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

Good morning, everyone, and welcome to HPE Networking Investor Day. Thank you for joining us both here in person and on the webcast. I'm Shannon Cross, Chief Strategy Officer at HPE. As you all know, we posted record Q3 results earlier this month. In Networking, for example, we reported both record revenue and orders. Today, we'll take a closer look at the business and the strategy we have in place to capture new opportunities we see for the future. Over the next few hours, you'll hear from Rami Rahim, Executive Vice President, President and General Manager of HPE Networking about how AI is reshaping the networking market and why networking is considered critical infrastructure in the AI era. We will also talk about how the combination of HPE and Juniper Networks strengthens our ability to compete and win in this increasingly important market. We'll discuss our integration progress and the financial benefits we are already seeing. We'll then invite the leaders of our networking business to join me for a panel. And finally, Rami and I will host a Q&A session. Before we begin, I'd like to introduce and welcome Dave Rubin who recently joined HPE as our new Head of Investor Relations. Many of you already know Dave from his time at Flex, and we're very happy to have him on our team. And let me cover our safe harbor statement. This event may include forward-looking statements involving risks, uncertainties, estimates and assumptions. If the risks and uncertainties ever materialize and the estimates or assumptions prove incorrect, our results may differ, perhaps materially from those expressed or implied by such forward-looking statements. HPE assumes no obligation to update such statements. Please find more information regarding our forward-looking statements on our website at investors.hpe.com. This event also includes certain non-GAAP financial information. Such non-GAAP financial measures may have limitations as analytical tools. Please note that these measures should not be considered in isolation or as a substitute for analyzing HPE financial measures as reported under GAAP. Certain financial information featured in the presentation today has been normalized to include Juniper Networks results as of the beginning of HPE's fiscal year 2024. With that, let's get started. Please welcome Rami.

