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Good morning. Wow, it's a big room. It is great to be here with you. HPE Discover is where we showcase what is next and shine a light on the ambition and innovation shaping our industry and our lives. Today, we are witnessing one of the largest technology platform shifts in history. Workloads and applications are moving from being driven by end users, but now being driven by both end users and AI agents, agents that will fundamentally transform how we design and build how we serve our customers and how we operate our businesses.

I have always been drawn to how things work, how systems are built and how they evolve over time. In fact, if I had not become an engineer and a CEO, I would have become an architect. Architecture like engineering teaches you to think in systems to build for today and for the needs of tomorrow. You don't design a building around a single room. You design a structure that allows the whole system to flow and adapt over time.

Architecting for AI demands the same focus and discipline. Fundamentally, AI is only as strong as the data foundation beneath it. If the foundation is not robust, nothing else holds. Across networking, cloud and AI, HPE is delivering the essential building blocks that make your AI-ready foundation possible. networking to connect to your infrastructure and workloads at scale, cloud to enable you with a hybrid operating model to run your workloads and applications where they belong and AI to turn your data into intelligence and put it to work. Architecting for AI starts with your network.

For years, HPE Aruba Networking has helped you deliver secure connectivity across campus, branch and the edge, creating a digital on-ramp that connects your users, devices and data. With the addition of Juniper Networks, we have extended that leadership into the data center and across the critical networks, connecting the AI era: scale up, scale out and scale across. With our combined HPE networking organization, our goal is to deliver the best user and operator experience possible. We will do this through our next generation of secure self-driving networks across every domain. They fix problems securely before they impact the experience.

We make new rollouts faster and easier and fundamentally transform how you manage your network. Whether you are on the HPE Aruba Central or HPE Mist, you get the full benefit of our accelerated innovation on both. Nobody is left behind on the road to self-driving. But the phrase self-driving may have caused some confusion with the Mercedes Formula 1 drivers. Let's take a look.

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I had the opportunity to talk to both drivers this past weekend, and they told me they have fun doing that video. But the reality is that they really are very, very keen and interested to understand technology. So congratulations to the Mercedes team for a fantastic year so far. Every AI architecture needs more compute. In the AI era, your servers need to operate more efficiently than ever.

With HPE ProLiant Gen12, you get the performance to run everything from enterprise workload to AI inference in a much smaller, more efficient solution. As AI moves from generating content to taking action, the demands on the compute are increasing. Agentic AI requires fast orchestration, continuous evaluation and real-time access to data, which shifts more pressure to the host CPU. That is why we are expanding our ProLiant portfolio with the new HPE ProLiant Compute DL394 Gen12, powered by NVIDIA Vera CPUs. Vera provides the low-latency memory access, bandwidth and coherence required for agentic AI, reinforcement learning and other CPU-intensive workloads. It does so with the security and ease of management you expect from ProLiant. As AI moves beyond the data center, compute needs to move with it. We recently expanded our ProLiant Edge portfolio, bringing secure AI-ready compute to rugged and distributed environments so that inference can happen closer to where decisions are made.

AI also needs to reach the always-on systems at the core of digital business. With HPE Nonstop, we are bringing AI-powered fraud detection and autonomous operations into high-volume payment processing. This helps financial institutions detect fraud faster, automate compliance monitoring and keep transactions moving safely.

The most advanced servers in the world are only as valuable as the data they can access, which makes storage a critical part of your AI foundation. The HPE Alletra storage MP X10000 makes your data accessible, context-rich and ready to continuously feed your AI data pipeline. Across the full life cycle from ingestion, training, inferencing continuous learning, the X10000 now supports native file and object storage on a single architecture. It is also the first object storage platform validated through NVIDIA-certified storage for enterprise AI.

And for the mission-critical applications that run your business, the Alletra Storage MP B10000 continues to deliver. The B10000 is the fastest-growing all-flash block storage array in the market. Sitting across the top of the stack, of course, is software. As AI advances, enterprise environments are becoming more distributed and complex. This find virtual machines, containers, AI infrastructure and, of course, public and private clouds. At the same time, rising virtualization costs are pushing many of you to look for more flexibility and choice.

With HPE Cloud Ops software, we have brought together HPE Morpheus, OpsRamp, Zerto and our broader cloud portfolio capabilities into one unified operating experience. This enables you to modernize on your own terms while simplifying how you provision, observe and protect your hybrid multi-vendor environment.

Security and resilience must be built into every layer of the stack of your architecture. As AI changes the speed and the scale of cyber threats, new risks continue to emerge. Resilience is no longer just a set of isolated tools. It is a converged strategy across your systems, your data and your network.

With HPE iLO Silicon Root of Trust, we provide secure attestation from the silicon to cloud, helping verify that your infrastructure is trusted before your workloads run. And with Zerto and Cyber Resilience Vault, we help protect your critical data so you can recover faster and minimize disruption.

Networking and security are also converging. As AI becomes more distributed, the network often is the first place to see what is happening across your enterprise. With Zero Trust Architectures and integrated SASE, the network becomes an active security layer, enforcing policy, detecting threats and reducing risk from edge to cloud.

We bring all the elements of your AI foundation together with our GreenLake Cloud. GreenLake gives you a unified cloud-native experience across your entire hybrid estate with the flexibility to run workloads across public and private clouds, colos and of course, at the edge. With GreenLake Intelligence, we bring agentic AI to hybrid IT operations helping you see across environments, act faster and continuously optimize performance. From simplifying network operations to streamlining virtual machine migration, GreenLake Intelligence makes your infrastructure more adaptive, more autonomous and easier to manage. So you can spend less time managing tech and more time managing and advancing your business. So let's take a look.

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It's an amazing advancement we brought with HPE GreenLake. But by the way, what you saw here is just the beginning. In the Discovery showcase, you can see how GreenLake Intelligence brings agentic AI operations to life. So I will encourage you to go and experience yourself. Architecting for AI takes more than technology. It also requires the right people, processes, and partnerships. Our services team is here to help you through your AI transformation. With the HPE Financial Services, we help you modernize with confidence and better economics, including lower upfront capital investment. And with our IT life cycle management program, you can retire legacy multi-vendor technology and turn that value into funding what is next.

This week is an opportunity to explore our full stack AI foundation firsthand with demos, sessions and in conversations with your peers. Discover is one of the few moments where we have the full power of the HPE community together in one place.

During the rest of our time this morning, I want to elaborate on two core tenets of our strategy. First, the networks that are at the heart of today's AI data center build-out. And second, how we are enabling your transformation into an agentic enterprise. In the AI era, the network is both the essential enabler and the main bottleneck for performance. Nobody understands what is at stake more than our customers who are at the leading edge of AI, customers like Vultr, the world's largest privately held hyperscaler. Let's take a look at what HPE and Vultr are building together.

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Thank you to the entire Vultr team for being such a great partner. I'm excited to share that this partnership continues to expand as we work together with NVIDIA to support Vultr's next phase of growth. What Vultr is building at hyperscale points to a truth that every architect knows that there is always one core element of your infrastructure that touches everything.

With AI, that core element is the network. The performance of your entire architecture depends on it. Every bite, every token, every decision, all of it crosses the network, which is why today, we are bringing the HPE Juniper network into our AI data solutions, enabling more efficient, high-performance AI environment. Whether you are a hyperscaler service provider on neo-cloud or a large enterprise, you have more choice in how you connect and secure your largest AI investment.

Let me show you how it all comes together, starting with a model training use case. An AI data center is designed for one purpose, turning data into intelligence as quickly and as efficiently as possible. At this scale, performance depends on how tightly compute and networking work together. For customers building AMD-based systems with Helios, we are introducing the industry-first HPE Juniper networking scale-up switch, purpose-built for the AMD Helios architecture. The QFX5250 brings scale-up performance into an open Ethernet fabric designed for AI at scale. It connects 72 GPUs into a single rack, delivering 260 terabytes per second of aggregate scale-up bandwidth. You get the low latency performance required for large-scale AI workloads with the openness of standard-based Ethernet SONIC OS support and Juniper AI automation.

But one rack is just the beginning. The largest models train across hundreds, even thousands of racks operating as a one cohesive cluster. Multiply a small delay across hundreds of thousands of GPUs over weeks of training and your network can mean the difference between training a new model in 90 days or 30 days. Think about that. It is the difference between chasing a breakthrough or making one. That is why the scale-out network is so important.

The Juniper QFX family is built for this next generation of AI scale-out connectivity. Our newest addition to the portfolio is shipping today. The QFX 5250 is the world's highest performance 100% direct liquid cooled ultra Ethernet transport rated switch. Powered by Junos OS, it moves data across massive AI clusters. It achieves this through low latency congestion control and operational simplicity required to keep hundreds of thousands of GPUs working together.

Increasingly, AI data centers are expanded beyond single sites that find multiple data centers and regions, sometimes hundreds or even thousands of miles apart. That puts new pressure on the network between these environments. That is where the HPE Juniper PTX routing family excels. PTX is built to carry massive volume of traffic across the data center interconnect core and edge networks that connect today's distributed AI infrastructure.

Our PTX 12000 series is an ultra-dense routing platform designed specifically for AI fabrics. It enables 800-gig routing, 1.6 terabit-ready scale and ZR/ZR+ coherent optics to connect data centers across sites without compromising performance. And to protect that connection, we have our HPE networking SRX family, including our most popular firewall, the SRX 4700. It is one of the fastest quantum-safe firewalls on earth, delivering up to 1.4 terabits per second of security performance in a single rack unit. It helps you secure modern data centers without slowing down the application and AI workloads you depend on it.

But when we talk about a complete portfolio for AI training, we support every layer of a modern networking architecture from scale up and scale out to scale across and secure data access, all in a single coherent architecture that is secure and fully automated. With the introduction of the HPE AI grid with NVIDIA at GTC in March, we extended this integrated network even further. Built for service providers, the AI grid combines NVIDIA accelerated computing and AI networking, including Spectrum-X, ConnectX and BlueField with ProLiant Compute and Juniper routing security and unified orchestration across the full stack. Together with NVIDIA, we are enabling a wide range of new real-time AI services from conversational agents and interactive media to hyperpersonalized experiences across hospitality, health care and retail.

The real value of AI increasingly comes from inference when intelligence moves closer to your users' applications and data. That requires a network built to extend AI to the edge locations like regional data centers and service provider sites where the Juniper MX family of edge on-prem routers is top of the class. Our MX301 brings the proven performance and flexibility of the MX family into a small form factor, 1RU, power-optimized platform. It is purpose-built to move AI inference out of the cloud and closer to where the data is processed for inferencing so we can accelerate decision-making.

Powered by Juniper's sixth-generation Trio silicon has near infinite flexibility to meet your networking needs today and into the future. To build your inference environment, you also need a high-performance switching. That is why today, we are introducing the new HPE Juniper networking QFX5140 inference switch, purpose-built for distributed AI deployments. Also in 1 RU, the QFX5140 delivers up to 16 terabytes per second of switching capacity, connecting GPUs and inference infrastructure with the AI optimized load balancing and end-to-end congestion control to maximize performance. The 5140 gives every edge location, the local intelligence to host AI workloads closer to where inference is needed for faster AI responses and better experiences.

Look, the bottom line is to win in the AI era, you need a network built for the full AI life cycle from training at the core to inferencing at the edge. AI is also transforming the demands of the campus and branch networks. They still need to securely connect people and devices. But now they also need to support AI-powered workflows that depend on real-time access to data without compromising speed, security and reliability. That level of complexity cannot be managed through reactive troubleshooting alone. Your network has to see more, understand more and do more.

Self-driving networks move IT from reactive troubleshooting to proactive assurance, understanding experiences, identifying root causes and resolving issues faster. In the race to self-driving, HPE continues to lead. In fact, we were recently recognized as a leader in the Gartner Magic Quadrant for both wired and wireless LAN the 20th consecutive year, positioned highest in the execution and furthest in vision. What matters most is what this capability means for customers like the Milano Cortina Winter Olympics, where HPE helped deliver flawless network performance across a very complex environment, spanning 15 venues, hundreds of miles apart.

HPE Mist adapted the network in real time, helping ensure seamless secure connectivity for everything from broadcast, live streams to event operations and client engagement. Every moment could be viewed by millions. I hope you watch the Olympics, while organizers operate with confidence, knowing the self-driving effort was working behind the scenes to maintain a rock solid performance.

Today, we are extending this self-driving experience across our Aruba networking portfolio with 2 new announcements. First, Aruba CX switching is coming to HPE Mist. You gain AI native assurance, faster troubleshooting and automated operations across your campus and branch environments. And second, which is what we talk about cross-pollination, right, we're running. Marvis actions is coming to HPE Aruba Central. Marvis is the first network assistant in the industry to bring conversational AI to networking. So your network can move from reactive to self-driving with AI native operations that are continuously improving.

So you can see how much progress we have made with Juniper in such a short period of time. We are really proud of the progress we're making for you, our customers and our partners. But across industries, customers are making the switch to HPE networking and discovering that the self-driving network is a quiet network because it just works. That is the experience we want every one of you to have. If you are considering a change from your current networking provider, we know who those are. I encourage you to start with a single site or even a single floor. Experience what a self-driving network can do in your environment. You will be amazed by how simple the experience is. And I will ask you to not miss Rami Rahim's general session later today plus our four networking spotlights throughout the week to see how our self-driving capabilities are coming to life across every single domain.

We have talked about the networks that make AI possible and how HPE is delivering the next generation of self-driving networks that are self-healing, self-protecting and self-optimizing. Now let's turn to the next major shift in the AI era, the rise of the agentic enterprise. AI is no longer just a tool for finding answers. It is a critical part of how work gets done. Agents now reason across data applications, models and workflows. They help you make decisions, automate processes and are increasingly taking action on your behalf. Soon, IT will be responsible for thousands of agents that are part of your enterprise workforce operating across every function. But today, much of that innovation is still happening in local clients in the hands of developers and small teams, often outside formal IT oversight. That speed of adoption is exciting, but also creates a real challenge, the shadow cost of an agent workforce that now must be managed at scale we have never seen before.

Agentic AI demands a new set of enterprise requirements. Agents need to be secure and governed with clear guardrails for what they can do, what systems they can act on and most importantly, what data they can access. They need to be trained with trusted enterprise data because the agents are only as good as the data and context behind them. And they need to -- they need also infrastructure that can scale as demand grows without runaway cost.

Well, we introduced our HPE Private Cloud AI 2 years ago. We gave enterprise a Turnkey AI factory that simplified AI adoption and provided more control. It brings AI to your data, not the other way around. So today, we are enhancing private cloud AI for the next generation of agent workloads, helping you govern agents, ground them in trusted data and scale your inference initiatives.

Let's unpack what is new, starting with agent governance. You can now register agents built in any framework and wrap them with security controls that protect API calls, identity and encryption with zero code changes required. A new 3-tier identity model verifies the user, governs the agent and enables human approval for sensitive action. Today, we're also announcing a new capabilities for secure agentic operations with NVIDIA OpenShell and NeMo Cloud. OpenShell provides a modern and active run time for advanced private AI agents with policy enforcement built into how agents run. Each agent operates in its own isolated environment with guardrails for what data it can access, what systems it can interact and what actions it can take. And with NeMo Cloud, you get an open source of reference stack and blueprints for govern agentic workflows, helping you move faster while maintaining the control and accountability enterprise AI requires.

As agents operate across production environments, they also need a new class of operational risk, introduce a new class of operational risk. And that's why we are bringing Zerto to your agentic enterprise. If an agent makes a mistake, Zerto helps you quickly roll back to a clean state, reducing downtime and helping you protect your business. Governance in your agentic enterprise is paramount, but governance alone is not enough. Your AI agents are only as smart as the data you use to train them. Traditionally, that data requires custom preparation for every use case and months of building the right AI data pipelines, but not anymore.

Private cloud AI helps make that data you already have ready for agentic AI -- enterprise for agentic AI. With a govern data layer and integration with the NVIDIA AI data platform, you get a unified way to access, prepare and manage enterprise data across your existing environments.

