 months, are you expecting there to be any deceleration? Is that baked into your guidance?

Go ahead, and then I will chime in. All right.

So yes, so thanks for the clarification question. So we feel that our backlog will remain elevated across segments, and that obviously is not just a matter for the HPC segment, which is by itself having a different dynamic with contracts that are incredibly long in their fulfillment. We do believe that the demand will remain solid, and the IT infrastructure industry is countercyclical to a large extent. Antonio highlighted that. And you've got to get to be more efficient if you're facing a downturn. And so far, the signals that we have with our global sales team headed by Heiko, who is here in the audience, is that the demand across all segments in our portfolio remains pretty solid, right? We're now seeing that. So you can expect backlog to continue to be elevated during fiscal year '23, which gives us good momentum into fiscal year '24 as well. And now the question is, how stable the supply environment is? And what are the pricing dynamics that we're going to observe in this environment? Because the inflationary pressures are real. And so yes, you have FX dislocation, but you also have inflation. And that opens up opportunity for pricing differently, and this is across the Board in our company. Makes sense?

So the way I think about this one is the product. First, let me start with the product to geos and then to route to market or customer segments. So from the product perspective, as Tarek said, we continue to see enduring demand, and the backlog is not HPC, it's across the board. And we quoted some of these numbers in Q3. We said that the edge business is 20x historical levels. When you think about digital transformation in a distributed enterprise, you need connectivity. We believe that business will continue to perform really well on the back, not just to the need of the customer, on the back of the fact that Aruba has a winning value proposition. It was architected for a mobile-first, cloud-first approach, it's delivered to the cloud, and now is part of HP GreenLake, which gave us a point of differentiation because the edge, the core data center and the cloud are now part of the same architecture. That's point number one. And as Phil said, he is now entering new markets in many ways with very little friction. It's just a natural extension of what he's doing. And that's why through the resource and allocation of funding, we prioritize those are new segments, which obviously come with very high margin, as you know. Second piece of this is that as I talk to customers, which I do more than 50% of the time, there is no one of them that said, you know what, I'm going to stop what I'm doing. Yes, I need to be judicious how we spend the money, where I make the capital investments. But now every business is an IT business. And if you are not innovating on your data, you are left behind. Our marketing team has done a wonderful analysis of brands that have accelerated our journey. They are winning in the market because they are operating in a new business environment, which is basically automation, cloud experience, e-commerce, all of that has to come in place. Now they may decide to deploy CapEx or maybe do it as on OpEx. But we provide that capability through our HP GreenLake platform. Now when you think about geos, it's no question Europe has a little bit more challenges because of currency or because of the war. But it has been steady. It's not like it has fallen off the cliff. In fact, I think the analogy to use here is, which I like as this, the sea level has risen, and it's kind of there. It's not like it has been drop into the pond. It's still solid. And I think because we have the opportunity to provide an end-to-end solution, we are uniquely differentiated in that space. Now listen, if the currency go to hell in a [ high ] basket, that's nothing I can do. At this point, I'm not a forecast on currency, even though I would not be here or we'll do something else. But the fact of the matter is that we believe that customer need is still there and our portfolio is unique and differentiated. And listen, even Compute for that matter. Think one area, which I want the analysts to think about it. Don't think Compute is just the server. Compute goes everywhere. Private cloud, has a Compute, right? The edge has a Compute processing. Everything some sort of the Compute. We have the ability to put Compute anywhere. There is a lot of the things you today don't see. If you buy a GE for example, an MRI system, there's a Compute there. It's called Hewlett Packard Enterprise. And there's many others.

Wamsi, apologies, I didn't mean to ignore the question on cancellations. Cancellations are really minimal. They were minimal in '20 -- sorry, in Q3 of '22. They are minimal to this day, no change.

We've got a bunch in the front here. Why don't we go with Shannon to start?

Shannon Cross, Credit Suisse. So I'm curious when you think about your business from an as-a-Service standpoint. I know for quite a while, it was more of a push than a pull from a customer perspective, just as they were becoming educated and the sales in your channel was as well. What have you seen from maybe on a segment basis in terms of willingness to buy that way? Are there areas where you think the will remain transaction for a long time? And is there anything you can do to really accelerate it? Because it seems to me that the faster you can shift over to as-a-Service, makes investors more comfortable, garners a higher multiple. I know that the growth rates of an ARR are pretty strong, but it just seems you can't do rip and replace like Adobe did. But can you get closer than you are at this point?

Yes. And we have Keith because Keith talks to customers every day, and we follow a very structural segmentation and hike as well. But maybe, Keith, you can come here as a start. But listen, we see customers coming to us now. Why they're coming to us? Because they want an open hybrid multi-cloud solution. The fact of the matter of [indiscernible] loads and data lives everywhere. They have, obviously, in the public cloud, they have on-prem and they have more on the edge. But what they want is a consistent cloud operating experience with a consistent way to pay around that. And the fact of the matter, the world has become more complicated, not less complicated. We can simplify all of that through the unification of that experience. And I think we -- our general segmentation is obviously the global accounts. And as I talk, there are 100 customers already of the global accounts, are 80% of them are HP GreenLake. We land and then we expand. And then we go down to the top [ riser ] accounts, which allows us to get into new accounts. Some of them have never done business with us. And then also as we go down into more of the commercial SMB, the partner plays a big role. And what they like is the access to their platform because then we provide them all the capabilities without them building it, but they can leverage our services or they can use their own services. So Keith, maybe you can...

