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- [00:00]
A
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B
Bloomberg audio studios podcasts, radio news HPE stock, can we just look at it skyrocketing this morning as we see it surge after second quarter results beat expectations. It raised its full year forecast where sales could jump by an entire 1/3 up to 33%. That growth is being fueled, you know why? By massive demand for infrastructure. Joining us now, HP President CEO Antonio Neri. You're up 21%. You have led to a record high on the stock. It is a record move for the stock and you've added $13 billion in market cap. Just reflect for a moment on what people are calling a blowout quarter.
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C
Yeah, well, good morning Caroline. Was an exceptional quarter as you said, right? We achieve a record break, results, a number of key metrics. We have tremendous demand across our portfolio. Our portfolio is at the intersection of NETworking, cloud and AI. And that demand is durable. And therefore, you know, thanks to the results of the first half, the tremendous record breaking backlog that we have, the pipeline which remains multiples of that backlog allow us to, to raise the 26 guide and to provide 2027 guide six months ahead because of that DUR ability. So we are very, very proud of this moment.
- [01:39]
A
Antonio, this is a story about demand, right? An outlook and it's through HP lens a revenue figure. But I think there's a lot of value if you could talk us through whether that outlook for 26 and then the 27 outlook, which you say is evidence of durability, is a volume story or it's a pricing story. In other words, no great volume of servers, more than you'd normally do. You can just charge a lot more for them.
- [02:09]
C
Well, first of all, when we talk about the the outlook we are actually pulling by two years, the 2028 outlook that we provided last October at the security Analyst Meeting, Intro 2026. And to give a sense, you saw that our earnings per share at the Midpoint will be $3.40, which is a dollar higher than the previous core of that is our networking story and the improvements we have made across the entire portfolio. A combination of course of volume in the key product segments, whether it is campus and branch, which is up almost 30% in orders. So the routing business, so the data center switch of business orders, which is close to 20% and then on the server side of the equation, we are up triple digits in demand storage for the sixth consecutive quarter, triple digits in our private cloud portfolio which obviously has the factories for enterprise continues growth. So it is a volume story with very disciplined pricing execution.
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B
I mean talking about discipline, the fact that operating profit you see going to 80 to 85% growth for the fiscal full year and this in the context of memory prices just going through the roof. How are you able to navigate what could be a significant pricing pressure bottleneck still, there's a lot still to be a little bit anxious about Antonio, what could disrupt this?
- [03:40]
C
Well, we need to go underneath the portfolio and look at the mix Caroline, because Now with an $11 billion business in networking clearly drives a different mix. In our gross margin which was record 36.9%. Let's not forget that we are ahead of plan in the Juniper and Catalyst initiatives, both milestones synergy that fuels cost of sales improvements and OPEX improvements. And then you have of course you have the cost increases in DRAM and nand, but fundamentally there is all about the demand. I have to tell you, and I comment this yesterday, customers need access to this technology. You guys have covered extremely well the momentum both in the build out. But we were very pleased to see the acceleration in enterprise which is driven by that option and especially in inferencing.
- [04:35]
A
There are lots of things happening on prem is back. Hybrid cloud as we just discussed with perplexity is becoming increasingly important in your outlook or even in the quarter gone. Was this a story about one big customer that changed the trajectory for you or are you seeing new types of customer? It's not just a hyperscaler story anymore.
- [04:57]
C
No, we have been very selectively playing in the air scale in terms of profitability as well as working capital because you need a lot of working capital. We have prioritized paying down the debt and making sure we drive the profitable growth through networking, cloud and enterprise and sovereign and inferencing. So this is not one customer, this is a number of many, many customers. I spoke yesterday about some of the customers that we are winning that they're bringing that infrastructure on premise because for Complian compliance reason, governance reasons, data privacy reasons, security reasons, they need to on premise. And I give an example of my own use case. We inside HP we have 1200 use cases of which 250 are in production. We actually use a combination of proprietary or closed models and open models and we have very stringent governance and we do it on premise. And we see that trend happening across the enterprise more and more I'm going
- [06:03]
A
to be very dry and very specific with you, Antonio. Is this an enterprise super cycle or is this something different where agentic AI leads to a complete structural shift on how all kinds of companies change their spending habits? What do you see is the latter?
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C
And I think, you know, enterprise will accelerate, but the reality is that Agent Ki is transforming the way we do business, is transforming business processes, workflows and is making companies more agile and efficient. So that's what we see today. And I think we are early in the enterprise adoption and I think, you know, customers now want to make sure they don't be they are not left behind. We have a say inside the company. The future belongs to the fast and so you got to move really fast. And we learn a lot through the COVID right through the on ramp to digital. So is the latter and I'm enthusiastic about this because it really help customers to be more competitive in the market which ultimately is the thesis about the productivity.
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B
It's about productivity and many worry that means fewer jobs, that means change in labor. Have you seen any changes to the way in which you're hiring? Maybe you don't need as many employees. What do you think about the narrative?
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C
Well, definitely the type of roles you're hiring is different. But inside the company we have a very aggressive talent development succession plan. In fact, this afternoon I'm going to conversation with my entire team about that. But the skill sets of the future have to evolve. And you know, I always remind our 65,000 employees to use this technology in their favor to become more productive. And I believe everyone, everyone including yourselves as anchors, you got to be, you have to have a minor in the I have to use the technology is going to be a competitive advantage in every role across that enterprise.
- [08:04]
A
We're using the technology. HP President and CEO Antonio Neri back on Bloomberg Tech. Thank you very much.
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D
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