Now with Alletra storage MPX10000 as the storage layer for private cloud AI, you can build on a high-performance data foundation designed for modern AI. The X10000 adds real-time metadata enrichment in native MCP support, so your agents and applications can retrieve the right data and context faster across structured and unstructured data. That means less custom integration work and 7 to 12x -- months faster time to value compared to what you normally do, which is yourself builds the whole environment.

Once you have governed agents and train them with the right data, it is time to scale across both agentic AI and your broader enterprise inference workloads. Private cloud AI can now serve larger models across multiple systems with multi-node inference, so capacity grows with demand. A new unified gateway simplifies access to frontier and open source models. This gives your team one unified API for model access with centralized credentials, budgets and policies.

We're also expanding private cloud AI with new configurations that scale up to 256 GPUs, including the new ProLiant DL394 with NVIDIA Vera CPUs designed specifically for inferencing. And for long context workloads, we're also introducing shared KV cache capabilities that reduce the need to recompute context over and over. This delivers significant cost benefits to first token and massive performance gain in compute capacity. With private cloud AI, you have now the foundation to build your agentic enterprise with confidence. And what is make us stronger is the ecosystem we have built around this.

We continue to expand the HPE Unleash AI program, our curated ecosystem of validated partners, blueprints and orchestration frameworks for private cloud AI. With more than 60 partners and hundreds of use cases, unleash AI helps you find trusted solutions for scaling AI across your enterprise from securing agents and models with partners like CrowdStrike and Fortinet to expanding where you can deploy AI with Digital Realty and Equinix. Private cloud AI and the unleash AI ecosystem help you move from AI ambition to real-world impact faster.

Take examples of that. For St. Jude's Children's Research Hospital, that means bringing AI closer to doctors and researchers, accelerating life-saving discoveries while protecting highly sensitive medical data or for Blue Star operations, the business behind the Dallas Cowboys, it means reducing lower-value work streams and advancing strategic decision-making across football and business operations. And for the Ryder Cup, it means being able to power real-time event intelligence from crowd management and concessions to volunteer assistance and operational planning. In fact, the Ryder Cup organization are now leveraging the private cloud AI to turn the next event in a massive success by really using a digital twin approach so that will help them architect the 2027 tournament experience.

But look, these are just a few examples of how we are giving you a faster, more structured path to AI adoption that will transform how you run your business. And there is more to come. Tomorrow, Fidelma Russo will share additional news in her CTO general session and go deeper in how our latest cloud and AI innovations help you build a new operating model for your agentic enterprise.

AI today is about moving faster from ambition to outcome, accelerating time to token, reducing execution risk and ensuring your environments are ready to perform from day 1. Our AI factory solutions are designed to do exactly that with validated architectures, agentic operations and enterprise-grade support. They also meet you where you are designed for your unique operating models, governance needs and scale. For enterprises, I share how private cloud AI is a secure and govern prepackaged AI factory for your agentic enterprise.

For model builders, service providers and neo-clouds, our AI factory at scale is built for large multi-tenant AI environments. And for government, regulated industries and sovereign entities, our AI factory for sovereigns enables you to deploy AI aligned to your local data, security and compliance requirements.

Across our AI factory portfolio, our deep collaboration with NVIDIA helps you build the latest accelerated computing platform like NVIDIA Vera and Vera Rubin. NVIDIA Vera CPUs is on our latest ProLiant servers are powering now agency workloads across enterprises. In supercomputing, NVIDIA Vera and Vera Rubin architectures are advancing our Cray portfolio for both HPC and AI. And in AI factories at scale, NVIDIA Vera Rubin NBL 72 is driving the next frontier of rack scale solutions. Compared to NVIDIA Blackwell, Vera Rubin NVL72 delivers AI training with 1/4 of the GPUs and AI reference -- inference at the 1/10 of the cost per million token. So think about that, the massive gains you can get to get to that token faster. So whether you are building for the enterprise or training frontier models, HPE gives you a path to build and scale on the latest NVIDIA accelerators.

As AI scales across more users, more data and, of course, critical operations, trust must be built into that foundation. That is why we are making confidential computing standard across the full HPE AI portfolio, helping protect sensitive data, models and workloads while they are in use. With NVIDIA confidential computing, AI workloads run in trusted execution environments that are a hardware-protected layer of security across the stack. And for organizations operating in a most sensitive environment, we are taking that trust foundation even further. Our sovereign AI factories now include defense grade security hardening, federal compliance readiness validated encryption standards and global data protection requirements all built in. So if you're in defense, government or financial services, this is the sovereign AI architecture you have been waiting for.

Architecting for AI requires looking ahead, anticipating and designing for the constraints that will shape the future. There is one challenge we all need to overcome, not just for our industry, but for our society and our planet, and that is power. Every model, every workload, every agent depends on power because at its core, an AI factory is doing one thing, turning electrons into token.

The U.S. is on track to have a 19-gigawatt power gap by 2028. That's roughly enough electricity to power 16 million homes. And data centers are expected to account for nearly half of the U.S. electricity demand through 2030. One customer, Siemens Energy is tackling this challenge head on, helping build the energy infrastructure, the AI era requires. They are doing it by applying AI to their own business with HPE helping deliver the AI foundation across networking, storage and compute. Let's take a look.

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I want to thank the Siemens Energy team for working on such an important challenge. We are proud to support your ambitions. Initiatives like this underscores a bigger point. As AI scale, the future will not be defined by compute alone. It will be defined by how efficiently we can power it, cool it and connect it. That is why research become so critical. For 6 decades, HPE Labs has helped shape the future of enterprise computing. Your next-generation infrastructure will need to operate with much greater intelligence, efficiency and transparency. Today, our researchers are applying AI to improve AI systems themselves, making them more scalable and more sustainable. This is where HPE has a unique advantage. We engineer the compute the complete architecture from compute, servers, obviously, networking, storage, software and security. And we apply that system expertise across the full stack.

With innovations like GreenLake Intelligence, we are developing predictive self-driving intelligence that can learn workload patterns and place data where it needs to be before an application asks for it. Across your broader data center environments, we are using AI to improve resource management, identifying idle patterns and reduce energy and water consumption without compromising performance. We also advanced in the next frontier of computing through our work in quantum with initiatives like the Quantum Scaling Alliance and our work in distributed quantum simulation, HPE is helping bring quantum out of the lab into the real world.

You can see that future taking shape right here at Discover, where a quantum chandelier sits along an original HPE Cray-1. It is a great reminder that how far high-performance computing has come and whether it is heading next.

As network in HPC and AI quantum converge, progress will depend on how effectively we bring these technologies together at scale. Yesterday, we took another major step forward with the announcement of an expanded industry collaboration to advance hybrid quantum. Together with these leading companies, we are building a full stack hybrid quantum platform that extends our world-class HPC and AI infrastructure and moves Quantum closer to real-time and real-world deployment. Quantum advancements like this are accelerating the path to faster, more efficient solutions for most of the world's complex scientific and industrial challenges. These are the challenges that inspires our HP Labs. Ultimately, it all comes back to one simple mission to advance the way people live and work. It is a guiding force behind our innovation, our people and our long-term strategy.

Today, we have covered how architecting for AI starts with your network and how we can help you transform into an agentic enterprise. You have seen the powerful outcomes that results from people with bold ambitions that are matched with the right technology and the right partners because none of this happens alone. Our partners help HPE bring these ideas to life with expertise, reach and execution customers depend every single day. They help us extend our impact, bring innovation closer to the customer and communities we serve. Many of our partners have generously sponsored this week. Discover is only made possible because of you, like us, believe in the vision and the power of pursuing it together. So I want to thank all our sponsors and all our partners. We appreciate you very, very much.

We take tremendous pride in knowing that our innovations are a catalyst for your success, driving outcomes that propel new opportunities for you and your customers. As you experience all Discover has to offer this week, keep these things top of mind. First, architect deliberately. The choices you make today will define your success tomorrow. Second, start with the network, make your network the core foundation of your AI and cloud solutions. And finally, choose HPE as your partner to bring the full stack to help you build your AI future with confidence.

This week is an invitation to think bigger, to move faster to architect the future you want to lead and for the world. And remember, you don't have to build this future alone. We are here to provide the intelligent foundation so you can move boldly, live with purpose and unlock your ambition. Thank you very much. I hope to see you on the floor. Enjoy the rest of the week.

Thank you for joining us at HPE Discover's Networking General Session. Please welcome to the stage, Executive Vice President, President and General Manager, HPE Networking, Rami Rahim.

Thank you. Good afternoon. Hello, everyone. Welcome to HPE Discover Las Vegas. My very first Discover Las Vegas, could not be more excited about being here. Okay. Thank you. Thank you.

So I got a story for you. A few years ago, in San Francisco, actually, San Francisco became home to one of the most famous engineering cautionary tales in modern construction history, and it was all about the Millennium Tower. This is a stunning 58-story luxury skyscraper in the heart of the city, beautifully designed, technologically advanced, built to be truly iconic. But over time, something unexpected started to happen. The building began to sink and then it began to tilt, not because the structure above ground was poorly designed, but because the foundation underneath it was built -- wasn't built to handle the long-term realities of the environment around it. And as the demand on the building increased over time, the weakness underneath became impossible to ignore.

So right now, companies everywhere are racing to build intelligent applications, autonomous operations, real-time experiences and entirely new business models powered by AI. But AI places enormous new demand on the infrastructure, massive data movement, constant inference, real-time responsiveness, explosive scale. And if the underlying foundation isn't designed for that new reality, eventually, the strain starts to show up.

So to succeed in networking today, we have to think differently because AI is changing everything. One of the clearest messages from this morning's keynote was simple. AI is reshaping every part of the enterprise. But none of that happens without the right foundation underneath it. And that foundation starts with the network. The network is no longer infrastructure sitting quietly in the background. It's become a strategic platform for how organizations operate, innovate and scale. Why? Because the demands on it are exploding, more users, more devices, more applications, more data and entirely new expectations for real-time experiences across every industry. From digital payments, connected stadiums, health care, research, media and AI-driven services, the network is what makes those experiences possible.

That's why leading organizations are treating the network as core strategic infrastructure, not just to keep up, but to unlock what comes next. Now the ones that embrace this shift will be better positioned to innovate faster and to compete more effectively. The ones that don't will increasingly find themselves left behind. But the good news is this, while AI is placing unprecedented demands on the network, AI is also becoming the answer to how the network adapts, scales and withstand that pressure because the old model of networking, static, manual, reactive simply cannot keep up with the speed and complexity AI introduces. What's required now is a network that can learn, a network that can predict, a network that can optimize and heal itself in real time. In other words, the future of networking will not just support AI, it will run on AI.

Now we see this in two really powerful ways, AI for networks and networks for AI. First, AI is changing how networks are operated. As environments become larger, more distributed and more dynamic, manual operations are just not going to keep up anymore. That's where AI for networks become a true game changer. The payoff is significant, better uptime, better user experiences, fewer tickets, faster remediation and more time for IT teams to focus on strategic work instead of constantly troubleshooting.

And second, AI is redefining what the network itself must deliver. So the reality is this, AI innovation can only move as fast as the network allows. You can have massive compute power and millions, if not billions spent on GPUs. But if the network introduces latency and bottlenecks and instability, you're limiting performance, slowing down outcomes and giving up ground to the competition. That is why the network has become essential infrastructure for the AI era. And none of this works. None of it works effectively at least, unless security is built into the foundation itself because the network is now both the connected fabric for the business and unfortunately, increasingly one of the main pathways that attackers use to target it. That means the network has to be a core part of the security strategy with AI-driven anomaly detection, automated response, role-based access and enforcement and Zero Trust approach that helps protect users, applications and data everywhere.

And just as importantly, it has to deliver that protection without adding friction that slows users down or piles more complexity onto IT teams. That is the real shift here. Security and user experience can no longer be trade-offs.

Now all of these point to a new era of IT, one where self-driving networks are no longer optional. They are essential because AI scale infrastructure cannot practically be operated manually. The networks of the future must be able to sense, to learn, to optimize, to protect and heal themselves in real time. And let me be clear about this. HPE has made more progress than any other company in these areas. We are bringing together AI native hardware, software, silicon, security and agentic AI Ops into a closed-loop system that operates at speed and scale that humans alone simply cannot match.

The result is a network that delivers better performance, stronger resilience, simpler operations and better user experiences, and that's what the self-driving network is really all about, moving IT teams from manually operating infrastructure to accelerating the business.

So today, I want to explore what this next era of networking actually looks like and how secure AI-native self-driving networks are solving real problems for our customers. Now some of these customers are going to be joining me on stage to share how their organizations are navigating real-world problems today. And you're going to be seeing demonstrations of how HPE, HPE networking helps organizations overcome these problems and move at the speed of innovation with confidence. Because you know what, the organizations that modernize their networks now with the right architecture and the right intelligence and the right operational model are going to be much better positioned for what comes next.

With that said, enough from me. Let's hear from the people out there building and operating these environments in the real world. So please join me in welcoming my first guest, CIO of the Ohio State University, Rob Lowden.

Rob, welcome.

Thank you. Thank you very much.

Rob, thank you so much for joining us at HPE Discover Las Vegas. Maybe just to get started, introduce yourself and tell us a little bit about your role. You're responsible for managing a very large campus, thousands of students, tons of connected devices and what a great school Ohio State is. So tell us a little bit more.

Well, thank you. Absolutely.

I think there's some alma mater in the audience.

Any grads out there. We have 650,000 living alumni. So there's got to be a few of them here. So thank you for the opportunity to share a little bit about the Ohio State University. Not only is it the namesake land grant university, small city within Columbus, the capital state of Ohio. We have 66,000 students and 8,500 faculty. We're the fourth largest university in the country. And networks matter a lot to us, as you've already alluded to. So, on our Columbus campus alone, we have 22,000 HPE wireless access points, indoor and outdoor across numerous acres on campus. We have 15 colleges. We have a hospital. We have a comprehensive cancer center. And maybe a few of those folks out there know that we also have a football team.

I have heard, yes. And I think there are some rivalries out there that people care a lot about. Higher education institutions are probably some of the most demanding network environments around because it's pretty much everything you just stated. What are the biggest challenges and demands that, that places on your infrastructure?

Absolutely. So one that's unique to the hoot and holler that we just heard, we have a stadium. Some of you might have heard of it, the Horseshoe, not the Horseshoe Casino, although similar to the Horseshoe Casino, the house always wins at Ohio State.

So at the Horseshoe, we can host 100,000 participants viewing us crushing maybe that institution to the north that we don't refer to too often. But that creates a unique networking challenge and fan experience, ticket, check-ins, everything being electronic. Last fall, we hosted a team from down south, and they were ranked #1 when they came to Columbus, but maybe they left a little lower. And that was the largest broadcast in NCAA history of any sporting event. So there's a lot on the line.

During an event there, there can be another 100,000-plus people outside the stadium. So it's not uncommon for a home day game for us to have 200,000-plus people around that. With the partnership with HPE, as we speak, engineers are working together, collaborating on refreshing our WiFi network there. And it's critically important to us, not just to ensure that, that fan experience is there. 200 yards away, we have a $7 billion hospital system, comprehensive cancer center, 2,000 beds in that facility. And that's going on next to 200,000 people enjoying the game. So we're putting in, I believe, the single largest implementation in the country, 2,000-plus wireless access points HPE, Juniper Mist. I'm super excited about.

Let me ask you, with that kind of complexity, I would imagine this is where AI Ops fits and self-driving automation, yes, leading question can be quite useful. Would it -- just comment on that a little bit.

Absolutely. AI Ops is something that we absolutely are excited to have in place. We have 100,000 managed devices where expectations for us on bring your own devices is substantial, adds tens of thousands of more. Throw in a game like that, we need AI Ops that's provided to crunch all of that data in real time. And we've seen this, in effect, move us from scenarios where problem resolution can take hours sometimes, and we just can't afford that with the various operations going on at the institution. So it's literally moving us from absorbing that threat intelligence, applying the AI Ops and giving us answers to resolution, and we're seeing things being resolved in minutes versus hours.