Thanks, Shannon. Okay. Welcome, everyone, and thank you all for investing your time with us today. So my objective for today is to demonstrate how our new combined HPE Networking segment will accelerate shareholder value for years to come. We're going to talk about a few critical things today: the AI market opportunity and why networking today is more important than ever in the new AI era; how our new combined HPE Networking portfolio and innovation are perfectly suited to capture the large AI opportunity; the significant strides we've made with the integration of Juniper and HPE; the strong financial progress made against our commitments; and finally, I'm going to share a new financial guide later in my remarks. So the core message I want you to take away is that HPE Networking segment is a key driver of our long-term strategy to create shareholder value through durable revenue growth, margin expansion and strong cash generation. We are executing ahead of plan, with the integration delivering greater-than-expected synergies and expanding into new addressable markets. Our HPE Networking portfolio is not just larger. It's more complete, more integrated and better positioned to compete at scale in large markets benefiting from strong, secular growth drivers. And finally, we're seeing that progress reflected in our results and in our outlook. So let's just get started. As you know, the AI market is driving major technology transitions, and it's reshaping the technology stack. It has become a strategic core element for how organizations architect and operate their IT to enable scale and competitiveness. So that's why every customer segment is treating the network as core, strategic infrastructure. Now as you can see on this slide, the expected market growth opportunities across networking are significant. And with the combination of Juniper and Aruba, we are positioned to win. We look at our opportunities across the four product categories you see here and our two customer segments, enterprise and service provider, which includes cloud service providers or CSPs such as hyperscalers and neoclouds. Data center is our fastest-growing market, largely driven by CSPs. And here, we are expanding our addressable market opportunity as AI drives increasing demand for both high-performance scale-out and scale-up solutions. In routing, we're seeing the opportunity broaden as AI moves beyond training and into large-scale inferencing environment. And that's creating demand across both service provider and enterprise networks. This is also an area where we have a long history of innovation and deep incumbency which is a significant competitive advantage for us. Campus & Branch is currently our largest product category. The combination of Juniper and Aruba further strengthens our competitive positioning from both a technology and a go-to-market standpoint. And finally, we cannot talk about the evolution of AI infrastructure without addressing the increasing convergence between networking and security, where HPE has a unique approach through the combination of silicon, software and agentic operations. The opportunity for HPE is clear. We have the right to win in every networking product category. And we are now even more confident because of the successful integration of Juniper into HPE. So how is the integration going? In short, it's been a tremendous success. We are moving faster than expected and delivering greater-than-expected cost synergies. Integrating two large businesses into a single networking powerhouse while also delivering strong order growth is hard to do, but we're doing it and delivering quarter after quarter. And the success is driven by the thoughtful integration we've done and the amazing execution by the combined team. Not only have we set a clear strategy but we onboarded all Juniper employees, combined our sales teams and never stopped innovating. This has given us tremendous confidence and excitement for what comes next: an acceleration of profitable growth. Now one of the strategic opportunities in bringing HPE and Juniper together was to combine decades of innovation and differentiated IP while accelerating product development and time to market that will result in market share gains. And we're already seeing the benefits. For example, we rapidly advanced our self-driving network capabilities, cross-pollinating the best of Aruba Central and Juniper Mist, supported by a new set of campus and branch wireless access points as well as access switches. We also grew our addressable market by expanding our innovation into the AI data center scale up market. We introduced a new data center scale up switch, leveraging HPE's decades of experience in rack scale architecture and liquid cooling technology. And I'll talk more about these products later, but the key takeaway is that we were able to accelerate our innovation through the integration process, leveraging unique IP and expertise. We've accomplished all of this in just over a year, and these are only a few examples. The second major element of the integration was bringing our sales organizations together. And here again, speed mattered. We called this Sales Day One, and it was completed globally in about 6 months after we closed. We made it a deliberate decision to move early and it is paying off. With our teams bringing Juniper into Aruba accounts and Aruba into Juniper accounts, one catalog, one compensation plan, one set of account rules, carrying all the sellers, carrying a full combined networking portfolio. Now in a minute, I'll talk about the channel opportunity and what comes next in our integration process. But first, let's turn to results and particularly cost synergies. Now as you may recall, when we closed the transaction in July of 2025, we raised our original cost synergy target from $450 million to at least $600 million in annual run rate savings by fiscal 2028. Those savings come from several areas, which include things like SG&A, go-to-market harmonization and the elimination of R&D duplicate costs. We are running ahead of our cost synergy plan while also spending less on integration through fiscal discipline. Given our progress, we're increasing our fiscal 2028 annual run rate cost synergy target to $800 million. Now let's talk about what comes next. We have two major integration priorities remaining: bringing our partner ecosystems together; and completing our commercial systems integration. The key milestone for the first one is called Partner Day One. Partners drive most of our networking business, and this milestone will enable all 60,000 HPE partners to sell the full networking portfolio through one unified partner program. Before the acquisition, only around 10% of HPE Aruba Networking and Juniper partners overlapped, and so this creates a significant cross-selling opportunity as we bring the combined HPE Networking portfolio to a much broader set of sellers and customers. Partner Day One is planned for November 1. On that date, we will converge the Juniper and Aruba programs under one unified partner program, HPE Partner Ready Vantage. The next priority is a little less visible but equally important. It's completing our lead to cash processes and systems. We're building a modern single quote-to-cash foundation that will make it easier for customers and partners to do business with us while allowing us to launch new products and operate more efficiently. The first phase launches in November with integrated quoting and ordering. And we expect to unify our supply chain processes by the end of 2027 with continued improvements coming throughout 2028. Now while there's still work ahead, we have made tremendous progress, giving us confidence in accelerating profitable growth in fiscal 2027 and beyond. As you've seen, the combination is already creating strong shareholder value through accelerated innovation, new expanded market opportunities and our scaled go-to-market reach and higher cost synergies. So now let's shift to our HPE Networking strategy. At HPE Discover back in June, we introduced our vision for the self-driving network. We discussed how we're bringing networking, compute, cloud management together to simplify increasingly complex IT infrastructure. Today, I want to focus on how we are winning in the market and achieving growth by leveraging the power of the combined HPE and Juniper networking portfolios. We've organized our opportunity around four focused strategic plays. The first go-to-market play is pretty straightforward, whereby bringing Juniper Mist and Aruba Central together, we now have a much larger combined Campus & Branch cloud-native and AI-driven portfolio. We've taken the combined networking portfolio through HPE's significantly broader go-to-market engine, creating larger growth opportunities through scale and productivity improvements. The second play is increasing services attach rates. Today, services represent about 1/3 of our HPE Networking business. Services deepen customer relationships, add higher margin recurring revenue and improve the quality of our products driving durable earnings. Juniper has a strong history of attaching services to products. And we see an opportunity to bring that business model and the culture to Aruba across a much larger installed base. So by fiscal 2028, we expect to increase services attach rates by 5 percentage points, supporting both recurring revenue growth and margin expansion. The third play is about bringing our data center networking portfolio into HPE's broader infrastructure customer base. This means networking is no longer a stand-alone conversation. It's part of a much broader discussion that can include compute, storage, security and cloud management. And that creates opportunities to participate in larger infrastructure deals across all customer segments. And finally, the fourth play is about expanding into new market opportunities. One example is AI infrastructure, of course, where we're leveraging HPE's AI data center momentum and innovation to expand into the scale-up networking market. And I'm going to talk more about the AMD Helios opportunity in just a moment. But the broader point is that the combination is creating new avenues for growth, not just expanding existing ones. We're bringing capabilities together to create solutions and address markets that neither company could have effectively pursued on its own. And importantly, we're building a large customer pipeline. So now let's dig into our specific market strategies and opportunities starting with data center where we're seeing the fastest growth. The pace of change in the data center is quite frankly, extraordinary. AI has fundamentally reshaped how infrastructure is designed and deployed. And the reason is simple, you can invest billions of dollars into GPUs, but if the network can't keep up with the traffic and the performance demands, those resources are not fully utilized. So as a result, networking has become a much more strategic part of the AI infrastructure stack. And we believe HPE Networking is exceptionally well positioned because we have the products to address networking across all layers of the AI data center. That includes scale out and scale up. We expect our data center networking revenue to grow at low to high 50s percent CAGR from fiscal 2026 through 2029. Our strategy starts with innovation and time to market. We have consistently been early with many of the technologies that matter most in AI infrastructure from 800 gigabit Ethernet to 1.6 terabit Ethernet and most recently, with the industry's first liquid-cooled Ethernet data center switch. That matters because it allows us to engage earlier in large AI deployments and establish a competitive position as customers build out next-generation data center and AI infrastructure. Now AMD Helios is a great example of what our integrated HPE strategy can deliver. We are bringing together Juniper's networking technology with HPE's compute, liquid cooling, rack scale engineering to deliver an integrated Ethernet-based scale-up solution. More importantly, it's opening an entirely new addressable market in networking, either by selling our AMD Helios networking trades as part of an HPE integrated rack solution or independently to other solution providers. We believe Helios represents more than $1 billion networking opportunity over the next 2 years with networking trade orders having already exceeded $200 million. I am excited to share that just this morning, we made an announcement that HPE was awarded a $1.2 billion AMD Helios order from Vultr. It's HPE's first order for the new integrated AMD Helios system, which features our new purpose-built HPE networking scale-up switch and software. This is a great example of the wins we can land working across the portfolio together with our partners. Let's move to routing and what's happening in routing today sort of reminds me of my early days at Juniper when we were building ever larger routers to keep pace with the explosive growth of the Internet. Today, AI is creating another major wave of networking demand. We see that opportunity developing in two areas. The first is the AI on-ramp, securely and efficiently connecting users, devices and branches to AI infrastructure. This plays directly to our strength of the MX platform and the Trio silicon, which were designed for high scale service-rich edge routing. And when it comes to programmable networking silicon, Trio is truly unique in the industry in its capabilities. The second is data center interconnect or DCI or scale across. As AI clusters grow beyond individual data centers, customers need to connect infrastructure across buildings, campuses and geographies with enormous bandwidth, with low latency and with high power efficiency. That's where our PTX portfolio and our express silicon truly excel. The important point here is that this is not a new market we are trying to enter. We are applying decades of routing innovation, custom silicon expertise and deep incumbency in some of the world's largest cloud and service provider network to a new wave of AI-driven demand. As a result, we expect our routing revenue to grow at low to high 20s percent CAGR from fiscal 2026 through 2029. Now a good example of our AI data center switching and routing strategy playing out is our recent win with Oracle. We are participating in Oracle's multiyear gigawatt scale AI infrastructure build-out, both in routing and switching platforms deployed across data centers globally. The significance goes well beyond a single customer. This win validate HPE's ability to compete in some of the world's most demanding AI environments and demonstrates the strength of our end-to-end networking portfolio. So, so far, you've heard how we're applying our strength in switching, routing and custom silicon to some of the fastest-growing parts of the AI market. Let me now turn to our opportunity in the Campus & Branch. The Campus & Branch, as you all know, is our largest networking product category, representing approximately half of our total networking revenue. We expect our revenue to grow at a high single-digit percent CAGR through fiscal 2029. Now the Wi-Fi 7 refresh cycle is one important driver, but the opportunity extends well beyond wireless. As customers upgrade their wireless infrastructure, they often need to modernize other parts of the network as well, creating opportunities across switching and the broader campus architecture. We are entering this cycle from a position of strength with stealth driving automation that truly sets us apart in the industry. Now in just a bit, you're going to hear directly from one of our customers who has experienced the value of this technology firsthand. Importantly, the combination of HPE and Juniper further strengthens our position, with a larger deployed base, a broader portfolio and significantly greater sales and channel reach. Put simply, we are taking proven technology and putting scaled distribution behind it, and that creates opportunities to drive adoption across the installed base and reach new customers to gain share. Importantly, that leadership is independently recognized. HP has been named a leader in Gartner's Magic Quadrant for Enterprise Wired and Wireless LAN Infrastructure for 20 consecutive years, including 5 straight years with the highest ranking for ability to execute and completeness of vision. The opportunity is clear. We're going to leverage the combined strengths of HPE and Juniper to capitalize on the Wi-Fi 7 refresh cycle. Okay. And finally, another really important technology trend we're capitalizing on is the convergence of networking and security. Now security vendors are increasingly adding networking capabilities to their platforms. Our strategy is to move aggressively in the other direction, bringing more security into the network, and that's playing both defense and offense. It helps us protect our networking position while expanding our addressable market and the share of customer spending. We have the assets to do just that, including a complete SASE portfolio, industry-leading SRX firewalls, network access control and identity and policy management integrated throughout the network. Now while some of these capabilities are sold as a stand-alone security product, our primary strategy is to embed them throughout our networking portfolio, including in our Campus & Branch silicon, which enhances our differentiation. As a result, we currently expect security revenue to grow at a high single-digit percent CAGR through fiscal 2029. Look, I believe we have the industry's most complete and most differentiated networking portfolios spanning from the Campus & Branch across the wide area, into the data center and with security embedded throughout. And I am confident that the strength of this portfolio, along with our expanded go-to-market scale will enable us to grow market share in the years to come. The progress we've made in our integration and the success we have achieved in building industry-leading self-driving networks, would not be possible without great customers. And fortunately, we have one of those customers with me here today. So I'd like to welcome Sajeev Nair of ServiceNow up here to talk to me about it. Welcome. Thank you for joining us. Please have a seat.