No, I think you nailed it. The -- you asked about customer segments and a majority of our business is up in the enterprise and above space. The focus has really been sort of fourfold. One, is you heard it, we talked a lot about shifting our dialogue with our customers to be much more about cloud, data and edge because they're looking for solutions from us. And what's that done is that's really flipped the page with our customers where we're now partners with them on their transformation on running their environment versus just being transactional-type scenario. So that relevancy has been significant, and we've leveraged our advisory and professional services and our partner ecosystem to do that. The second is where Antonio just touched on, which is we're selling through and with our ecosystem. So the solution is with SAP. It's with Microsoft. It's with Google. It's with BEAM. It's with Nutanix and the others. Because that's, again, the solution that's being asked for, all done in an as-a-Service way, right? VDIs, virtual desktops-as-a-service, SAP-as-a-service, backup and recovery-as-a-service. So that's been the sort of the second. The customer success aspects has been very successful. So we now have customer success architects with over 500 of our top customers that ends up driving a significant amount of continued value out of the platform and additional usage out of the platform, which has done that. And then you asked about scale and our real focus on scale down into the sort of mid-market SMB space has been both through the cloud and managed service providers. So they're providing solutions to the customer, dental patient records to a dentist office, retail point of sale to the deli market or whoever. So that big push has really driven -- everything is powered by GreenLake through the service provider to that customer. And then now as Antonio talked about earlier in the pitch, he talked about us creating APIs for our partners to leverage. So we're now landing in all of our top disti marketplaces for them to sell solutions to their value-added reseller to get to that scale engine. So that's where you'll see us really kick up scale outward. We've targeted our sales force on both new logos, and so you hear us talk about the new logos we secure every quarter. That's going up and up and up, and we'll have an even higher target next year. And then again, that customer success is driving the majority of our expansion within the customer set.

Yes. Thank you, Keith. Maybe, Fidelma, are you there? I can't see you, but maybe you can talk a little bit about channel because it goes with that, about how we are building the experiences and the capability inside HPE GreenLake.

Yes. So I'm Fidelma Russo, and I partner with the teams here as the CTO. So over the last number of years, we've built the GreenLake cloud platform. And so we've put a lot of investment, development investment into it. All of our cloud offers now are located on the platform. And what that means is if you go out to a customer and let's say they're using Aruba on the platform, when they log into the platform, they now see our catalogs for Compute, our catalogs for storage, our catalogs for private cloud and other services. So that gives us an ability for customers to see other services that they may not have seen before when they were looking at each offer independently. So a lot of work going on to make sure that those are refresh and we give the different options like managed-as-a-service, deliver the APIs through a common API developer portal for customers, integration with partners, we do it once. It gets all of the offers versus doing it multiple times. And so all of this, I think, is a great foundation for us to really do what you're looking for, Shannon, which is how do we accelerate this and we accelerate this by continuing to invest in the platform. Okay?

And by the way, there is a whole back end investment, which we're not going to talk today, which is to do this at scale you need a lot of capabilities in billing and invoicing and so forth. So anyway.

Kyle, right behind you.

Kyle McNealy, Jefferies. You mentioned that some of the impact from macro uncertainty, rising interest rate environment, potential recession risk is baked into your guidance for 2023. I just wanted to unpack a little bit about what that may look like for you across your businesses, what are -- which ones are more or less impacted? How much total revenue could that be, at least in terms of how conservative you are being for 2023? How much EPS? And then are you seeing any of the evidence of the behaviors from the customer showing some hesitation due to macro which is given you that insight? Anything you could share would be helpful there.

All right. So I would say the impact is overall roughly the same across businesses with respect to inflationary pressure, FX and so on, right? And if you take Aruba nowadays, it's an incredibly global business. It wasn't the case just a few years ago, but it became completely global, just like anything else that we have. And so really, what we have modeled, and that's why you see my EPS bridge, is that we can offset, say, about $0.40 total headwind coming from normalization of Q1 for Russia, which is $0.03, $0.08 from OI&E, $0.11, and then the rest is FX. I think we feel that there is at least a $0.40 headwind. We have plans to offset that at the EPS level. Should FX rates deteriorate even further, then it's a different debate, but we feel reasonably comfortable offsetting $0.40 of EPS with the current momentum we have coming from the demand, the backlog that we have, portfolio mix shift, pricing and quite frankly, brutal execution.

So the other thing I would say, listen, I mean we have plans in place to offset all of that. I mean if you ask me upside of any source, which obviously, we can give you definitely. We know and it goes back and forth all the time. Right now, that's our best view. But over time, that may shift one way or the other way. It depends, specific time in the quarter and whatever. But right now, we are giving you our best insight, which is the $0.40 that he talked about it, and that's what we have operationalized in our plan. And we have line of sight to deliver that, which if you used Shannon's analogy in Q3, I said, well, it looks like you're increasing guidance.

That was brilliant.

It was brilliant.