That's awesome. Look, Rob, we so thoroughly enjoy having you as a customer. We've become a better technology company as a result of having you as a customer. Thank you so much for joining.

Thank you, Rami.

Okay. I am pretty sure that what Rob just shared resonates with many of you because what he described isn't unique to one university or one industry. We hear the same thing from customers everywhere, more users, more devices, more applications and now AI adding an entirely new layer of demand and complexity. And at the same time, IT teams are being asked to move faster, simplify operations, strengthen security and deliver a flawless experience. And that is exactly why the self-driving networks matter. And if the self-driving network can handle an environment as dynamic and demanding as Ohio state's, it can handle just about anything.

Now you all know we deliver those AI-native autonomous capabilities through 2 industry-leading Agentic AI Ops platforms, HPE Aruba Central and HPE Mist. Each platform brings unique strengths and serves different customers and is trusted every day by organizations around the world. And let me be clear about this. We are committed to innovating and innovating aggressively on both of these platforms, including bringing the best capabilities from each platform onto the other. That means both platforms continue to get stronger and both are here to stay.

So to show you what these self-driving capabilities look like in practice, please welcome Sunalini from HPE's campus and branch business.

Hi, Rami.

Hello.

Hello, everybody. Hello again. Welcome, welcome. As you said, we are innovating in both platforms to deliver a consistent self-driving experience. This is possible due to two things: Microservices and a common Agentic AI framework. With micro services, we are able to develop self-driving innovations once and deploy them on both the HPE Aruba Central and HPE Mist platforms, much like a single app experience is delivered on both iPhone and Android. So no matter what Agentic AI Ops platform you are on, you are going to be enjoying the benefits of a self-driving network. And with a common Agentic AI framework, we are able to accelerate self-driving capabilities at a much faster pace on both platforms with trusted actions that deliver measurable value.

Our Agentic framework, Rami, is unique in the industry because of these key foundational pillars. First, we use real live experience data, every user, every minute, which HPE has uniquely validated against real customer support cases and enriched with digital twins to maximize the efficacy of our AI-driven insights. Second, we have an API-first approach, which means all the data is available via our APIs. This makes our MCP server and tools extremely powerful, delivering agentic automation at scale. Third, a powerful set of AI agents and skills analyze all data sets and apply reasons from HPE Marvis Minis, which serve as digital twins of user experience to agents analyzing packet captures, logs, knowledge-based articles, security vulnerabilities and all the support data and signals we get. They all work together to proactively diagnose and autonomously root cause problems impacting users without inundating operators with data.

And fourth, not the end yet. The fourth aspect of what makes us unique, models take the analysis and curate it to understand and analyze post connection issues. For example, Marvis has a large experience model or LEM, as we call it fondly, that identifies the cause of bad Zoom and Teams calls and predicts future problems to prevent them when possible. We bring all of this together into the Agentic framework, resulting in a system that is continuously observing, reasoning and analyzing with autonomous actions that optimize user experiences. This is a self-driving network.

So Sunalini, most vendors talk about AI assistant and agentic AIOps, but still rely on reactive, human-driven troubleshooting. But if humans still have to fix the problem, where exactly is the self-driving in that? So can you provide us an example of why real self-driving network operations actually matter?

Of course. We all know that today's networks need to cater to high-density requirements while also meeting the performance expectations of every user and application. But most networks are not designed to meet intermittent surges in peak traffic. Think of an all-hand in an office building, a crowded classroom during a popular university lecture or even this very room right now where thousands of you are eager to see the best networking solutions ever. Operators try and accommodate these situations with a combination of static boundary parameters and on-demand changes. But often, that just isn't enough.

Let me show you a self-driving network powered by real Agentic AI and how that handles this problem.

They can't wait. Let's do it.

If we look at Marvis, we see that all the users in this office building are currently happy. But was this the case all of last week? No, it wasn't. So what happened? How did unhappy users become happy? Let's take a look.

Last week, Marvis detected that over 6% of user minutes were bad, which may not sound like a lot, but it impacted hundreds of people. Marvis has a self-driving action for dynamically fixing capacity issues. This action was enabled and was able to autonomously fix the problem by enabling dual-band 5 gigahertz. This reduced the fleet utilization from 90% to 54%, enabling a better experience for users that were unhappy. But how did Marvis know what to fix and when to fix it? The unhappy minutes in the past week triggered various models and agents in the HPE Agentic framework to reason and analyze and root cause the problem.

For example, one model analyzed the service level experiences. Marvis Minis agents were activated to test the network using digital twins and other skills went into effect. Based on the reasoning and analysis, Marvis determined that the wired and WAN was not the problem. The wireless network was, but what in wireless wasn't working? Coverage was fine, roaming was fine, wireless capacity was bogged down on a few APs that were functioning at 90% peak utilization. This is when Marvis went into full self-driving mode. It changed the RF parameters and validated the service expectation of the users to ensure they had 100% satisfaction.

Rami, this wasn't manual tuning. This wasn't chart an error. This was a network optimizing itself to deliver the best user experience. And this is available right now in HPE Mist.

Today, like right now?

Today, right now.

Amazing. So let me just think about what I just saw there. The network identified the issue, right? The network understood the root cause, it determined the right action and resolved the problem automatically before any user even had a chance to complain about their experience. No emergency troubleshooting, no IT team scrambling to diagnose, no help desk tickets. I mean that sounds like real value for IT teams and also for end users, Sunalini, right?

Absolutely.

But that's just one example. I suspect you've got more.

Well, let's find out.

Okay.

We heard from our Mist customers that Marvis Actions, which automatically identifies network issues and proactively resolve them is mission-critical to daily operations. So that's why HPE Marvis, our industry-leading AI engine is coming to HPE Aruba Central. It has all the simplicity and all the impact that customers have come to expect from Marvis. This is experience-first AI in action, and it is a perfect example of how we are able to develop self-driving innovations once and deploy them on both the platforms, Aruba Central and Mist seamlessly, thanks to our Microservices foundation and the common Agentic framework. That's how we are bringing Marvis to HPE Aruba Central right into the global NOC View.

Behind the scenes, Marvis does all the heavy lifting, correlating logs, alerts, signals across the entire stack. Your morning cup of coffee view will now showcase end user impacting issues across wired, wireless and SD-WAN with recommended actions. Missing VLAN, MTU mismatches, negotiation failures, they're all coming to Central. In addition, what we call the Marvis Trust list is also coming to HPE Aruba Central. These are actions that you can choose to be fully autonomous. When enabled, Marvis not only finds the root cause, it fixes it for you.

Imagine a security camera connected to a wired port in a bad state. No camera feed, that's a real problem. With Marvis in self-driving mode, that port is recovered automatically and expeditiously and the camera is now working again. That is the power of bringing Marvis into HPE Aruba Central, not just more visibility with highly accurate actionable recommendations, but a better end-user experience, thanks to self-driving capabilities.

Okay. That's like a pretty awesome example of just how quickly innovation can move when we bring together the best of HPE Aruba Networking and HPE Juniper Network, bringing Marvis into HPE Aruba Central is a -- not a little, a huge step forward. That being said, Marvis truly is the AI engine behind the self-driving network, and now Marvis will be available across everything, both platforms. So our mission is simple. It's not easy to do, but it's simple to say, bring the best innovations to both platforms so that every customer in every industry gets the same powerful self-driving network no matter which platform they choose.

Okay. Now Sunalini, we did this by promising both software and hardware cross-pollination. You just demoed some compelling examples of common software. What can you tell us about hardware? Have we made any progress on that front?

Yes, Rami. We have made quite a bit of progress. A few months ago, we made a commitment on common hardware by announcing the first dual-platform access point, the 723H, which is now generally available. Within the first year of the Juniper acquisition, not only have we cross-pollinated AI models and Agentic frameworks, we have delivered an access point that works with both the Mist and Aruba Central platforms. And on that same theme today, I am super excited to announce that we are doing something very similar with switching. Our world-class HPE networking CX portfolio, which previously was supported by Aruba Central will also very soon be supported by Mist for day 0, day 1 and day 2 operations.

It's a big deal.

It's a big deal. Let me give you a sneak peek of what you can expect in just a few -- few weeks, sorry. Let's start by showing how easy it is to onboard the HPE networking CX switch into the HPE Mist platform. It starts with a simple scan of a QR code of the CX switch from within the Mist installation app. Once onboarded, the devices show up in the inventory and they are ready to be configured with templates that enable you to centrally define and apply consistent configurations at scale like pushing VLANs and port profiles to hundreds of switches.

With telemetry coming into the Mist platform every minute for every wired client, combined with high-efficacy AI/ML models from Marvis, we can measure pre-connection and post-connection wired SLEs and not just a port is up. For example, the successful Connect SLE measures pre-connection experiences and the bandwidth congestion and throughput SLEs will give us insights into post-connection experiences. With the SLEs, the IT administrators can quickly identify where an experience is bad, including interface anomalies and other issues but we don't stop there.

All the goodness we get from Marvis Actions will also be available for CX switches. This includes proactive recommendations for missing VLAN, MTU mismatches, bad cables and more. And the best of all, a self-driving trust list will also be available, starting with the ability to autonomously fix stock ports to remediate wired clients in a bad seat. This enables real-time closed-loop self-healing, reducing mean time to repair, eliminating manual troubleshooting and delivering great user experiences at scale.

This is huge because we all know the network being up is not the same as users having a great experience. So for our CX customers, no matter what agentic AIOps platform you choose, you get simpler operations, actionable and proactive recommendations and a real self-driving network.

Let me just pause here and say like, what makes this so powerful Sunalini is not just what you just saw, what all of you just saw, but how fast we made it happen. In just a few short months after the close of the acquisition, our teams came together to deliver real software and hardware cross-pollination. Honestly, I could not be more proud of you and the team, Sunalini because this is -- yes, yes, clap for Sunalini and the team. Mad respect because this is exactly what innovation at scale should look like, moving fast, bringing the best ideas together and delivering value to customers with speed. And the result is incredibly powerful.

You all have a self-driving network with the flexibility to choose the platform experience that works best for you with the confidence that your investments are fully protected. And Sunalini, the market, I think, is taking notice of this, right?

That's right, Rami. The best evidence is the new Gartner Magic Quadrant for wired and wireless access published just 4 weeks ago. Hold the applause, it shows HPE as a leader, applaud. And even more so, we are furthest to the right for vision and highest in the ability to execute. In my humble opinion, it is clear who the overall leader is. What do you think, Rami?

Look, I could not agree more. Thank you so much. Thank you so much for joining us again.

Thank you, Rami. Thank you, everybody.

I really think that says a lot. Last year, the industry looked at HPE Aruba Networking and Juniper Networks as two separate leaders. This year, the market is recognizing what happens when you bring those strengths together. One team, one vision, one innovation engine and most importantly, one clear direction towards AI-native self-driving network.

Now of course, this doesn't just apply to wired and wireless networking. It also extends into security, which happens to be the next topic I'd like to talk to you about today. And to help me tee it up, I'd like to welcome from the Royal Bank of Canada, one of my favorite countries, by the way, [ Marlin Grumman ].

A lot of people right?

A lot of people.

Please have a seat.

Thank you.

Thank you so much for joining us, Marlin. I know you're at RBC, an iconic bank. Just maybe tell me a little bit about your role at the bank.

Sure. My name is [ Marlin Grumman ]. I run -- I'm Senior Director, I run engineering and automation and by extension, AI, fifth largest in North America. And just sort of lay the context of -- so there's difficulty from a threat perspective, about 4,000 endpoints from the SD-WAN and the Edge Connect. But if you took the entire scope of the threat landscape, it's probably double or triple between cloud, trading, every business line. So it is quite extensive, and it's extremely difficult for a legacy bank. And I'm not going to -- I don't mean that in the sense it's truly legacy, but very, very difficult to do.

I would imagine you're dealing with massive volumes of not just data, but sensitive data. So security, I suspect, is a bit of a consideration for you, right?

Yes, it is job #1, I think, for the most part. I don't think -- I think if you're a bank and you're regulated like we are in 29 countries, you have all of the, I'm going to say, the environmental from a regulatory perspective, you have to deal with for every single country. It is a very difficult process. So security for us is job #1. We actually don't have any other job other than protecting our client data. And not only that is a blueprint to actually how we operate. We feel that it's our competitive edge. You have 13 million clients, you're in lots of different countries. That data in itself forms the basis for decisions and all exactly our competitive edge. So that we protect with everything in our [ power would be ]...

So test me on this. One thing I think every malware has in common is that it has to use the network to do security work. So I always said that an effective security strategy must also leverage that same network to better detect and to better enforce policy. I mean, what do you think of that?

Absolutely. I think like we think about this a lot, and this is primarily to sort of keep the services up. I know you talk about self-healing and -- but for the most part, in general, you troubleshoot at the network layer. That's the first -- that's the only place that you can get some immutable evidence to be able to identify what's going on. So we've always lived on that mantra. So for the most part, how we sort of detect and manage troubleshoot, protect is all at the network layer.

So being able to sort of identify when somebody is knocking at the door, that's very important. And the only way you're going to really see that is whether it be lateral movement in the network and so on and so forth. So you want to make sure that, that side of it has -- is fully covered part of the resetting the stage for the 4,000, at least what we can identify and speak about clients is the Edge Connect and that platform using CPI engine helps us sort of create, I would say, a persona or a personality for a user. Anything outside of that becomes an anomaly. And that's something that allows us to now be able to go look, something is going on and so forth. But it's part of the intel that we need to be able to sort of shore up our threat intel.

Makes sense. I know you're working on some big AI transformation projects. I mean maybe just share with us a little bit about how these AI projects are geared towards network operations in particular?

So as you know, I know it's public knowledge, we are AI first and AI everything right now. We've pledged to our Investor Day shareholders that we will generate $1 billion in revenue just using AI. So we've embarked on this incredible effort. So the AIfication, I guess, if you want to look at it, of the entire bank. So that's a significant effort. The operational side of it, I think is sort of table stakes sort of -- I don't want to say it's the easy piece, but it certainly stretches all the way through every business line, AI being sort of the horizontal in which you kind of build the framework.

But the operations side is near and dear because that's where we actually can make a difference at least on our side. And we're sort of extracting telemetry. We're building the harnesses and creating a framework to be able to take that data you take the Connect, for instance, that's one place we also collect data to be able to sort of put into whether it be a [ SIEM ] or through some sort of [ MITE ] framework to be able to sort of mitigate the threat response but -- or create a threat response. But the whole idea is that this will be an AI everywhere, collecting data, mining it, normalizing it and vectorizing it and using that data to be able to help us solve the AIOps problem.

Thanks so much for sharing that with us. Fun fact for you. Everybody, I built my career at Juniper and now HPE. Many people think that was the only job I've ever had. Actually, my first job was serving ice cream downtown Toronto. And the very first paycheck I got, I deposited at RBC.

I have to tell you...

So I am proud to have you...

Absolutely. Absolutely. And I have to tell you, I hear it a lot from a lot of people. We're sort of that cradle-to-grave kind of bank. We want to make sure that you come in early and stay forever.

Thank you so much for joining us. Appreciate it.

Thank you, Rami.

What Marlin just described is really the reality for IT team is pretty much everywhere in the era of AI. Increasing scale, more complexity and a nonstop wave of evolving security threats, which is why networking and security can no longer operate separately. Security has to be built directly into the network. And that's exactly how we designed the AC self-driving network because the truly self-driving network doesn't just optimize and heal itself, it protects itself. So to show you what that looks like, please welcome product leader for SASE and security, Madani.

Hey, Rami. Good afternoon, Las Vegas. I'm excited to be here.