A pleasure.

Okay. So Sajeev, thanks for joining us. You have been a customer since 2018, I believe, starting with Mist and then Juniper Networks and now with HPE. You've seen the vision of self-driving networking truly come to life. So maybe start by just taking us back in 2017, earlier, what did the network look like day-to-day? And what was your team just dealing with?

2017, gosh, I think if I have to just simply put it in one word, it was chaotic. If I think about it now, that's how it comes across. The enterprise was not doing anything wrong. It was very typical stuff that you were going and sourcing deep tech solutions, solving a particular problem in a stack. And at the back of your mind, you knew that you are creating another fragmentation in your telemetry that is already fragmented, you are signing up for another control plane that you have to manage and then you're going to be basically trusting the humans to do the magical correlation that needs to happen to solve the problems faster. And the hidden element into this whole thing was the cost that was so high that we did not realize that there was a better way to solve these problems. And we have this thinking in the back of mind that we need to solve some of these products, but how do we go about it? In 2018, another tiny company walks in, tell us that they are doing something radically different in the wireless space that was -- so Neil and Bob and Sujai in front of us, and they were like, "We're going to do something different," and we said, "Okay, tell us more about it." And they said, "We're going to focus on two things. Number one, we're going to solve something that has been completely overlooked in the networking industry that is end-user experience." We said, "Wow, this is exactly the magic word that we wanted to hear." And the second thing they mentioned was we're going to overlay AI on top of the entire wireless infrastructure. We said, "Okay, that sounds ahead-of-times thinking, but we are on board with this thought process. Let's begin small." And that was the beginning of our relationship in 2018.

That's awesome. We're talking about almost 10 years ago, well before AI was a fashionable term to be used by pretty much everybody in the industry. But we see what you're talking about so often, the consistent troubleshooting, the silos. What were some of the first results that your team saw when you started deploying the technology?