We're excited to have you. We're excited to have you. Okay, listen to me Madani. Attackers are already using the network as their weapon of choice, as you all know. And with the AI making threats faster, smarter, more sophisticated, defenders need to use the network as part of their defense. That's why security can no longer sit beside the network. It has to be built into the network. How do we help the good guys do this?

Well, Rami, it starts with a Zero Trust approach to network security. This assumes that no user or thing is trusted by default and requires continuous verification of every access request. This would be like a Blackjack dealer making a check a background check before ever dealing a single card and then kicking it off the table in the case of cheating. Wait, I think they actually do, do that. We successfully implementing a Zero Trust approach requires 5 core elements: visibility into all connected users and things, policy-driven orchestration, ubiquitous policy enforcement, real-time detection and automated AI-driven responses.

Now you do have to have the right mix of protected -- protective layers in the network to deliver autonomous protection for the strongest defense possible. And HPE has a full security portfolio, which includes firewalls with industry-leading efficacy and performance, NAC with comprehensive access control with consistent enforcement across every type of device or user on the network, SSC with agent or agentless deployment options, supporting a broad set of applications with intelligent routing. And last and certainly not least, SD-WAN with integrated application performance, which is -- and security, which is optimized for any environment.

So okay, we clearly have all the core security pieces in place and all of the elements of a winning hand, you might even say we have a full house. I'm sorry. But ultimately, what's important is how these capabilities come together, Madani. And nowhere is that more important than in SASE, right? Where networking and security operate as a single system to securely connect users, applications and data everywhere. I think you have a pretty interesting announcement to make on that front.

That's right, Rami. I am very excited to say that we have now combined our EdgeConnect SD-WAN and our SSE into a unified SASE orchestrator with one console, consistent Zero Trust policy and AI-driven operations for simpler, faster and more secure connectivity.

Very cool.

Now what do you all think about that? But Rami, I can't just come to stage and talk about it. I need this audience to actually see it and to demo it live.

Okay. Let's do it.

So let's check it out. All right. The new SASE orchestrator is a powerful solution combining both networking and security under one umbrella. Here, you see the dashboard page. This is where an administrator would get sort of a quick snapshot of everything that's going on within the environment for the last 1 hour to up to 7 days. But this isn't the special sauce.

Let's go ahead and check out the business intent overlays. To me, that's really where EdgeConnect shines. This is a great example where EdgeConnect has been self-driving for many, many years already. It autonomously delivers the best quality of the experience while also handling the worst kind of links for any type of application. Now let's jump out of this a little bit and talk a little bit about security. We'll navigate over here and check out the global firewall policy rules. This -- what's great about this feature is the fact that these firewall rules are written here, but automatically distributed across the entire SD-Branch -- SD-WAN fabric. Next up, let's take a look at the SSC policy rules. This is the new capabilities that are part of the unified orchestrator. Now being in Vegas, Rami, Blackjack is on my mind, which is probably okay. But visiting a gambling site on my company laptop, probably not so much.

All right. So let me show you how quick and easy it is to ultimately deploy like a web filtering policy for our ZTNA users. I'm going to attempt to type up here in front of a live audience, and hopefully, we'll get this right. I'm block gambling, come down here to the destination, and I'm going to look for gambling again. We've made sure that it sets a block and I'm going to go ahead and save it. Now what's going to happen is it's going to push this out. As you can see, essentially added that policy rule, fairly easy, even a product manager can do it. I'm going to go ahead and apply it. And all at once, we're now pushing out that policy for all of our users. And again, this policy could -- making these changes is all done directly here from that one place.

Now, that's what's really exciting about the fact that what used to be done in two different products is now possible in the single SASE orchestrator.

Super simple.

Super simple. Now before I leave, there's one more thing I want to take a look at, which is the new SASE Copilot, where ultimately, a user can ask a variety of different questions. We also have some pre-populated ones. And ultimately, what's great about it is it allows them to resolve issues and minimize risk to their environment very quickly.

I think this is a pretty big deal, right?

Absolutely.

So our SD-WAN and SSE solutions are already like excellent on their own. But now we're taking things a major step forward, bringing SD-WAN and SSE together into a deeply integrated solution. What else you got for us?

Well, I've got a few more demos, I do want to tell this audience that this is coming out just later this year. All right.

Let me actually -- before you go on, it's clear that SASE Orchestrator is like a great step towards agentic AIOps and Agentic SecOps with a network that is not just self-driving, but also self-protecting the Madani, right? But security is also critical to AI itself. Organizations need a way to harness the power of AI without compromising their data. So what are we doing to help customers on this front?

Well, Rami, we are all over it. Our AI aware firewall lets you safely embrace AI by giving you governance over how AI is used with real-time visibility, #1 rated efficacy and threat detection and simplified security operations. That means that you can protect sensitive data without slowing innovation. Let's take a look.

All right. So here, we have the Security Director Cloud, which manages our SRX hardware and virtual firewalls. Up at the top, we have a new capability, the Security Director Copilot, which lets our administrator ask different types of questions and can also select pre-populated ones. So this little exercise, I'm going to try my luck again at typing. And let's see here. We're going to show the latest threats to my environment. All right. We'll go ahead and do that.

And now the Copilot is going to spend a little bit of time thinking, doing a little bit of crunching of data. And what's happening behind the scenes is that we're pulling information from all the SRXs that are in this particular topology. We're also leveraging threat intelligence from our HPE Threat Labs. And ultimately, what we should see here any moment now as it finishes up its thinking is that it's going to give us some very specific insights about the different types of threats that we're seeing, as you can see here.

I'm going to go ahead and scroll up just a little bit here. We can see a variety of different pieces of information, user names, source IPs, [ destinations ] and so forth. But we really get some real detailed information in terms of things like what the threat is, industries that are being targeted and what countries. Now at the bottom, we also have a great set of recommendations, right? It's not just about showing the information, it's also being able to help supercharge our administrators.

All right. Let's go ahead and we'll jump out of that. Now for this next little segment, I'm just going to put a little bit of background on what we're going to do for my last demo. Taking a look at some of the policies that we have here. And I'm looking specifically around some AI governance rules that we put in place. Now there are 3 types of rules that we've implemented. One is for sanctioned AI apps, which are AI apps that are allowed by the organization. Unsanctioned AI apps, which that's just a fancy way of saying we're going to block it and tolerated AI apps, which are AI ops that have some guardrails. Now sanctioned and unsanctioned is pretty straightforward, but I would say that tolerated is a little more nuanced, and it's about having the right types of guardrails in place.

So let's just take a quick look at what that is. So here, we have a few different types of things that we're looking for. We're going to be looking at upload protection rules, prompt protection rules and last but not least, some keyword protection rules. Now let's see this in action. So I'm going to jump over. Now we've switched over to another view. This would be the end user view, if you will. I happen to be here on hp.com. And you know what, I'm going to go ahead and try to go to ChatGPT. Immediately, I get a block message, right? This is one of the apps that we've actually flagged as not being allowed. It's an unsanctioned app.

Now let's go ahead and try Claude as an example, same thing, just to make sure that everyone kind of saw that happen, we'll go to Google, and we'll bounce back, same effect. Now let's see what happens when we try a tolerated app. So I'm going to go over here to Gemini. And remember those guardrails I spoke about, Rami.

I remember clearly.

Okay. So I'm going to attempt to upload a corporate file, a company report, probably has some information, maybe it's an internal content. I don't necessarily think I should probably uploading it into this tool. And as we can see, Gemini is struggling a little bit. It's attempting to pull this file. But what's happening behind the scenes is our firewall is going and blocking this. And so ultimately, what we'll see here in a mere few seconds is that lo and behold, the upload fails.

All right. Now let's try a different example. I'm going to grab some text here that has some unique words like restricted, secret, encrypted. I'm just using this to facilitate my typing. And what I'm going to do here is I'm going to say, "Hey, let's summarize this information." I'll go ahead and paste that and let's go submit lo and behold once again, Gemini struggled. Can't figure out what to do, can't process this information because I was doing what he needed to do. All right. Now as I mentioned before, this is a tolerated application with some specific guardrails. And so I want to basically show to the audience that I haven't completely crippled this.

So let's see what happens as I say, summarize HPE Discover, and I go ahead and submit that. Look, already, we see a little bit of a change in behavior here. It's searching the web. It's going to figure this out. And yes, it is our flagship annual conference. So very cool. As you can see, how we would use this technology in a real-world case.

That's awesome. That's really, really cool. And I would imagine it's super, super powerful, right, Madani.

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Absolutely. And to me, this is what makes this solution so robust, so powerful, if you will. It proactively detects threats, simplifies operations with guided insights and enforces granular real-time controls to safely govern AI application usage.

You know what I really like about our AI firewall is that it gives customers the ability to see, govern and protect how AI is being used across their entire organization without slowing down their businesses because at the end of the day, nobody wants to choose between being secure and moving fast. And what you just saw were two powerful examples of something bigger, right? At HPE, AI, networking and security are no longer separate domains. They are converging into a single intelligent self-driving system. Madani, thank you so much.

Thank you, Rami. Thank you, everyone.

Okay. I want to shift gears a bit and talk a little bit about something that sits at the very core of networking. You know what that is?

Routing.

This is what Juniper was originally built to do. And honestly, routing has never ever been more important than it is right now because no matter what kind of network you are building, AI fabrics, data centers, campus environments, WAN, cloud connectivity, security architecture, service provider network, blah, blah, blah. Keep going, routing is foundational to it all. It is the connective tissue. There are some routing fans here, okay. It is the connective tissue for the modern infrastructure. And as networks become more distributed, more dynamic and more AI-driven, the demands on routing are growing dramatically.

So to help me kick off this important topic, I'd like to welcome the Director of IT at Sentara Health, Tom Johnson.

Tom, How are you?

Great, Rami.

Thank you for joining us. Tell us a little bit about yourself and also about Sentara Health for those that are not familiar.

Absolutely. So I've been with Sentara Health for 29 years. And during that time, I've witnessed and been a part of many major technology transformations. We are one of the largest not-for-profit integrated health systems in the U.S., Mid-Atlantic and Southeast. Over $14 billion in operating revenue, 35,000 employees, 12 hospitals in Virginia and Northeastern North Carolina. We have over 200 connected sites with 400-plus total points of care. We have a health plan division that serves almost 1 million insureds in Virginia and Florida. It all keeps us busy.

So I would imagine with that many different locations, employees and then patients and insurance business as well, you have a lot of sensitive data that you are dealing with on a daily basis. How does that impact your infrastructure and networking decisions?

Well, we moved massive amounts of data across the organization, and it directly impacts patient care. That's why our network has to be resilient, secure and always available because when data is delayed, care is delayed. Our clinicians rely on real-time data for decision-making at the bedside. And that requires instant, reliable delivery everywhere. Areas like radiology, where images from some of our systems are always pulled fresh with no caching. Latency simply is not an option.

Okay. So get it. You mentioned latency as an important consideration or requirement for your network. Now with many AI applications that require that, I get it. But what kind of AI applications are you typically deploying in health care? And what does that mean? What else does that mean for your network?

There are a lot of opportunities for AI. One example where we've seen real success is using ambient AI to capture patient conversations. It generates the clinical notes and even helps identify potential care gaps. It allows clinicians to spend less time focused on documenting and more time focused on the patient. But for those kinds of capabilities to work, our network has to deliver that data in real time, reliably, securely and without latency. So clinicians, they can trust it at the point of care.

So we were talking backstage and discussing this a little bit. But looking ahead, I know you have ambitious growth plans and digital transformation plans in particular. What can you share with us about how this is -- how HPE is helping you on this journey?

Well, I could spend a lot of time talking about our initiatives. Health care has got tons of them. But to enable them, our infrastructure has to be ready to grow with us. We need to be able to expand our operations and embrace new technologies while maintaining performance at scale. And HPE is a trusted partner that has given us the solutions we need now and into the future. And we love the AI capabilities that this gives us. You've heard about some of them today already. But we would love to see that extended across all the networking domains.

I hope you're paying attention to the keynote that I'm delivering here because that's exactly what we are delivering, my friend.

Excellent. I can't wait.

Listen, thank you so much. You are on an important mission, and we're proud to support you on it.

Thank you, Rami. Appreciate it. Thank you.

As Tom showed, the network sits at the center of everything we do and routers are the backbone. In fact, our routing solutions power some of the largest cloud providers and service providers and enterprises across the globe. If you access the cloud today, guess what, you use an APE Juniper router. It's that simple. What enables our routing solutions to deliver exceptional scale, flexibility and resiliency is the way we engineer them from the ground up, purpose-built silicon, purpose-built systems and purpose-built software, all designed together as a single architecture. That end-to-end approach allows us to optimize performance across every single layer.

And you see that engineering philosophy across the entire routing portfolio, our ACX routers built for enterprise and metro access and aggregation, our PTX routers with industry-leading density and power efficiency and our MX routers, my personal favorite, purpose-built for limitless flexibility across demanding edge environments and our AI native software and self-driving capabilities that automate the entire network life cycle. This is far more than just a routing portfolio. It is the infrastructure foundation of the modern digital world and the engine powering the AI era. So to show you more, I am excited to welcome the product leader for our routing infrastructure solutions, Katrina.

It's great to be here at HPE Discover. And I'm so excited to show how we ensure our customers' networks deliver the experience that we promise at scale without routing and complexity because you don't need to be a routing expert to manage your routers. With Mist and Marvis AI engine, we make routing operations simpler, easier and more intuitive. Many of you guys have the horror stories when it comes to launching new applications. The escalations, the sleepless nights, the weekends in the situation room. There's got to be a better way, right? There is, and it starts with HPE AI native routing.

Let me give you an example. So it's Friday afternoon, and our network operations manager is sitting down at his desk, he's ready to go home. He works for a leading health care provider. And on Monday, they're going to do a big launch. They're going to put virtual AI agents deployed into every hospital, office and clinic in their whole network. It's going to manage everything from patient care to hospital triage. If the network falls short, patient care will suffer. And the staff is the one that picks up the slack. So how can we help our network operations guys with this? Let's go ahead and take a look.

Yes, I'm excited to see.

So the network is ready and everything is connected to miss. There's just one problem. Until Monday, there are no users. So let's see what we can do with Experience Twins. And everything looks green, which that's great, but what does all this mean? So effectively, Marvis turned the routers into digital twins, generating synthetic application traffic into the network just like a real user would, detecting degradations in real time without a single truck roll or single user being impacted. That's the power of Marvis. So if we revisit our engineer, he's sitting on his couch, he's trying to have a good day and lo and behold, notification. The experience has deteriorated. The latency has increased from 80 milliseconds to over 200.

Let's go to Marvis and see if we can fix this quickly before it ruins our weekend or worse, the launch. So red does not look good. But what does it mean? We've got a bunch of failed tests across two separate KPIs. So there isn't an obvious root cause. So what are we going to do about this? Let's ask Marvis. So why has the latency suddenly increased? And Marvis has a clear read on what happened. It analyzes the network in real time, and it gives us an answer in plain English. The latency has increased because the traffic has shifted to a less optimal path, and it gives us the steps to validate and fix the problem. It looks like some configuration changes have removed the preferred route, forcing the traffic onto a backup path. Marvis even has a recommendation to fix it. Well, it's a relief that the router kept the network up.

So let's see what we can do about these SLEs. If we check out the latency view, we can see these failed tests have increased gradually over time. And if we want even more details, we can see the granular spike in latency. Overall, this aligns perfectly with what Marvis told us. So let's go ahead and look at what's going on with these excessive hops right here.

So since Friday's baseline, we can see 2 additional network hops. This new route is definitely the issue. So we're going to go back to Marvis action and see what we can do to fix this problem. Let me call over here. And there we have it, the missing prefix. Marvis knows exactly how to fix the issue and how to restore the prefix. So if we click here and look. I approve this recommended configuration change is a good idea. But you guys know what they say, trust but verify. So let's check the actions on those experienced twins one more time, just to be sure and everything is back to normal. The latency is restored, the networks is recovered, the application is performing as intended. And if I'm ready, I can even take one step closer to self-driving by letting Marvis do this automatically next time. And with that, we're back to enjoying our Saturday and watching the game with no one but us the wiser about the disaster that never happened.

And here I was, I thought that routing was hard.

Not anymore.

Not anymore. I see the power of AI native routing. It senses what's happening in real time. It reasons through the impact and recommends or even takes action before users feel the pain. This is a great example of how our Marvis AI engine is delivering impact across every domain. Katrina, thank you so much. Great to have you up here.

Thanks, Rami. Thanks, Vegas.

Okay. I want to now shift our focus to the data center because this is where the demands on AI are becoming very, very real. And in many ways, there is no greater test of a modern data center network than in media and entertainment. Few industries push infrastructure harder, massive amounts of content moving continuously across globally distributed product environments or production environments, real-time collaboration across teams and continents, ultra-high-resolution video workflows and production time lines where downtime is simply not an option. In that world, performance and resilience are everything.

So to talk more about that, please welcome Director of Global Networking at the Walt Disney Company, Ben Croy.

Nice to have you. Please have a seat. Can you introduce yourself maybe and tell us a little bit about your operating environment?

Sure. Thanks, Rami. It's great to be here. I'm Ben Croy. I lead Global Networking for the Walt Disney Company. My team owns network architecture, engineering and operations with a strong focus on media and production infrastructure. One of our largest production networks support studios like Marvel, Pixar and Lucas Film. At any one time, I have over 200 concurrent productions globally, and a major film could easily generate a petabyte of content. This data has to move quickly, securely between partners, creatives and departments globally.

So maybe give us an example of like a recent movie.

Okay. Sure for an animated feature like Zootopia 2, we may create the content in a single Burbank location and then regionalize it around the world to prepare day-in-date release in 35 or more languages. So the scale and the global movement of content is constant. And that's what our studio production network has to support.

It's interesting. How has the technology behind filmmaking evolved over the last, let's say, decade? And what does that meant for data centers that support your production environment?

For one thing, film is made digitally end-to-end now, driving a lot of change. A few things stand out. It's gone from terabytes to petabytes. Visual effect workloads have grown significantly with over 80% of the movies now relying on some type of EFX. Virtual production environments emerged as well on films like Mandalorian & Grogu. This is much more sophisticated than the green screen VFX processes of the past. And there's no physical fallback anymore. It's all data end-to-end.

So when you're supporting some of the largest and most complex media production like in the world, what do you need for your network infrastructure to ensure that productions are delivered always successfully?

Well, for us, it comes down to delivery and predictability for our large feature production we release globally at around the same time in every country. If we miss that window, there's real financial impact. So the network must be reliable, scalable and able to move very large data sets without becoming a bottleneck. We leverage HPE Mist platform for our campus and Apstra for our data center fabric. We found that these solutions give us more consistency across environments and a platform that allows us to scale.

Okay. So Mist and Apstra. What role do you think the network should play in the creative process? I mean, how visible should it be to the filmmakers, to the artists, to the production teams who depend on it every day?

Well, it's foundational. The network is a critical part of production, but it's ideally invisible. Our goal is simple. We want our filmmakers to focus on story, character, amazing visuals and sound, not to worry if the network will do what it needs to do.

Okay. So as you look to the future of content creation, the technology just keeps getting more and more powerful, but also keeps getting more complex, unfortunately. What's the challenge that you're really trying to solve for, let's say, over the next few years?

Two things, speed and simplicity.

That's it. Speed and simplicity.

That's it.

Okay, Ben. I'm proud to make the network invisible for you. It will be my mission. All right. Thank you, my friend. I appreciate you joining us.

Thank you very much.

Thank you. The pace of innovation in the data center space is absolutely extraordinary. Architectures are evolving rapidly. Workloads are advancing rapidly. Customers' expectations are changing rapidly. But guess what, fortunately, so are we. Our innovation engine is incredibly strong here, and we are moving aggressively to help customers build the AI data centers of the future. And yes, we are bringing self-driving operations to the data center as well.

So to dive into this, in more detail, I would like to bring up product lead for data center, Kyle.

Kyle, how are you?

Okay.

Great to have you with us. Tell us what's happening in the data center space at HPE?

Yes. Thanks, Rami, and you said it. What's really exciting is that we're bringing the power of AI native self-driving operations into the data center. Our solutions continuously collect rich real-time telemetry across the network from our switches, routers and firewalls. That telemetry flows directly into the Mist platform where Marvis AI turns it into deep visibility, operational insights and automated actions. And what makes us truly unique is that we bring design, deployment, assurance and operations together into a single life-cycle experience. The result is continuous visibility, automated operations and self-driving optimizations across the entire data center network. You want to see it in action?

Let's do it.

Excellent. With HPE networking, you get the proven self-driving capabilities you already know and trust applied to the data center, too. For example, the Marvis dashboard that Sunalini showed for wired and wireless actions also services key anomalies for the data center network. And it clearly explains how to fix them. In addition, service level expectations or SLEs, which are a key part of the Mist platform for optimizing user experiences are combined with our Knowledge Graph to continuously measure network health. We take this a step further with application awareness. We map application flows directly onto the data center network, allowing operators to instantly see the real impact of a switch or link failure. This moves application troubleshooting from reactive guesswork to intent-based decision-making.

And to minimize downtime altogether, Marvis AI-powered intelligence enables proactive maintenance with Marvis Minis running network tests that continuously validate network intent and services. Further, predictive analytics monitor system and optics behavior, tracking 30-plus metrics such as voltage, current, temperature, CRC errors and more. Machine learning models analyze these metrics to predict optic failures before they occur. And now we go even further with Agentic AI.

The Marvis AI system uses reasoning models and intelligent agents to solve problems the way a seasoned network engineer would. It correlates data from multiple sources, contextual data, switch telemetry, application flows, historical tech support cases and then it performs expert level reasoning, leveraging skills to rapidly identify the root cause and recommend next steps. But once took hours or days can now happen in minutes. And by demonstrating the logic process and reasoning used, the agents give operators insight into the solutions being recommended, building trust in the network and allowing it to act autonomously.

So I think the pattern is pretty clear by now. We are extending self-driving operations across everything, camps and branch, security, routing and data center networks as well. But of course, HPE does much more than networking, right? Inside the data center, we provide the networking, the compute, the storage and the virtualization and orchestration layer that brings it all together. So the obvious next question becomes, why just stop at the self-driving network? Why not extend self-driving operations through the entire data center?

Agreed. And we have been working hard to deliver a truly integrated data center infrastructure solution across HPE networking, compute, storage and hybrid cloud to enable faster deployments and streamlined operations. We integrated our management capabilities with OpsRamp, our hybrid cloud observability platform and compute ops management for our platform for managing and automating server infrastructure. These integrations deliver comprehensive observability, predictive assurance and proactive issue resolution across server, storage and now the networking domain.

Plus, we have now integrated with Morpheus, our management platform for virtualization in containers. We did this because many times, when a virtual machine gets provisioned, the virtual network could take hours or days to provision in the physical fabric. Meanwhile, the app team and the business are waiting by integrating data center operations with Morpheus, the network and server teams no longer work in silos.

These integrations really make a difference when it comes to streamlining data center operations. And this is the value that HPE like uniquely is able to deliver. So Kyle, can we see what that looks like in real life?

Yes. Let me show you. Here we are in Morpheus, a single pane of glass for managing your entire virtual infrastructure. VMs, cloud, clusters, workloads all here. First, we connect Morpheus to our managed data center fabric. That's the bridge between the virtual world and the physical network. Now we create 2 virtual networks, vnet 10 and vnet 11. We provision 2 VMs, a VM on vnet 10 and another VM on vnet 11. Both are live hosting critical workloads. Now Watch what happens. Without anyone touching the network, vnet 10 and vnet 11 were automatically created and pushed to the physical fabric. No ticket, no waiting, no manual configuration, no human error. And the proof, both VMs communicating perfectly across the HP managed fabric.

But here's where it gets interesting. What happens when a VM moves? Let's start a continuous ping between the 2 VMs. Now we migrate one of the VMs from server 9 to server 15. Watch the packet loss counter, 0, not a single dropped packet. The network and security policies follow the VM automatically and visibly instantly. We've automated networking and removed silos. This means that you get faster deployment in zero touch networking without manual errors. And when you move workloads for resiliency or server utilization reasons, the network and security policies follow automatically.

What you just showed us is obviously incredibly powerful. You just demonstrated is that infrastructure operating as a coordinated system, Kyle, where networking virtualization and cloud operations are part of a single intelligent workflow. No tickets, no manual networking changes, no operational lag between teams, just seamless automation from the VM all the way down to the physical infrastructure. And I love how when we integrate with the rest of HPE, customers get all the benefits of GreenLake, flexibility, cost savings and accelerated time to value, thanks to its industry-leading hybrid cloud platform. But Kyle, I know this integration goes beyond just that, right? I mean what more do you have for us?

That's right, Rami. Right here at Discover, we announced that HPE is expanding its AI data center solution to include our QFX switches managed by Apstra Data Center Director. This creates a full stack free integrated solution spanning compute, networking, storage, software and services, which accelerates AI data center deployment with assured interoperability, scale and performance.

So that's great news, obviously. But we all know that the automation and intelligence that comes from self-driving operations is kind of useless without a solid hardware foundation, which is why innovation in data center hardware has never been more important than let's face it, hardware is kind of hot again, right? So there has been a lot of new innovations recently to our AI data center product, tell me about them.

Absolutely. We continue to innovate in our data center. In addition to recent enhancements to the MX and PTX routing lines, we keep adding new QFX platforms for scale-out and scale-up networking. We recently introduced the industry's first Ethernet-based scale-up solution, the QFX5252 purpose-built for AMD Helios systems. Thank you. And you can see this product in the demo area right over there. Trust me, you can't miss it.

It's massive, like the size of fridge. In addition, we launched the QFX 5250, which was the first 100% liquid cooled switch using the Tomahawk 6 chipset. Just as we were the first OEM vendor to ship 800 gig, we did it again with 1.6T connectivity. And I'm excited to say this product is shipping now.

So let me just get this straight. If anybody wants to build a data center with 1.6 terabit connectivity, they really only have one option, right? It's us.

That's pretty damn cool. Congratulations to the team. Yes. All of this innovation across both data center software and hardware is definitely getting the market's attention.

Our solutions are positioned as a leader in the Gartner Data Center Networking Magic Quadrant and ranked #1 for enterprise build-out and #2 for AI Ethernet fabric in the Gartner Critical Capabilities Report, right? This recognition is based on decades of innovation.

So when organizations think about building data center networks for the AI era, I believe they can have tremendous confidence in what HPE networking is delivering.

Kyle, thanks so much for joining me here.

Appreciate it. Thank you, Rami.

Today, you heard a consistent message from every customer, every demo and every innovation we shared. The old way of operating networks has reached its limits. The scale is too large. The complexity is too high. The pace of change is too fast, and AI is accelerating all of it.

That is why the future belongs to networks that can think, that can adapt, that can optimize and that can protect themselves in real time, self-driving networks, not a futuristic idea, not a lab experiment, but as a practical necessity for operating modern infrastructure at scale. Now look, I know I'm not the first tech executive you've heard from talking about how their AI is better than everybody else's AI. And I'm certainly not going to be your last.

But I have deep conviction about what sets HPE networking apart from companies that are mostly showing you slideware. And it comes down to one key thing, efficacy.

Our self-driving network just works. It works at scale. It works under pressure and it works across our whole portfolio from the wired and wireless edge all the way to the data center, delivering real outcomes to customer environments every single day.

But honestly, the only way to truly believe it is to experience it yourself. So I would urge you to try it. And by the way, with HPE Financial Services, we can make it really easy for you to do just that, including a new network migration program to clear out old non-self-driving tech and reinvest in what is new. Because once you see the infrastructure that can continuously monitor itself, optimize itself, protect itself and get smarter every single day, you simply cannot unsee it.

At the beginning of this presentation, we talked about foundation. About what happens when the foundation underneath something is not built for the demand placed on top of it. AI is creating one of the biggest technology shifts any of us will experience in our careers.

Every company is being forced to rethink how they operate, innovate, secure their business and compete. And in moments like this, there are really only 2 choices. You can be disrupted by those who embrace the change faster or you can become the disruptor. If you want to be on the right side of this change, if you want to move faster than your competitors, if you want AI to become an advantage instead of a source of complexity and risk, -- you have to start with the right foundation, a foundation built to adapt and scale with whatever comes next. That foundation is IT. That foundation is the network. That foundation is the self-driving network. Thank you all so much.

Good afternoon, and welcome to the HPE Discover Investor Relations Summit. [Operator Instructions]

Please note, this event is being recorded. And just a moment, I will turn the conference over to Shannon Cross, Chief Strategy Officer.

If uncertainties materialize or if 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 forward-looking statements on our website at investors.hpe.com. So with that, let me welcome Antonio Neri, HPE President and CEO.

Good afternoon.

So Antonio, we all enjoyed your keynote today and Rami's talk during the networking general session. We've also had an opportunity to tour the show floor. It's clear HPE is leading the adoption of Agentic AI in the enterprise.

We're leveraging our innovative networking, cloud and AI portfolio, helping customers move from AI experimentation to fully autonomous operations at scale.

During your keynote, you shared that we are deepening our work with NVIDIA with the next phase of AI factories and HPE Private Cloud AI, and we are excited about the opportunity to work with AMD on Helios. Rami also talked about HPE extending our leadership in self-driving networks as critical foundation for Agentic AI from campus and branch through data center.

I'm excited by what we've announced so far at Discover, and I hope everyone listening on the webcast as well as everyone here in the room can tune into Fidelma Russo's general session tomorrow, where she will discuss how HPE's innovation will continue to support customers on their AI journey. So I look forward to this Q&A session with the investors and analysts. But first -- and we'll take questions from the audience shortly.

But first, let me kick off with a couple of my own. So first, networking has become such an exciting part of our portfolio and our story since we combined with Juniper. How do today's announcement show the extension of our networking leadership in the AI era?

Well, first of all, good afternoon, and those who are tuning in on the webcast, thank you for joining us today. For those of you here in person, I hope you enjoy so far the event and the day. And I understand you did the tour on the show floor, which it takes 2 days to see everything.

But I hope you got a glimpse of the amazing portfolio that we have curated and built. And at this event, you can see the continuous innovation we continue to bring to the market to address the needs of both cloud and AI. But obviously, the biggest topic is AI. And in that context, we think about AI as a productivity tool that will change forever how we live and how we work.

But fundamentally, it's to power it. And at the core of that powering is the foundation, which sits on the network. We talked about the need to improve the cost per token or the first time to token. And fundamentally, every aspect of that stack needs to be productive.

And today, the network is a bottleneck. No question about it because we saw the tremendous advancements with the compute and accelerated computing.

But what we have done with networking and the portfolio that we built with the acquisition of Juniper is address the demands of AI and cloud from the edge of the network, which obviously is the on-ramp for many things, including going forward, the inferencing component of this all the way to the training side. And I thought what I covered this morning and what Rami covered, whatever just an hour ago, is a testimonial about how well this integration has done for us.

It is not just integrating 2 great companies and 2 great assets, which were very complementary with each other, but really scaling that integration with innovation perfectly tied to the inflection point, whether it's in AI, scale up, scale out and scale across. We have an amazing portfolio. And that's why we see the results we saw in the previous quarter in terms of orders, in terms of backlog, obviously, because of the supply availability and in terms of durability because the networks for AI demand is untouchable.

And for us, I think we are perfectly timed for that moment. And look, I believe in the Agentic enterprise is also using Agentic AI to make these solutions more autonomous and intelligent. And this concept of self-driving network is something that we started we were running a while back. But now it's live. It's available. I mean if you see some of the demos we put on the floor even on the routing side, it's a little bit scary to see how far you can self-optimize traffic across data center interconnect. And to give a sense, that 12,000 router, you can put together the entire population in New York and London together. And concurrently, 60 million people can broadcast a movie or watch a movie on that single rack.