Absolutely. And some of these numbers are going to just blow your mind, because it did exactly the same thing for us. We're like, okay, we are on this journey with this amazing vendor/partner that was so agile and they were ready to listen in, and they were ready to implement and move as fast as we wanted. And as we deployed this stuff in a small way in 2018, 2019 was when the Juniper acquisition -- Juniper acquired Mist, and we said, "Wow, this story is now going to get amazingly better because the goodness of what we saw, the AI and the end user experience that Mist was delivering was now going to be spread on top of the entire Juniper stack." And when that was conveyed to us, we said, "Okay, this is actually opening up a completely different radical thinking in our mind of how we want to transform ServiceNow network." And COVID happened, and that was the amazing time for me and my team to go and do something strategically different. And we said, "Okay, what are we going to do?" We're going to basically going to rip and replace every single vendor stack that we had in our networking environment, and we're going to basically shift all of that into Juniper switching, Juniper routing. And it worked out phenomenally well because everybody was coming back from home, using Wi-Fi networks, and they said, "Okay, this is not going to be different. My home and my office looks exactly the same." And that was the time when we scaled it up and we took the whole full-stack approach. So think about it, right, we came from a world of fragmented silos and multitude of control planes that we were managing to now this space where we had Wi-Fi, wired and WAN, all available to us in a single plane overlaid with Marvis AI and the story was just getting brilliant day by day. So 90% reduction in our incident volume, can you believe? 90% reduction. And we had patchings that used to run for hours over the weekend. We fully automated it. We had incidents that took hours to troubleshoot and figure out where the problem was, was taking minutes now. And the end-to-end visibility that we gained and the AI capabilities that Marvis delivered just was game changing for us.

I love that story. And you said you were talking about how excited you were when Mist was being acquired by Juniper. Now we're taking Marvis and applying it across the entire portfolio, and we've made -- already made amazing progress in doing so, so the opportunity is immense. So that's obviously the self-driving network in action that you've just described, Sajeev, with almost instant results. What changed for your team sort of from an operational standpoint?

Yes. This is -- so the time when we met the Juniper team, the company -- the strength of the company today, we were just 1/3 the size. I can tell you that it's the same team that is managing the network today because of the design partnership, the trust, to be bringing the two platforms, the Marvis and ServiceNow that we have done here together, it has just transformed the way the team does the work. So the team that was a nonbeliever in some of these automation and the AI capabilities has fully leaned on that today and focused on doing much elevated work. So as I was talking about patching, I just want to add some numbers to it. We used to spend almost 2,000 to 3,000 hours a year. I'm just pulling out a very small number, I think. Now we spend less than 60 hours a year patching network. When engineers are sleeping, the network is patching itself. So there is an example. One of the examples of self-driving network that we are leaning on and the enterprise is testing.

That's awesome. Thank you so much for sharing that with us. So you've been on this journey with us now for a while, like we said, in almost 10 years. How has the partnership and the technology evolved over that time? And where do you see sort of the momentum right now in that partnership?

I think the -- I would say that we are just getting started because every time we meet there is something exciting and there is something always new going on. And as Rami, you touched upon, in the age of AI, when the data is sitting everywhere and the AI is distributed, whether it is in your iPhones, whether it is laptops, it is no more the enterprise edge, it is actually going to the consumer edge. The role of networking is just more important than ever before. The nanosecond, the microsecond, subsecond latencies that network needs to support for the best-in-class inferencing that needs to happen, I think that network has a huge role. And that's exactly how we see it in ServiceNow that we want to continue to build with you. We love the design partnership. We have brought the two platforms together. We present these stories, and we tell this real -- show these real demos of these two companies and the two platforms coming together, and it has blown customers' mind -- combined customers' mind of how we are able to achieve greater things because network is -- I want to say that when people ask me, what do you do? I said, I run a utility-grade service. What does that mean? It means that when you flip the switch, the light has to come on. When I turn the tap, the water has to flow. So there is exactly like the working. Nobody needs to walk into the office, thinking about whether my Wi-Fi is going to work or not. It is supposed to work. It is going to work. And it is. If it is not working, it is supposed to inform you proactively that I have a problem. I'm working on fixing myself. Please show up on the other side of the campus, and you will have a fantastic Zoom call that you can take from there.

I love it. The network has become, as I said, the critical infrastructure for the AI era. So the big question we get is around trust, Sajeev, so handing the network operations over to an AI agent is never an easy thing to do from a human trust standpoint. How did you overcome that obstacle and start to get comfortable with taking your hands off the proverbial steering wheel, if you will?

Absolutely. And as I said, my team was non-believers, and there was this hesitation that is this going to -- we found ourselves in crosshairs with all sorts of issues because anything that goes wrong in the company, the first blame was on network. If a Zoom call is choppy, it's the network. If the application is slow, it's network. They said, "Okay, is this thing going to make it absolutely worse and is going to go out of control?" So we had the hesitation, but being an AI company that we are today and being an AI-first approach that we take, we said, "You know what, we're going to lead with this, and we're going to trust on this AI that we have in our hands." But it has to be essentially a graduated autonomy that we need to lean on. We need to slowly peel the onion, and we need to keep making the progression. It was imperative that we are going to keep marching forward and not look back. So today, the platform, which is AI-driven platform from ServiceNow perspective, from the Marvis perspective, I think we are definitely looking at something that is going to change the way we operate. Personally, we have a bold goal within ServiceNow, and that is 100% autonomous network by 2028, right? And the only way we know that is going to happen is that if we keep our mind and our thoughts open, and we keep working and designing with Juniper HPE team. I think we can make that happen. And I'm super excited. I mean all your updates that just -- you just shared, it was absolutely net new to me. It has just blown my mind and it only tells me that we are partnering with the right company, and I can't be more excited about what we have coming up in the future.