So the performance and the ability to do it in an autonomous way it is just remarkable. That's just an example. But that's why we say we extend it to everything. And we already had it anyway in the campus and branch, and now we brought into Aruba side as we brought the switching to the Juniper side.

Yes. No, I think it's fantastic what we've done. It's a testament to the hard work, I think the team did in terms of the integration and the IP that sat in Juniper and in Aruba and now is being supported by the total [indiscernible].

When you think about it for a moment, right? So we closed the transaction on July 2. And by January 2, just exactly 5 months, we brought in 10,000 Juniper employees inside the company. We announced our strategy for networking. We announced the road map across the 4 key networking segments, campus and branch, data center switch and security and routing. And we integrated the sales force into one unified sales organization. And we announced all these products along the way. And of course, we are doing really well from a synergies point of view.

What comes next now is that vision to build the best networking business on the planet, and that includes also the back end of how we do business. But fundamentally, also the next chapter is also the synergy with the rest of the portfolio, particularly with the cloud portfolio, which we are integrating products, whether it's software in the virtualization stack or whether it's in the private cloud stack or whether it's with storage, which are sources of revenue and profit as we think about '27, '28, '29.

Well, that's a perfect segue to my next question, and then we'll open it up to the floor. So we've come out of a great quarter. How are you thinking about the durability of these results? And what gave you the confidence to provide the fiscal '27 framework that have called for double-digit growth for basically both revenue and EPS at the midpoint?

Well, I think at the core is structurally, the portfolio of our company has changed forever with the addition of Juniper, right? So the mix has changed dramatically.

I argue we're still undervalued in many ways from a peer multiple perspective against not just today and '27 guidance, but against the long-term potential, especially because the networking demand is very, very high.

So my view is that first is the mix of the business. Second is the demand that we see in the market, right? I mean we grew in security mid-teens all the way to the routing and 30%. And in between, you have upper 20% in the rest of the portfolio. And then we have an enormous backlog, obviously, that we need to clear.

But what gives Marie and I confidence to give 6 quarters of guidance because that's exactly what we did, second half and 2027. The pipeline is multiples of our backlog. Number two, our portfolio is being seek by customers and networking clearly is the driving force that's doing that.

Then obviously, the supply constraints in many ways, are driving demand because everybody wants to get in the line, in the queue to make sure they don't have to wait too long to get the supply. And let's be clear, that supply problem is not going to be solved anytime soon.

So it's like I make the analogy one time happened to me, I made a mistake. I went to the DMV, I took the ticket decision. I have to wait whatever, 40 people ahead of me. I left and then I come back the next day, shoot. Now I have to wait 60 people, right? So that's what we -- and then look, all the programmatic things we have done with Juniper synergies and catalyst, particularly catalyst in the way we work inside the company and the ability to improve our gross margin profile and operating margin profile to the OpEx.

It was a no-brainer for Marie and I to go out and give all that, which for us was the concept of durability because that's the key here, right? It's not one time.

And as I said in the earnings call, Q2 was not just a onetime event. It was a combination of many things we have done in many, many quarters. And in the AI scale, we have been very disciplined about what capital to deploy for what return.

That's it.

Great. Well, thank you, Antonio. So with that, let's open it up to questions from the audience that we have. We will have mic runners, so please wait until you have a microphone before you begin. And we are webcasting this session, so please state your name and company asking your question. And finally, can you just stick to one question. We will come back around as time permits.

We are under the earnings rules here.

Yes. And Wamsi, you have the mic.

Wamsi Mohan, Bank of America.

Nice to see all the integration progress you made. So we've heard a lot of exciting things about the networking portfolio.

When you look at your Q2 results, 10% growth. There were differences within the subsegments in there. You guided next year, 8% to 12%. And I'm thinking like why is that not -- why should that not be viewed as a very conservative guide just given the fact that we heard so many things here in the pipeline that are coming through in the next several quarters?

Yes, because you guys always look at revenue, we look at orders and the ability to convert to revenue. And that's the thing. Look, in many ways, it was a prudent guide from a pure revenue perspective, which is what drives profit and eventually free cash flow.

As I said, the supply availability will continue to be severely constrained into 2027. And to give a perspective, we already have the capacity allocated for 2026.

And what we do, the way it works every 90 days, we tell our suppliers how we want that capacity to be between, I don't know, server storage between this 64 gig to this 128 to 256 this speed, that speed. And so basically -- and I met one supplier here, which is a great partner, and I say, it's great what we're doing together, but I need more supply. And then he goes on and said, yes, we'll see what we can do, right? But it's really that the issue, Wamsi. And so we expect to exit 2026 with a higher backlog in many ways than we are today.

And we felt it was prudent to give that double digits based on what we believe we're going to be allocated in 2027. And that process is a process that's still going today because we have no firm final numbers because we are -- we have negotiated now the LTAs and those LTAs are not just 1 year.

Now they are multiyear commitments. But we need them to come back with the final, final, final. And so that's the reason why. But we expect in many segments of our business to continue to grow faster than that number on an orders perspective. And we're going to go back, but he [indiscernible].

Tim Long at Barclays. Sorry about your ticket, but given what the stock has done, you didn't have to go, you could have just paid the full price, I think.

The ticket for what.

The DMV. So I wanted to get back on networking, if I could, a 2-parter. You showed a lot of really good technology today. And in that AI piece, you raised the numbers a little bit last quarter. Two parts.

One, can you talk a little bit about leverage of the strength you guys have in server and storage? And have you started to see that at all impacting that line? And then second, some of these newer layers like scale up, you have the nice AMD deal and much more importance on scale across. Can you talk about how that might impact positively that AI data center line?

Yes, Tim. Fair to say that one of the areas that are growing the fastest is actually the scale across for sure. I think both the 10,000, 12,000 and the MX product are becoming key references for DCI and the on-ramp to the edge. Scale out, which is the QFX products continue to grow, and we have a number of marquee customers, which are adopting that.

That -- think about it in the case of NVIDIA, right, and the Ultimate II, that's the NVIDIA Grid announcements we made at GTC -- and there is a number of hyperscalers and, I'll call it, large service providers in new cloud that actually have adopted the QFX on top of the Spectrum-X to do the scale-out, right? And there is a number of reasons for that. They love the management control plane.

They love the AI operations that we built into that. They love the performance of the actual switch. And as you saw, we announced the 1.6 terabits first industry time to market with Broadcom on the Tomahawk 6. And even there, we offer the 2 distributions between Junos OS and SONiC-based OS. And both have AI embedded into it. Now with the Junos OS, you get more telemetry by definition. But the reality is that depending on the type of customer may pick one versus the other on how their environment work. In the case of Scale Up, in the NVIDIA case is NVIDIA. I mean that's a given because of the Spectrum-X, ConnectX and BlueField.

But in the case of Helios, which I hope you saw there is, I call it, a double fridge or, right, because it's an OCP design. That's going to be our Junos -- sorry, our SONiC OS with our 5252 QFX switch, which we are excited because as customers adopt alternatives to NVIDIA for certain training -- large training, this is a large environment, right, for training.

Then obviously, that's our networking in it. And then everything else will scale out and scale up will continue to be the same with Juniper. So -- and that obviously gets deeply connected with our compute, right? Because inside that Helios or NVL, there is an HPE server that comes with it, right? And so in the case of the AMD, there is a tightly integrated work between AMD, our server team and our networking team. It's not just GPUs from AMD with the network fabric. It's actually all 3 together.

Obviously, we have to see the fall when that comes out, right? And I expect a number of large marquee hyperscalers and/or service providers to adopt that. And so that will be clearly a tailwind for us as we go forward.

Yes, behind you and then Neil.

Asiya from Citi. There's investor perception that in this cycle where we have so many component constraints, HPE has done a really great job and specifically as it relates to networking chips, access to having silicon.

Maybe you can just help us understand like why do you think HPE is better positioned in this cycle to get access to components? And where could there be some upside to driving better component access as you go into fiscal '27?

Well, thank you for the question. I think it's important to remind ourselves our portfolio and what IP we own across the portfolio.

So first of all, on the routing side, we have 2 dedicated silicon road maps that we run. One is for the router MX, that's the TRIO silicon, our design, our silicon. And the other one is the PTX, which is our Express 5 silicon.

Basically, we do not use merchant silicon for any of our routers. So that's number one.

Number two, when you go to the campus and branch equation, our entire Aruba CX portfolio, maybe just a couple of products on the fringes, is our silicon. We designed that silicon for many, many generations now. And it was part of the original portfolio we won, which I reverse integrated into Aruba in 2015, which is our ProCurve business. And now that silicon is across the entire campus access layer and aggregation layer for the campus and branch. And what we announced today is that those switches now are also managed and available to the Juniper Mist, okay?

So in those 2 aspects of the portfolio, we have our silicon. We don't buy any one else silicon. When it comes down to security, you will see very quickly that, that campus switching silicon, I just talked about it, is converging with security. So unlike others that converge security at the software layer, we are converging security at the silicon layer. So the next generation of CX switches will be a converged silicon between networking and security.

That's a unique value proposition that is going to give us a huge advantage because that silicon is truly programmable. So all the algorithms are built in the silicon, so we can program that from our cloud control plane, whether it's Mist or whether it's Aruba Central.

And then in data center switches, we use, of course, Broadcom and Broadcom, we are now the largest OEM partner for Broadcom. So that's another reason why we have an advantage when it comes down to that. But look, there is constraints there in networking, too, and the networking constraints are mostly aligned to the same constraints you see in the market, which is memory.

Even though the memory footprint in a networking switch is much smaller, it's actually the older technologies, the DDR4, not even DDR5, which people have, of course, deemphasized. And so we are moving to the latest design in some of these switches. In fact, some of them, we may skip all the way to HBM. .

Louis Miscioscia, Daiwa Capital Markets. So looking beyond networking, I guess, for a moment, you had some very good questions on that. Can you differentiate the demand and the highest supply chain constraints for, let's say, GPU servers, AI GPU servers, CPUs, Vera, normal x86. Maybe leading the answer here a little bit.

A few years ago, I thought that maybe CPUs would see 10x the capacity needs of GPUs once you get to inference. It seems like you're starting to see that, but maybe you could help us with the differentiation.

Yes. On the GPU side, I would say there is not severe constraints, but the model works slightly different. Unless you're willing to invest way upfront and take a bet, you normally place orders POs based on orders.

You don't place and build a huge inventory. We learned that lesson early on in the cycle, right? Especially with the life cycle of these GPUs moving so quickly, it's -- maybe at the beginning, it was great to have some. And look, if I knew what I knew today, I will have more power -- both power and GPUs. But that was not the case.

So it's less about the constraints. It's more the lead times. And so if you build -- you're going to need to build a large AI training system, that's based on lead time based on where you place the POs. And obviously, generally tends to be a 3-way conversation between the customer who has sometimes significant relevance with NVIDIA and then just us, right?

So we work together on that prioritization. However, there are other constraints around that, power loops, cooling loops. This is you think chassis will be a problem. That's a problem. In networking transceivers, that's a challenge. So there is a number of things, peripheral things that goes around that. On the CPU side, there has been constraints.

I think we have done a very good job navigating that. But look, you can have the CPU, but if you don't have the memory, it's a waste of time. So like I have the car, I have no wheels, okay? That's not very helpful, right? So you have to move as a system. But look, we have done a very good job in partnership with both AMD and Intel. Because of a long-term relationship. Their CPU is just early, right? We just introduced the product. And I think that product is going to do great in the inferencing space.

But when I think about between now and end of the decade, the vast majority of the demand will be in the inferencing, not in the training side. That's our view. And the question is, number one, where the inferencing will be done, what type of architecture you're going to deploy for that inferencing and it's not going to be one kind of unique architecture. Use cases and verticals will variate. And then ultimately will be more centralized or decentralized. These are all things we're going to learn as we go forward. But the ratios of CPUs to GPUs, I think it's going to variate based on the type of inferencing, whether it's 4 or 8, I don't know.

But look, having a server business that has that scale is important in that context. What I'm working with the team is that, okay, how the architecture really collapses because you don't want to build more layers and overhead in the architecture. I do believe there will be new emerging architectures between KV cache cores and networking fabrics coming together in a more efficient way because you have to solve for scale, cost, right? -- and eventually energy. So a lot of things will happen.

So that's why in my head, I always think about it, I have a server, I have a storage, I have a networking. No, I have network fabrics. I have cores, I have software, I have memory because storage is an extension of memory. And then how you bring it all together in a way that creates some differentiation. Yes, he was asking for a while.

Erik Woodring, Morgan Stanley. Antonio, can you maybe help us just to build on that question by contextualizing how your enterprise customers' compute needs are really changing in this environment with Agentic AI, with inferencing, more getting done on-premise. And the question maybe is, is this customers materially growing their server installed base?

Is this just refreshes to modern architecture, the sustainability behind that? Would just love to understand because we do seem like we're at an inflection point, but just the context behind that, that you're seeing would be really helpful.

Yes, sure. Look, first of all, I spend more than 50% of my time with customers because I always say the truth is in the coalface, when you talk to customers, right? They will tell you exactly what's going on. Fair to say maybe a year ago, things were a little bit slower. People are sitting on the fence is understanding how this is going to evolve.

But it's fair to say, at least in the last 6 months, there is a significant acceleration. But we're still early. That's the interesting part, right? So if you look at the ratio of compute for training versus inferencing, it's still maybe 70-30 right now. And at some point, that has to go the other way around. And then again, where it's done and what level of scale you need? Look, I'll give you an example of us as a company. We, as a company, are aggressively using AI everywhere we can.

We have 1,200-plus use cases in the life cycle. 250 are in production, meaning already deployed in production. Marie is not here, but Marie and finance have been super aggressive deploying AI everywhere she can. This is part of the modernization with Catalyst. And interesting, we are striking some unique partnerships where they use our AI factory for enterprise, take a private cloud AI to develop the agentic models that eventually get packaged and we can take it together to market.

That's an example of Deloitte with Zuora AI suite for CFOs. But when I talk to customers, and I was a couple of weeks ago in Chicago and in Europe, they are aggressively moving forward. What is interesting, people started with large language models, we call it frontier models.

And that's fine because it's very isolated, very contained and you can see the benefit of it. But I think the way you become an agentic enterprise is by actually bridging together, stitching together agents in a workflow by first digitizing, automating and then deploying AI on top of it.

So there is a little bit of process engineering going on, understanding value streams, then doing the hard work. But one of the barriers has been governance, data, preparing the data and all the regulatory goes around. That's why this morning on stage, I talked about everything we built in that AI factory. Unlike some of the competitors we have, they just resell just the hardware. We went on and build an entire software ecosystem inside our GreenLake Cloud that ultimately, the infrastructure that sits underneath is tightly couple for that, whether it's RAGing, whether it's small language model training or giving context to multi-modality and so forth.

Now when you say, okay, how many GPUs are you going to use? I can tell you, inside our company, 300 don't need more than that, right? And so what I always said is that if you have -- if you picture on a whiteboard 2 axis, you have the axis of training and the axis of inferencing, right, the question you ask.

Clearly, training is all GPUs for the most part. And the inferencing will be a mix of things. But then if you take a different view of that, which is service providers, model builders, hyperscalers, these are a very low number of customers, right, although it has been growing because everybody wants to participate in the build-out through some sort of financial engineering that's going on.

But let's say, 50 that are big enough to make a difference. Those 50 will consume millions of GPUs. So it's like here to here. And then you have the opposite, which is hundreds of thousands of customers who are going to consume the opposite, very low amount of GPUs. Now this transaction value is significantly lower than that transaction value.

So that's why you have to find the right balance. But ultimately, I argue it comes down to, honestly, working capital and our return on the working capital and obviously, the margins you can generate. And more software, more services embedded into it, the better it is because if you believe end of the year -- end of the decade, that's what it's going to be, you want to be ahead of that and now build an enormous revenue with huge amount of capital that eventually that's going to be a tough compare. So -- and in either case, we need when networking. It doesn't matter.