Wow, I couldn't thank you enough for the really inspirational words. We love ServiceNow. We love our partnership. You have made us a better technology provider in the time and through the advice and the engagement that we've had over the years. and I can't wait to take it to new highs together. Thank you so much for joining us. Thank you. Appreciate it. Thank you. Okay. I love that. So I have talked about the opportunity, the integration progress and our innovation. Let's now discuss how all of this is resulting in financial strength. A year ago, investors were asking whether we could integrate Juniper without disrupting the business. Today, we've demonstrated that the combination is already creating significant value. But this is about looking forward. The market opportunity is expanding, demand is strong, our execution is ahead of plan and visibility into future growth has significantly improved. We continue to see a strong pipeline across the entire portfolio from Campus & Branch driven by enterprise modernization, to Data Center Networking and Routing driven by the massive AI investments. Based on continued strength and demand, we now expect our fiscal 2026 networks for AI cumulative orders to exceed $3 billion. This is up from our prior estimate of $2.5 billion to $3 billion communicated by Antonio and Marie at Q3 earnings. Now as we continue to look forward, our focus is on accelerating revenue growth. The demand is certainly there, and this is reflected in our orders, which in Q3 grew 3.5x faster than revenue. We've been working through supply chain availability to meet this growing demand. And in the last quarter alone, we doubled our networking supply purchase commitments, which we're confident will help ease constraints as we move into fiscal 2027. So based on strong portfolio demand, the incremental Helios opportunity and improved order conversion, we now expect fiscal 2027 HPE Networking revenue growth in the range of high teens to low 20%. This is up from the prior FY '27 guidance of 14% to 17% communicated at Q3 earnings. We do expect a more back-end loaded year than normal given the timing of Helios shipments and the anticipated contribution from the Oracle agreement. But revenue growth is, of course, only part of the value creation story. We expect our growth, increased integration cost synergies and operating leverage to drive margin expansion. As mentioned on our Q3 earnings call, we expect our fiscal 2027 HPE networking operating margin to expand to mid- to high 20%. This is up from our FY '26 expectation for low 20% operating margin. We're focused on executing through the current market environment, but we remain equally focused on generating durable profitable growth, which means looking beyond FY '27. Looking ahead, we see continued broad networking demand driven by the AI secular trends I described earlier today. So with that, we're projecting a high teens revenue CAGR through fiscal 2029, with operating margins in the mid- to high 20% range. And we expect to gain market share in Data Center, in Routing, and Campus & Branch relative to the multiyear CAGRs we have provided earlier. So now I've covered the significant and growing networking market opportunity, I've outlined why our strategy, portfolio and innovation gives us the clear right to win, and I've shared how we're translating these advantages into growth and value creation. We're going to transition to a panel now, so let us welcome Shannon back to the stage to moderate that discussion. Shannon, come on up.

Thank you, Rami. You've heard Rami discuss the networking opportunity, our integration progress and the financial framework that supports our outlook. What I'd like to do next is make it even more tangible. The innovation happening across networking today spans everything from AI data center fabrics and routing infrastructure to security and autonomous operations. Please join me in welcoming the leaders responsible for those areas. So thank you all for joining us. One of the themes you've heard throughout the morning is that AI is changing what customers expect from their networks and expanding the role networking plays across the broader infrastructure stack. You are each leading a different part of the business affected by these trends, so can you please briefly introduce yourself, explain the business you lead and where you have seen the greatest benefit from bringing HPE and Juniper together. We'll start with Praveen.

I'm Praveen Jain, SVP, GM for the data center networking business. I have been part of five start-ups in my 30-year career. And the start-up rigor and the HPE scale is bringing such a big opportunity in front of us that I'm super excited. One such example is the Helios tray or the networking tray, which is on the right side of the room, in the morning, people made comments, it looks like a piece of art, such a complicated technology. And honestly, some of this was not possible without HPE and Juniper coming together. Please find me during the break time, I would explain to you how 1,700 wires are into it, how the liquid cooling technology is playing into it. It's my heart, which has been put into this product. So thank you.

AE?

My name is AE Natarajan. I'm SVP, GM of the routing infrastructure solutions business here at HPE. I'm most excited about this AI opportunity over here. Praveen talked about the right, if you look at the left, the most complex, most compact routers excite me and the opportunity that it actually gives us in terms of what we have there. And least but not the last, getting HPE and Juniper together gives us the ability to scale up and address this market with compute, storage and networking together giving us a total solution across the portfolio and making us one of the biggest companies in the world.

David?

I'm David Hughes, I lead our security business. I joined HPE in 2020 when they acquired Silver Peak. I was the Founder and CEO of Silver Peak. In terms of what's really exciting about Juniper and HPE coming together, I think from a security perspective, first of all, Juniper had a really strong portfolio with SRX, with Advanced Threat Prevention, with Threat Labs. We're bringing that together. And what is really exciting is being able to build an autonomous full-stack end-to-end self-driving secure systems. So embedding that security technology into everything that we do. That's as important if not more important than just the portfolio that I manage.

And last but not least, Sujai?

My name is Sujai Hajela, I'm the EVP and General Manager for the Campus & Branch business. I came to HPE as a part of an acquisition of Juniper, and I actually came to Juniper as a part of an acquisition of a company I co-founded and was CEO, which was Mist. Excitement, it's very simple. It's the self-driving network. And what is even more exciting Shannon, is the coverage and the scale, as Rami had mentioned that HPE enables us which allows us to take self-driving networks everywhere.

Great. Well, Praveen and AE, I'm going to start closest to me here. Before we get started, can you walk us through a couple of terms we've heard a lot about lately in networking? So Praveen, can you please briefly describe scale up and scale out?

So when you connect GPUs inside a rack, like my networking tray goes inside the rack, when you connect these GPUs inside the rack together, it's called scale-up networking. While if you take multiple of these racks, or even stand-alone servers and you want to connect them together, that's called the scale-out networking.

And AE, can you talk about scale across?

Absolutely. Scaling now has the third dimension. It's not just within a rack and within a data center. Now GPUs are required to be distributed across data centers. And when you need to connect them across data centers, that is what we call as scale across, in other terms, data center interconnect. Any of those terms that you would use interchangeably for scale across.

Great. And that's what we're calling networks for AI. And so I'm going to stay with AE and Praveen here. So what differentiates HPE Networking? Why are customers choosing us? And how does the Oracle opportunity demonstrate that? Let's start with AE.

Yes. So very interestingly, I talked about AI, transforming the needs of what the network needs to do with AI, which means it is not just scale, it is not just bandwidth, it's not just throughput, it's latency, any of those metrics. But it also means how well you actually have a portfolio with the right tools, the right routers, switches, capabilities to actually build this network out. And it starts with three fundamental principles that we use to deliver anything and everything we built starting from our silicon to our systems to our software. The first part of it is sustainability, which essentially means we drive the most power-efficient network devices that you can get across the portfolio, whether it be with our own silicon or with merchant silicon. We drive that and we also make sure that these network devices have or use the most -- least amount of space, which means they are the most compact devices that you can get in the market. And these two are very important because AI is hungry. It eats up all the power and space, so you need network equipment that really needs to fit in this environment. The ability for us to do that is important. The second part of it, which is a slam dunk, which is performance. The ability for AI to actually grow the traffic, require more bandwidth, do all of that stuff, which means we have to deliver 100 gig, 200 gig, 400 gig, 800 gig, 1.6T and beyond and be the first to actually do that. Our strategy to build it with our own silicon and to also deliver this makes it completely possible to build a complete portfolio with the performance that we have. Last but not the least is our ability to actually take AI and put it into our devices. You heard Sajeev talk about automation and self-driving. When you build these complex networks, it needs to work by itself as much as you can. And embedding that makes us bring a huge value to our customers in terms of sustainability performance and automation.

Praveen?

Yes. So I'll start with the breadth of our portfolio like we talked about, we have products for scale-out. We have products for scale across, even on ramp to the cloud through our MX platform, how users and application connect to the cloud. So we have the full breadth of the product, which customers need. But also, I want to focus on relentless execution. And this comes in many forms. As I said, it's about a start-up mentality. We had a startup within this big company. If you look at it, first, we delivered a TH5-based switch ahead of every OEM. We repeated that with Tomahawk 6-base switch, 100% liquid-cooled, first vendor to deliver. And to deliver that, it was not just taking ASIC and put it on the board and you deliver. There were so many components around it, whether it's cold plates, whether it's liquid cooling technology, whether it was anything else, it was such a complicated piece, and there's a reason why others were not able to deliver, Shannon. We were able to deliver. We leverage the HPE expertise, we went around and talked to every single component vendors and said, "We need to make it happen," and we made it happen. And now when customer needs you, let's say there is a problem. Problems do happen. Customer needs you. We are there at any point, any time of the day because for me, it's the customer experience, which Sujai calls it as customer experience, that's what matters. I believe when I am in their shoes and my network is not working, I will be yelling, honestly. That's what I want to do. That's the reason I'm there. So that was point number two. But also, if you look at it, again, going back to my start-up mentality, if we are not innovating, let's say I'm executing, but I'm not innovating. This AI is the fastest changing environment. If I'm not innovating, I'm not doing my job. So if you look at the customer like Oracle, we are innovating, co-innovating with them in getting the deeper network visibility. Let's say something fails, network tells you what exactly happened. Why -- where exactly. You don't go need to look and fix, that is my co-innovation track. And last but not the least, company like HPE, the HPE Financial Services, I had no access to that as part of Juniper. Amazing results with combination of all these four factors.

And Shannon, I just want to say good morning, that's relentless execution.

Yes, we're very happy to have them all with us. So I'm curious, AE, and I do think this is one of the underappreciated parts of what HPE Networking has. And it's the combination of what Aruba had in terms of silicon development and then clearly what Juniper had invested in over many years. So from a customer perspective, what does it mean that we have our own silicon?

It's a lot. Rami touched upon it. It says in the AI era, you're basically taking customers and bringing them into the AI world. You're also taking GPUs, which cannot operate by themselves without a network, whether it's scale up, scale out or scale across, and you need to connect them together. And the best way to do that is to have the right tools and our silicon gives us the capabilities to have these right tools and the right devices for it. The best way to illustrate this also is by an example. We talk about building networking gear where we increase our throughput, we increase our performance. So I was working with one of the largest hyperscalers. They spent a lot more money with GPUs, and they put these GPUs in front of them and connected them together. And they were finding with various different network devices, these GPUs were waiting for data, waiting for the network. What does this mean? This means you need to stop these GPUs from waiting for data and give them the data at the right time and the right way that we can manage. With our own silicon, we have the benefit of programmability. We worked very closely with them to program it in such a way that when they use our networking devices, the traffic management whether it is east-west traffic into GPUs or the north-south traffic across data center interconnects and anywhere else that you would take becomes the most efficient, and it's easily measurable by the GPU duty cycles that you get. That is the power of our own silicon delivered in our networking products.

That's great. So for both Praveen and AE, curious, what are you seeing in the pipeline today? And how is AI changing demand across data center networking and routing? Are these orders AI-driven? Is the interest AI driven? Or is it more a traditional data center refresh? We'll start with Praveen.

Yes. So we are seeing pipeline in both traditional data centers as well as in AI data centers. Let me start with traditional data centers. So first of all, we have a highly differentiated management platform for managing your networks. It used to be called Apstra, now it's called DC Director. But think about this way, where it's not just managing discrete elements. It's trying to create a graph of who is connected to what. So it means if anything fails or anything potentially is impacted by a change in the network, it will tell you because it knows that graph. On top of that, the technology which Sujai brought to the table with AIOps, by the way, tens of years of ago even before this current wave of AI showed up, I said, leverage that technology for us. So we leverage that technology, brought it to data center. Let me give you an example. So let's say, optics fail all the time in the data center. Let's say that Shannon, you have two options. One option is an optics is failing or failed and you need to rush some engineers because application is impacted, option number one, which is our competitors are doing. Option number two, using my AIOps or this AIOps technology, I will tell you that 2 weeks from now, your optics is degraded 2 weeks from now, it is to a level where it will start impacting your performance, which option will you choose?

I would hope I would chose #2.

So then you should choose HPE products. All right. So that is about traditional data centers. Similarly, in AI data centers across the board, it's about execution and staying ahead of the market. Helios, why I'm so excited. This is our open Ethernet ecosystem where we are able to create a scale-up switch ahead of everybody else. And somebody might say, "I can create one, this and that." In this switch, we have our own AIOps if you have 1,700 wires going into the switch, do you think somebody -- something could fail potentially or degrade or even if you did the best technology in the market or something might need attention, I'm bringing that AIOps into the same train. That's my differentiation on top of the complicated piece I generated. So pipelines from traditional data centers to the new areas we are investing in, like in scale up we are just seeing growth in all the markets.