Kath Murphy from Goldman Sachs. So maybe extend on the conversation around the AI server opportunity, talking about sovereign in particular, realizing that sovereign use cases are not monolithic.

But can you share anything to think about the size of the opportunity and the maturity of the market and then where that falls on the training versus inference spectrum? And what in HPE's portfolio and your existing relationships is unique in kind of addressing that opportunity?

Yes. Sovereign is a unique customer segment because it's a combination of many things. You have what I call the traditional labs and government entities that they are making investments in order to deliver an AI cloud under the principal sovereignty. A lot driven by the geopolitical environment we live in, but also as acting some sort of service provider for the communities that obviously, the country or the regions are. But look, their ability to raise capital, it depends on the -- I mean, here in the United States is very easy. I mean, like how much you need and how much you're willing to pay. And you go to Europe, it's an ongoing fight, I will say.

They have a lot of ideas, but the ability to raise money is complicated. In fact, I was with one and he said, we are very excited. And I said, great. We're going to build a gigawatt factory fantastic. So how much money you have? -- simple, we have $4 billion. I can't get out of that for $4 billion, right?

This is literally -- the understanding of scale is so off, right? But then it goes through that process where basically they're trying to attract the private sector to bring the capital. And through regulation, through geopolitical inside their own is long. It's a long sales cycle. The bottom line is a very long sales cycle. But look, we built some AI clouds already. If you think about the U.K., the AI Bristol Cloud is a sovereign cloud. If you think about the European Union, the Lumi system is an AI system in Norway and is in service the European Union. So these are examples, and we are working with a number of them.

But I would say it's maybe 12 to 15 in total, right? And then what's going to happen, the sovereign AI clouds are going to be these new clouds that have the capital to become the driving force. So they're going to act as a sovereign AI cloud, although they are new clouds, but just happened, I'm going to build it in this country. I'm going to open with the same regulation so that you feel that we can serve you.

Obviously, Middle East was going strong until the conflict started and that put a significant slowdown to the process, although UAE is still going, I would say. So this is the challenge, right, that we see. But it's not just AI because all of them also need supercomputing. And supercomputing is very important because it's an incredible adjacency to AI. And if you take in the United States, all the national laboratories are supercomputing entities.

Oak Ridge, Argonne, Los Alamos, Livermore Lab, all are HPE supercomputers. Now we built those 3 years ago in some cases, they're all exascale systems. And now they are adding to it an AI system. And in the case of the Oak Ridge National Laboratory, that it was Frontier, the first exascale. Now we're going to what you saw a little bit of a [indiscernible] through of 2 cabinets, Mission mission.

And then next to that, you have Lux, which is the AI pure system. So that for us is an opportunity to grow in sovereign because we have the expertise and the trust, which is super important when it comes down to sovereignty.

And the other part is the networking.

Yes. And the networking, obviously, look, we're trying to be simplistic in the way we tell stories so that it become super, super technical. That's why I said, Rami, go do that later. But it's like when you build your house, you're not going to start putting trimming around the doors and all that until the plumbing the electricity.

To me, the network is exactly that. Without the plumbing the electricity and the plumbing being the network in this case, you're not going to finish the data center. And then obviously, you have the cooling that goes with it. But networking is going to be that core foundation because without a robust foundation, you can't deliver the rest.

Victor Santiago with Evercore ISI. Antonio, could you help us better appreciate how customers are navigating this higher-priced hardware environment we're in based on the conversations you're having with customers?

Just given the recent strength in traditional servers you guys saw where prices are multiples of where they were from prior year, how are customers managing their IT budget allocations? Are they extending life of existing assets or reallocating spend from other areas?

I mean, look, of course, they're not trying to extend what they can. However, the need to modernize their infrastructure to be able to adopt AI is stronger than ever.

Look, you need to find -- if you're going to host this on-premise, you need to find the space and the power. The demand for power are pretty significant. We -- when you look at the Helios Rack, there is a chance depending on how you deploy, I think, you may need 700 kilowatts power.

That's whatever, 5 feet, Y, whatever. But the reality is that they all need to modernize and save space and save cooling. We can show customers that we can take 7 Generation 10 servers of any vendor for that matter and reduce it to 1. So that's a 7:1 reduction just on space. And then we can save up to 65% energy and then increase the performance by a factor of x in terms of core and memory density and so forth.

So that's why we see the momentum we saw in what we call traditional servers, which was -- the orders were up triple digits year-over-year. Of course, a lot was also driven by the cost. So cost is clearly cause of concern, but it's not the reason why they stop it. So they have not stopped. And then we have a portfolio with HPE Financial Services that actually helps them because with HPFS, we can come in, accelerate depreciation of those assets, remove legacy infrastructure and then free up the capital for them to reinvest where it makes sense. And in many cases, they actually pivot to OpEx versus CapEx. And so it's not just, I don't know, free up $3 million, let me buy $3 million of CapEx.

They actually shift to OpEx because they believe, particularly with AI, is probably a prudent way to start small and then start growing from there on. So that's why our portfolio is not just technology, it's also the financing capability, but it's all delivered also to one unified control plane, which is our GreenLake Cloud because everything I've done now for 5 years plus, doesn't matter how you pay, you will be using our GreenLake Cloud to manage it. And that includes a subscription model to the software associated with that infrastructure.

So there's a number of ways. But look, we have not seen a slowdown because of the cost. If anything, we have seen an acceleration. And we believe that's going to continue to be the case because even in '27, that cost curve will be more stable, but it's going to stay very, very elevated. So do I wait 18 months, 2 years, who knows, right?

This is Michael Tsvetanov with Wells Fargo. With your new networking product announcements, which you talked a lot about today and obviously, the integration of Juniper going quite well, it seems you're very well positioned to attach your networking alongside the rapid server growth you're obviously seeing. So I'm curious if you can just speak to the attach rates that you sort of see today between your compute and networking and maybe if you would expect that to trend moving forward? And then just generally, I assume as you customers upgrade their compute portfolio, you kind of need to bring networking and storage with it. But kind of what's the timing lag between those 2 things? So if you can just expand on that, that would be really helpful.

Yes. Well, look, we are very early in the process in terms of integrating the data center switching with the rest of the portfolio. On the AI front, that's happening at the customer side because, again, in the case of NVIDIA, you sell the NVL 72 and then we win the footprint above on our own architecture for scale-out and eventually scale across.

So there is no really attach of anything. You need to win the footprint inside the data center in the AI space. When it goes to the traditional enterprise or cloud, that's where the data center switching attached to the rest of the portfolio is very important.

But the way you do it is not just here is the switch. You have to integrate the entire life cycle. So what we are doing and we already kind of done is the integration of the life cycle provisioning management for networking, which we call it Apstra with Morpheus enterprise and then eventually with the full rack for private cloud.

At that point, you basically slide the switch into the top of rack and you're kind of done. That's -- the hardware part is the easy part. It's like no different than any other vendor top of rack. The hardest part is the software integration, and the team have done a great job. That's one part.

The second part of this is the integration of the software-defined layer of networking with Morpheus and VM Essentials, which is our virtualization and container environment and that's done. And so we did that in record time.

So now in our Morpheus enterprise software, not only we provide orchestration and brokering with the public cloud and on-premises, but also we provide the full software-defined layer from network to compute, obviously, virtualization all the way to the storage layer. And then we integrated there also the OpsRamp for multi-cloud and multi-vendor observability. That will drive an attach rate, of course, of networking with compute. And then on the storage side, as we now have the 1.6 terabit, there is a lot of workloads that are perfectly tuned to use Ethernet as the fabric inside the storage. And so that's going to be a Juniper QFX switch into our Alletra MP portfolio where it makes sense.

But once we integrate the Astra software with our switches and then with our control plane, then everything else is flow. So this is why we expect that the revenue synergy of this will start '27 and then continue. And the private cloud footprint is the perfect instantiation because a server storage network and an infrastructure with a software-defined architecture with GreenLake, all in one tightly coupled package, whether it's virtualization or AI because it's the same thing.

The only thing changes is really what type of GPUs and storage you use underneath. And in that case, it will be a server with GPUs -- and in other cases, will be the storage file and block for -- file an object for unstructured data. I think Wamsi has a question.

Wamsi Mohan, Bank of America. Antonio, in this world of agentic AI, where there is more attach of traditional server storage, why should HPE not consider maybe selling to Tier 2 CSPs in this world where the margin structure of the entire portfolio can be higher relative to maybe the opportunity of selling just AI-based servers?

I don't think -- look, the traditional servers in the context of hyperscalers and large service provider, that already moved in the cloud space a long time ago. Like if you recall, in 2017, I decided to stop selling that because the margin rates were inexistent. So they go -- they have -- in many cases, they have their own design to begin with.

In many cases, they have their own silicon, if you think about AWS with Graviton and so forth. So there are elements of the hyperscalers where we participate and will continue to participate is more the edge of the hyperscaler where they use products like us as the on-ramp into the large data center. right? And that's more the distributor element of the hyperscaler as a point of entry to the large cloud.

But once you are inside the large cloud, it's not like I'm selling ProLiant DL products or any other products. In fact, none of us, including our competitors sell into that. They go straight to the CMs or ODMs who build that for them because they have a unique design based on the footprint, how they lay that cloud with CPUs. And I think for them is another CPU recipe that now just sort of inferencing for those centralized. Look, there is an opportunity, of course, we will do it. But I don't think that's going to be the biggest opportunity in my mind. We're going back there and then we'll come back.

[indiscernible] With Loop Capital. Just to kind of double-click on some of the things you've already. talked about. In the last 6 months, you talked about the significant acceleration in demand. Could you elaborate a little bit more on how much of that you're seeing is due to inference on-prem and how you think HPE will kind of continue to outperform its peers if it is kind of in an on-prem world with inference?

Yes. Well, what we're seeing is that -- and it's a pattern that we see, right? Look, you have to see multiple data points over time is that when enterprise customers in particular verticals decide to go all in on the AI and they pick a mix of expert models. Once they attach that data to that model, they tend to want to have it under their control. And so yes, we are making things like private cloud with the security around punching an API out more secure.

But look, there are industries that even though you make that secure, they said, no, I'm going to have it on-prem, and I don't want anybody to touch it. So there are a number of verticals and use cases that will be definitely on-prem. And as they grow in deployment, the interest is going to grow. And that's why I said earlier, we believe that at least 80% of the demand by 2030 will be inference. And what we need to see is what's the mix between on-prem, off-prem, meaning large centralized environment.

But interesting enough, how many will be at the edge -- and we showcased, I think, on the floor, you have 4 products that they are designed specific for inferencing at the edge and large distributed enterprises. And you can see, look, warehouses of sorts, manufacturing floors of sorts, health care, right, where they need to process. I mean, look, there's a lot of regulation, they are HIPAA and everything else that putting around all the control is more expensive than just putting an inference server in their environment, be done with it.

I mean it's just math and physics. So we saw it. We believe we will continue to grow, but we need to see more about eventually how these architectures evolve and ultimately, what decisions to make.

He has a question, too, but if you can bring the mic and then we go back to Tim.

Just had a quick one for you, Antonio.

Erik Woodring, Morgan Stanley. Quantum. So we saw quantum computer out on the show floor. Some of your competitors that have talked about quantum benefit significantly when we think about valuation multiples. How relevant is Quantum to HPE?

Well, I will not comment on valuations of sorts because sometimes, look, you can go back to other valuations, right, of other company. I'm speaking from a practical point of view, and obviously, as an engineer, I used to be at least one.

I'm bringing a pragmatic view. Look, quantum is awesome for many things. But the scalability of quantum is not there. To put it in perspective, [indiscernible] there probably has, I don't know, 75 qubit is not on because you can't do it here. It needs to be in a vacuum location.

But if you really, really, really stretch it, we may be, as an industry, 1,000 qubits. And we have multiple technologies being tested for qubit creating the qubit. So that's a fight we don't participate. And that's why we are qubit agnostic. So now to do something very, very useful with quantum, you need at least 10,000 qubits.

So we are far, far away from 10,000 qubits. However, our approach was work, we can accelerate quantum by focusing on 3 things: Number one is the ecosystem. Number two is the network. Networking, again, comes to play, and I will explain why. And number three is the environment to develop quantum applications. And so on the ecosystem, you saw a number of vendors with us. Number two is the network. So what if you use the same principle of traditional computing, applying scale-out architectures to quantum.

So normally, if you want to get to 10,000 qubit, you have to scale up. Remember, HPE had and still has today Superdomes. Superdome is a scale-up system that today can scale to 64 terabytes of memory. you can put a lot of -- you can put an entire database there, right? And it was great at the time and still great for many applications for that.

But to get 10,000 qubits on that is going to take time. What about if we take 1,000 qubits, scale it out, that requires networking. And now with Juniper and other assets we have inside the company, including silicon photonics and other things, we can go enable that. And then number three, probably the most important one, which is how we develop quantum applications today, not when we have 10,000 qubits. And that's where we use traditional compute environments in this scale-out model to allow them to develop applications for those who want to build it -- and that's why the connectivity between the quantum system to traditional system like HPC or supercomputers are very important.

So you can start simulating this thing. The question is, will people develop scale-out applications in quantum or wait for a scale-up? That's the question, and that's a technology decision people would have to make. So that's my view, is the pragmatic reality. And the reality is, look, I'm old enough to have seen every inflection point in IT, mainframes to PC clients, to the Internet to mobile cloud to now AI.

All the other stuff still alive. Many of you work in banks here, you have a mainframe guaranteed, right? -- you still have applications that were developed 20 years ago. So -- and quantum will be another one. I think quantum will be great for cryptography and all the things. But ultimately, I think as a form of an accelerator to traditional computing.

We already connected a supercomputer to quantum computing. And so what happens is that the supercomputer is doing all this work. And they said, for this specific task, let me give it to the quantum. They do it faster for that thing and give the answer back so that the outcome of the whole thing goes out faster. That's how we think about it. Tim?

Sorry, Tim Long of Barclays.

Antonio, I wanted to go back to the kind of the core enterprise business. Obviously, servers, you went through some of the reasons why they're so strong. Just curious your take on why not just HPE, but the industry seems to be seeing less storage growth in the enterprise than compute server growth. So why do you think that is? And do you think at some point, there will be a catch-up? Or any perspectives there, that would be great.

I think there are a few reasons for that, Tim. First of all, on the training side, you can't think of storage the way you normally think about storage, right? I think about a large amount of boxes with traditional compute and a lot of SSDs that the fast object gets laid on top of it as a software-defined layer.

But that's in the training side of the equation. We go to enterprise, look, you already have data all over the place. And what we did with the team is giving an intelligent context to that data through the MCP aspect of this. But I expect data to grow once the inferencing continues to grow. So my view is that, that data will grow as the inferencing grows, not because of what we're doing today.

So if that inferencing kicks off, then it will go faster. And then the question is how it shows up. I don't think it's a traditional storage only. I think this memory of -- concept of memory and K-V cache attached straight to the fabric and the cores is going to be -- let me -- I don't think it will be a storage array only. Lou?

Quick question, Lou, and then we're going to wrap up.

Okay. I think it's pretty quick. Lou Miscioscia at Daiwa. Just obviously, you talked about the biggest point is really the supply chain. What about power and data center space in the U.S.? Will that be a constraint?

Power and data center space.

Yes, both individually in '26 into '27.

Yes. I think Louis, it's fair to say we are behind. Look, I'm sure you do the analysis and all of you will probably have different numbers to begin with. That's a given. But how many gigawatts have been announced? I don't know, 150.

We think by 2030, there will be 250 gigawatts of data center somewhat announced. I don't know how much of that 100% will be in production. But the biggest limitation today is power and cooling. And in the United States, we don't have space problem. You may have a community that doesn't like to have a data center in the back of their house.