That's great. And everyone definitely should go and see the switch you have back there or the trays because it's -- not only is he very excited about it. It's a really cool piece of technology. So AE?

I'm really excited about two different things that AI is bringing to us. One is GPU clusters to cluster connectivity which essentially, what we call as data center interconnect when you go across data centers. Out there, we talked about our PTX12000, which is the most compact router. Think about it. This gives you in 12 slots what our competition would give you in 16 slots or even 18 slots, which doesn't even exist. 30% more ratings and capabilities and throughput that you would need with all of the value that I talked about, with the traffic load balancing with all of that stuff, that is really exciting and interconnecting AI clusters across the globe, whether it is hyperscalers, neoclouds, all of those things is exciting, and that's a huge, big opportunity. The second biggest opportunity right now is when AI is connecting customers into the AI clusters for AI consumption. And when you do this, no better than our Trio-based MX portfolio, which gives you the security, David, which you use anyway, and it gives you multi-tenancy, it has in-line security built-in and capabilities to program it effectively to make that the de facto on ramp. And it's used by every hyperscaler in the world to get their customers into the AI clusters.

And how are things changing? I mean you can't turn on a TV today or open a newspaper. No, we don't open newspapers anymore -- but look at your phone without seeing something about agentic AI. So how are things changing from a traffic perspective with agentic AI? What are you seeing in terms of customer buying and customer behavior and buying patterns? And how will this influence the next generation of silicon?

Absolutely. This is interesting and important. And everybody looks at AI and say, "Hey, AI is making more demands into the network." Let's take a step back and look at three important things. In your house, you always had an upload speed of X and a download speed of 10x. Now with AI your uploads and downloads are going to be synchronous, which means you need the same amount of traffic because you're sending rich content, images, content upwards for AI as well as for downwards, which means your network has to transform and address that. The second part of it is AI does not allow you to cache. You could take a movie, you could cache it and then you could stream it. It's a lot easier and simpler to handle the networking challenge that way. But you cannot cache because within 10 milliseconds, it gets obsolete. Last but not the least, we have a new plethora of users that Sujai and I were talking about, the digital user, right? Many of you traveled, you might have jet lag, you might fall asleep, you didn't have your coffee, but digital users don't fall asleep. They are always on, which means they drive the network 7 by 24, every second, every millisecond away, which is important. This transforms the network, and we really need to build the network to address this.

That's -- and I mean, I think -- how do we think about AI inferencing? Because so much is changing, right, within the network within the world over a very short period of time. I do think, ultimately, we're going to look back. I mean, Juniper has been such a phenomenal acquisition for us because we bought it right at the time that this was all inflecting. How do you think about AI inferencing and what it means for your business, AE? Because we're all going to be entrancing closer to the edge connectivity is becoming even that much more important. So how does that play into your plans?

Absolutely. Inferencing is catching on. It is actually more mainstream now, which means you need to consume AI. You have trained these models, you get these models out to the edge and you want to actually leverage them to increase their productivity with agentic AI and everything else coming in. And as you drive it closer to the customer who is -- or the digital user who is using AI, you need the ability to have multi-tenancy, which means, when you get that traffic, you need to be able to take multiple of these traffics and bring them back in. You also need to have built-in security, so one traffic doesn't leak into the other, which is also important. And I'm going to touch upon something very unique with our Trio. Rami said this, the most programmable networking chips, sometimes he says it's the CPU of networking, where you can program it to anything. I was actually dealing with a customer, and they wanted to actually -- and this is true, where they want to actually have packets go up to LEOs, to orbit, satellites, right? And when they switched from one satellite to another, guess what, you need to be able to balance this really well. Our Trio is programmable, you can actually write code into the Trio with the data plane in what we call as a capsule and make this the most efficient way of handling traffic that goes through low latency but high bandwidth links like satellite links.

And Praveen, we'll come back to you on this one. HPE has such a large enterprise customer base. And Rami talked about the opportunities to cross-sell and we have -- I shouldn't say we because we're now part of one, but HPE brings a wider geographic reach and very, very, very deep enterprise customer relationships. So can you talk a bit about how you're seeing the opportunity to cross-sell with your products across the entire HPE platform?

Yes. Actually, I want to start with this. It's a complete surprise to me how fast we started embracing each of the Juniper part and HPE part. Just to give you an example, GreenLake and OpsRamp and Morpheus, all our products, Juniper products are already integrated. So that's a cross-sell opportunity #1 in front of me. Anywhere you sell OpsRamp or GreenLake or Morpheus, you are there. Then look at the deals like Oak Ridge National Lab, which was a full stack opportunity, including networking, compute, storage. Wouldn't have happened without HPE being present, right? So in other words, that's my cross-sell or the full stack opportunity. And then I own now as part of this acquisition, the data center part of Aruba business, and those customers, as they need the high-end switching gear, I'm cross-selling the higher-end data centers, which is into that. And before that, obviously, before the acquisition, we were cross-selling into Mist environment. Security plays a tremendous important role, as Rami mentioned, it's built-in security. So when I'm selling a solution, I'm selling, cross-selling with security. So opportunity is tremendous, just we need to just keep going with fire from all angles.

Great. So I'm now going to move down a bit in the panel. And Sujai, before we jump into self-driving networks, can you just give the audience an idea of what's included in our Campus & Branch portfolio at HPE?

HPE's Campus & Branch includes Wi-Fi and our campus-wired Ethernet switching portfolio. Key is to note that it's got a strong time with security, which David is going to be covering in more depth soon.

Great. And David, why don't you give us an idea of secure at HPE because we are a bit differentiated from what some would say are like the pure-play security providers.

Yes. So in terms of what we measure in our security business, we include SD-WAN, SASE, SSE, next-gen firewall and network access control. But what I really want to emphasize is my team's job is not just delivering financial outcomes relative to that part of the portfolio, but to make sure that we have an architecture that extends security edge to edge from the Wi-Fi access point, all the way through into the data center and making security a core part of our self-driving vision.

Great. And so now I'm going to talk a bit about the self-driving network. And I hope everybody saw the commercials that were up there as we were eating breakfast, but beyond that, if anybody watches football and I'm a huge football fan, especially college football. Our marketing team has done a phenomenal job working with the Mercedes team and our F1 sponsorship to come up with some great networking commercial, so please watch for those. But for now with the audience, what does self-driving network mean for our customers? And what differentiates HPE's approach?

Self-driving starts with a very simple philosophy. Up is not the same as good, which means Shannon, our network being up does not mean that you're having a great experience on Teams or Zoom or whatever app you're using. And that is the philosophy, which we are manifesting with the vision of a self-driving network. It is unique in its ability to deliver on that philosophy. Number one, we are the only ones in the industry that measure every user. Yes, every user, every minute across the global universe which is connected to the HPE Cloud and try to understand end user experience. Number two, Marvis allowing AI engine actually works on troubleshooting or isolating a problem when that happens. And [ Daryl ], who runs our services and support, who is in the audience here, his organization customer success actually uses Marvis, this AI engine to also help with customer support. Again, the only ones in the industry, in the networking industry to do that. And third, guess what? I can identify Shannon, you're having a problem in our Teams call. I know how to fix it because the support team has digitized the solution, and all I need to do now is make it happen autonomously. Welcome to the agentic aspect of self-driving networks. The differentiation leads to clear benefits. One of the fastest deployment times a customer that rolled the self-driving network across thousands of locations were able to drive their deployment times from years to months. Actually, one customer in manufacturing, Jennifer, you remember this, one customer in manufacturing, went and changed out the network during lunch hours. Welcome to self-driving networks. Number two, Sajeev spoke about this, ridiculous reduction in user-generated trouble tickets you'll hear 90% most of the time. And last but not the least, driving real business outcomes. The fastest check out at a retail store, number of transactions, number of packages shipped, amazing patient experience in a health care organization, welcome to the self-driving networks.

Great. So one of the things we hear from investors fairly often is what's going to happen with Aruba Central and Mist and how does this all come together? So can you talk about how you're going to make 1 plus 1 equal 3?

Maybe 5. But self-driving vision is common to Aruba Central and Juniper Mist. Every customer, regardless of which platform they are on benefit from this vision. We have actually realized products within a year, dual platform access points, Praveen, you're aware of this cross-pollination of AI models coming from Mist to Aruba, all done within a year of an acquisition, and you can check with other vendors in the industry. It's been a decade and they are still at it. And the most important part, the self-driving vision is assuring our customers on the longevity of the portfolio. Frankly, our financial results back that up. Record orders for Campus & Branch and Mist and Aruba, both are doing exceptionally well.

Great. So self-driving is obviously truly unique to HPE, and it's giving us key business benefits. But what are you hearing from customers about trust in the self-driving network? Because clearly, they've got to trust it if they're going to hand over all the keys to the kingdom to Marvis and Mist.

Customers actually trust the self-driving network because Marvis, the AI engine, actually works. That's key. Just to give you a simple stat, in the last 90 days, we ran a check on our cloud channel. Marvis executed thousands of trusted self-driving actions, where the network IT or the administrator did not have fingers on the keyboard. That is critical. Where does this trust come from? It comes from a unique trusted AI harness which has these memory of episodes, which Daryl's team from customer support has inserted into the harness, so we know how to solve a problem, defined scope, clear guardrails and we always provide the customer evidence and the recommendation. And then all we do is run the network on that trusted AI harness. Actually, it was interesting channel. We recently had our self-driving summit with over 40 large enterprise customers and prospects across verticals and one pattern came out clear. Customers are looking at this network transformation, not just to replace hardware but to fundamentally bring this ability to drive the network on its own. And you would ask, what is this transformation? We heard about digital transformation a few years back. Actually, this is the transformation, which is of a new kind, which is what AE referred to, the digital workforce, the agents. The shift is driven now by a new kind of user. It's not about user, it's not about IoT. It's about the agents that never sleep. Self-driving is the way to keep pace using the same trusted models which we build for humans and IoT to now take care of the digital workforce.

Great. And I think one part of trust is security. Obviously, it's very important. So how do investors -- or how should investors think about our security strategy, David? And what makes our approach different?

Well, first of all, you heard Rami say the network has never been more critical to business outcomes. And nowhere is that more true than with the security related to the network. Everybody understands threats are escalating, particularly driven by AI and defense is critical. You need to use as a cybersecurity team, every tool that you have in the toolbox. And one of the most important tools is the network. Using the network as a sensor to detect problems and using the network as an enforcement point to stop problems spreading. For example, you take a health care organization as a customer example, in a health care organization, there's a lot of east-west traffic with medical devices talking to sensors and much line of traffic going back and forth, many devices that operate with old software. It's easy that for one of those devices to be compromised. What you want to be able to do is detect that compromise rapidly and then you want to be able to isolate the device immediately. What's really different about HPE is unlike a cloud-driven security company, which is really optimized for traffic going north-south to provide a good experience for users using applications. We have the ability to do things in the cloud, but we can bring everything on-prem, not just to the firewall, the next-gen firewall where traffic exits the organization, but to extend that security all the way down to the access point and the switch port where those devices connect. So we can detect these problems immediately, and we can act immediately. Just think about it. The network is a sense that every single threat coming in, every piece of data that's being exfiltrated out is going across that network. That lateral movement is going east-west, you need to be in the path of all of it. We are with the network. And what's really different about HPE is we're not just focused on the cloud or the next-gen firewall, we're building that capability into the network.

Great. And AI is changing -- I mean we've talked about AI this entire morning so far as we should be. But AI is changing both the nature of security threats and the tools available to defend against them. So how does AI fit into our security strategy?