But look, I think as I reflect the back history, this is also an opportunity to innovate entire -- around the entire ecosystem. There will be no new sources of power. I think it will be independent grid to power this data center. I don't think the vast majority of the energy will be connected to the main grid. And that also forces new innovation in gas turbines. I mean you saw Siemens Energy has using AI as a way to create next generation of gas turbines, obviously, nuclear power and small reactors of sorts.

We talk about putting AI data center in space. Look, we already have -- funny enough, HPE already has a very small AI data center in space. It's going around the earth, 256 miles above our head every day of the week. That's called Spaceborne 2 and the Astronauts are using that to do research on the international space station a small scale. And then here, probably by the end of the year, October, November, Artemis 3 is going to take the first rover on the moon, that compute module and the network to connect back to us is Hewlett Packard Enterprise, and that's Astrobotic.

So the first flip rover on the moon will be powered by Hewlett Packard Enterprise because before you show up there as a human, you need to have some infrastructure, right? And Hawthorne is going to control that rover through that connection. And so -- but yes, I expect Lou that -- and that's why United States has a huge advantage, put aside the politics, right? Getting into this faster, including regulations compared to other geographies of the world, I don't think anybody can really match us.

So we had a suggestion that the next investor event we have is going up to the International Space Station.

Yes. Good luck with that. I have -- I want to say 0 liability with that. I can take you to one of the space mission controls where actually we are going to power that as well. So the mission control where the rover is going to be controlled is also Hewlett Packard Enterprise. So it's a fun thing to do, but actually you learn a lot.

Yes. That's great. Well, thank you, everyone, for joining us here in the room and on the webcast, and thank you to Antonio.

Yes. Thank you for everyone that logged in through the webcast. I appreciate it. Thank you for spending the time with us in the next couple of days.

Welcome to Day 2 of Bank of America's Global Tech Conference. I'm Wamsi Mohan. I cover IT hardware here for the bank. Delighted to welcome HP Enterprise today to the stage. We have Shannon Cross, who's Chief Strategy Officer. A lot of you probably know Shannon Cross from her prior roles as well. So Shannon, welcome. Pleasure to have you here.

Thank you. Very excited to be here. It's a great time to be talking about the company.

Yes, absolutely. I mean this has been a pretty incredible earnings season from a hardware standpoint and you guys really knocked it out of the park. The question that we get a lot is how sustainable is this? And you expressed confidence by giving an outlook for '27 as well. So I would love to -- for you to frame that a little bit for everyone.

Sure. I think when we see what we -- obviously, we're very pleased with what we were able to report for the quarter, how we're looking at the growth that we expect, I mean, in '26, we took up our EPS target by 40%. And then we did provide a financial framework for '27 that I think underscores our belief that what we're seeing is durable and sustainable. What we've been getting in terms of questions clearly on the sustainability and durability side is far more on the server versus networking. I think networking good story, people understand it. We're -- and I'll touch on that a bit in the future.

So right now, I'll focus on server. I think I've been around this industry for a long time. And clearly, I think we're seeing the creation of a new TAM, the creation of a situation where servers are seen as a really critical important component of company's agentic AI journey. In terms of the data points and the reasons why we think this is going to be sustainable, when we talk to our customers, they're clearly at the early days of their agentic AI journey. They see that they want their data to be more on-prem. They want to do more of the compute on-prem, there -- we're seeing demand at the higher end of our platforms. So more memory, more compute power.

Clearly, there's a reason when you've seen ASPs increased as much as they have over the last year, that customers are still saying, hey, we want to buy, we're going to start new programs, we're willing to pay the higher prices because we clearly see that there's an ROI in whatever they're putting out there that justifies the purchase of the hardware. And I think that's something that's different than we've seen in the past. We're also seeing customers who when we had contracts that were not particularly advantageous for us because, remember, we used to have 90-day quote validity. We pulled that back in. We went back to our customers and we said, "Hey, we need to renegotiate. We need to look at this." They weren't all happy. I mean, I'm sure we would have been super happy in this situation. But they've seen what's gone on with the memory provider.

They've seen what the stocks have done. They've seen what obviously, some of the bonus payouts and things that are being talked about right now. And so they realized this isn't a server situation. This is an industry situation. So we were able to come to terms with a lot of those customers in mutually beneficial arrangements. And so I think that plays into it. I would say that we're seeing and we talked about this quarter, we're seeing triple-digit order growth in the quarter. So even in light of the higher ASPs, people are buying. We are -- we have the highest backlog that we've ever had, a record backlog. Our pipeline is multiples of our backlog. We -- the conversations we're having, clearly, customers are looking at what they're going to need. It's not -- this isn't just -- I think we've talked about for a while this idea of a data center refresh. I'm sure that plays in somewhat.

But I do think that they're fundamentally seeing that the server is driving a higher ROI. I mean I kind of think about it when we look at the company, like our company and we talk about it, we have cost of workforce, cost of our consultants. And then we, I think, are going to have sort of cost of whatever you call the agents within the server ultimately. And so again, it's just -- it's become so much more a part of the way that people are doing business. Now I know there's questions about pull-ins, we are seeing minimal pull-ins. Are there some? I'm sure there are, and we have heard of some cases.

But in general, we believe this is just sustainable demand. And we do track. We look for cancellations. We look for signs of double ordering. We're monitoring the situation very closely, but everything seems strong. And again, we're seeing now where the orders that we're placing are at ASPs that are substantially higher than earlier in '26. And so when you figure you leave '27 at that higher ASP, that also provides some underlying support.

Yes. No, that's a great framework to start with. Maybe just to remind a little bit right, like what would you say specifically changed over the last 90 days from customer conversations. Is that sort of an acknowledgment that this inflationary environment is just going to stay longer? Is it agentic? Like what is it that's kind of driving this elevated level of interest but now is going to sustain itself?

Well, I think -- and we all -- we think in 90-day increments, right? But I think a lot of the building blocks for what we're seeing now have been in place over the last 6 months or so. You could even go back to November when we were the first to raise prices and customers continue to buy, and so we continue to see sustained demand. I will say we are hearing more about agentic AI. I would say if you think about our PCAI business, when we first launched it, we had small, medium, large, extra large, and then we realized people wanted developer sizes so more like the extra small and we're seeing those extra small purchasers now moving up the stack and buying multiples of PCAI and also just buying bigger ones.

And so to me, that means they're finding agentic AI use cases that they're able to deploy. Internally, we're -- we have a multitude of use cases that we have and we've been looking at it very closely in terms of we've got grassroots, how do we put the enterprise framework on top of it. And part of my team is working on that. So I've been talking to a lot of our other Chief Strategy Officers or transformation officers about what their journey is. I think we're all sort of in the same camp, and we're all moving forward, we see significant opportunity. And again, underlying that is the server, the data center. I don't want to sell networking short. I think there's a significant opportunity for networking as well, and we're super happy to have Juniper in the fold. So I think that's part of it.

And just in general, I think the idea that customers continue to come and like I said, triple-digit order growth in the quarter, no signs of slowdown. And so I think all of that is kind of playing into the opportunity. I mean I do think one of the questions we've been getting at this meeting is -- or in the conferences we've been at is basically where is the money coming from? I think that's a legitimate question over time. But I think that right now and certainly for the foreseeable future, technology is what's going to enable this incredible improvement that we should see in productivity, and we're right at the center of that.

Yes. Yes. And anecdotally, like we've heard about basically parts of whatever was allocated within corporate, within finance, within sales and marketing, within all these other functions of HR. Money is coming from all of those to kind of support a lower cost structure and higher productivity essentially for an organization. So kind of aligns with the increased use of agentic AI and enterprise. Maybe, Shannon, you can talk about how, as a company, you're thinking about the inflationary environment and how you're managing that. I mean I think there's a lot of concern in the market that for particularly hardware OEMs, it's going to be a really difficult time with the rate and pace of DRAM and NAND price increases.

So how are you managing that? And what's kind of your strategy on a go-forward basis? Are you doing anything with LTAs, are you doing anything in terms of procuring how much supply do you have access to? Because I think supply, I think you said it was a gating factor in growth.

Yes. I think -- I mean, one thing to keep in mind is HPE has been in this business. I mean, we'll go back to Compaq. We've been in it for decades. And so we have very, very long close relationships with all of the component suppliers. We've had LTAs for a long time. We've had various different agreements. So are people leaning a little more heavily into them? Sure, but it's not like this is a significant change in the way we do business with our partners. And I do think that our long-term relationships play in here. I also think the memory providers want to have diversity of customers. And so one of the areas when I talk to the Head of Supply Chain, they're definitely very cognizant that they want to keep us healthy and our competitors healthy, frankly. It's an interesting kind of position.

So I think from that perspective, we're benefiting. In terms of managing the margin side of it, we were the first to raise prices back in November, everybody else followed. We've continued to raise prices. Everybody -- the entire industry changed sort of the quote validity period. And then, again, the conversations, and I think this was -- it's a testament to the relationships and the trust our customers have in us. When we went back to them and said, "Hey, that quote we gave you 90 days ago, we can't honor it because it's -- the prices have moved so much." They worked with us, and we worked with them. And I think that goes back to very tight, long-standing relationships. When I got to the company, I think that was one of the things that I found very positive relative to maybe how I thought about the way the world works is that our customers are sort of the who's who of, I don't know, everywhere, like all industries, we're global.

It's just we're kind of there. And they do look to HPE as a trusted resource. They respect us. They take our advice. They love our technology. And so I think all of that kind of plays into the ability for us to have the conversation with customers and then have the positive outcomes that we have seen over the last few months. So all of that kind of comes in, it's just -- it's talking to them -- talking to our supply chain all the time, talking to all of our partners and working with them. And it's -- I think it's been a -- it's a tough -- I mean it's a tough environment. Don't get me wrong. And as Antonio said on the call, if we had more supply, you would see upside because demand is not an issue. It's supply. But I think we're managing through it as good as could be expected.

Yes. No, I mean that's actually impressive to see the margin results that you guys are delivering in the face of this. Maybe sticking with servers for a minute more before we switch to networking. I do want to ask about AI servers and storage because it feels as though that the AI servers you guys have been selective about the type of deals that you do, and not maybe participating in the super competitive end of that spectrum, whereas on the storage side, I would love to also get your perspective if the server strength is translating and if there is more yet to come on the storage side? And how do you see that group playing out?

I think when it comes to AI server, I think we've been pretty upfront with -- if you go back 2 years ago, we've announced that we're going to buy Juniper. It's a $14 billion acquisition, largest company has done, and we levered up to do it. And so then as you sort of move through the AI server journey, we wanted to focus on making sure that we maintain investment grade that we paid down the debt that we were very prudent with the way that we approach working capital and that we also focused on where we thought we had the right truly to win and to add extra because when you add extra, that drives more margin. And so from our perspective, and I think it's played out, we focused on sovereign and enterprise and we do -- I mean, we bid for hyperscale deals. We will play in there where it makes sense and it fits our framework.

But so far, I think our strategy has definitely been working. And clearly, from a Juniper perspective or from a capital -- from a balance sheet perspective, if you look at it right now, we're now going to be at 2x net leverage by the end of '26, which is a year ahead of our plan. So super happy about how that's working out. And so I do think there are areas that you should remember, we'll get to networking. But I think don't disregard the fact that when we think about the hyperscale opportunity and the large model builder opportunity, networking is going to play a significant role. We've come from a very small position in what we call networks for AI just a few quarters ago to now talking about having $2 billion -- over $2 billion in cumulative orders by the end of '26 so we may not lean super heavily into the lower margin opportunities for hyperscalers and AI server, but we're certainly looking at what we can do from a networking perspective.

And we're also interested -- we work very closely with NVIDIA, but we're also very interested in what we can do with Helios because on the AMD side, we actually have the Juniper technology that's been designed into the system for scale up, and then we have our server technology. And so that, I think, may be an entree for us to be maybe a little more aggressive on the hyperscale server side as well.

Okay. And what about storage, are you seeing any pull in?

I think it's still early for storage. We're happy with what we're seeing in terms of Alletra MP demand. We had triple-digit growth there for -- I can't remember what number consecutive quarter. I mean, we're doing well in that space. But I think it's still coming. And what I really do like though, is the quality because I mean we're not the biggest storage provider out there. I mean I don't think it's a surprise to anybody. But when I talk to the customers, and I talked to the leadership in that business, it's really the technology that's pulling customers along.

They're very happy with the idea that they can have one platform that has file block and object on it. We are seeing both and this is really important storage because another thing I didn't quite realize when I was on your side of the table was just how sticky storage is, it's really hard to rip and replace. And what we're seeing here is not just a refresh of our installed base, but also significant new logos coming to the platform. So it's a smaller part, but it also just like networking has a really nice margin profile.

Yes. Yes. So maybe now switching to networking, right? So clearly, you're now showing some better traction with the Juniper acquisition. And if we just think back to SAM versus now? I mean, you obviously -- I think people felt like your guidance at SAM might have been conservative feels like it is conservative, right? So what are some of the opportunities that you think were not properly calibrated by the market from a Juniper standpoint. Let's start with the revenue side and we will talk about...

Well, I think it's fair because we have consistently raised our revenue expectation through the year. So I'm not sure it was just market. It was how we were looking at things because I do think -- look, this is the largest acquisition the company had done. We had to bring together sales forces, we had to bring together products, which we still are. We had to bring customers along on the journey with us. And so I think we approached guidance for '26 from a networking perspective very prudently, clearly too conservatively given what we're seeing. But I also think that things have played in that are better than we expected. So clearly, campus and branch is doing well. Wi-Fi 7 refresh. There's significant demand there. Our orders were high 20% this quarter. So we're seeing positive moves there.

I think from where there's really excitement and I think probably we were too conservative as you think about networks for AI and the opportunity in data center scale out, scale across what we're seeing in terms of the routing opportunities is strong. But again, in the $2 billion, it's both data center networking as well as data center interconnect. So there's a combination there. And I think the -- whether Juniper could have gotten there themselves, I think having HPE for the scale and the scope, some of the introductions has really helped. And I mean we're at the table with a lot of the large logos that you guys would all be very excited about because they do want alternatives.

And we also -- we're time to market -- first to market with Tomahawk 6 in terms of direct liquid cooling and we're 100% direct liquid cool there. And that's something we started investing in months ago. We started investing in the Helios stack many months ago before it was really maybe something that everybody else wanted to lean in on. So I think that it's a testament to the Juniper and Aruba combined management team that they had the foresight to put the money and the dollars in those places. And it's -- we've made the right bets, I think, and they're coming through.

But if you went back to October, a lot of that was just in very infancy stage. So we weren't necessarily sure where that was going to play out. But I think overall, the reaction has been extremely positive. The combination of the sales force, I mean, that's always kind of a risk, right? You have one salesperson at one account, and then you got the HPE and the Juniper and you put them together, you figure out who's the best, either you keep both or you probably don't, but all of that can cause disruptions. And I think we've managed it exceptionally well. And that is one thing, too, I would say, while we didn't want the extra time, and obviously, some of it was pencils down as we were dealing with the DOJ and all of that. I do think that this integration has been extremely well planned out, gone through -- there are issues. I mean everything is going to have an issue, but I think it's been very smooth relative to what could have happened. And I think that's a testament to the leadership that we have.

Yes. No. It's -- I mean your execution has been obviously very strong here. And it's a complicated deal. It's a very big deal and complicated portfolio emerging, technology emerging. So great job on that. I guess, if I -- you mentioned like data center interconnect. What's the sort of IP that you're able to bring to the table on DCI and how do you think about that opportunity?

Well, we have our own silicon. And I think maybe that's something that people don't necessarily appreciate as much, whether it's parts of campus and branch, whether it's routing, obviously, we work with Broadcom in other areas, too. But HPE has and Juniper has their own silicon. And I think it does create a competitive differentiator that again, I probably underappreciated it. So I'm guessing it's maybe not necessarily as well understood out there. So that's part of it. I think AIOps and some of the technology we have, obviously, the Mist platform is extremely popular and provides customers with significant savings and better quality of service and just their experience.

And some of that, we're able to bring over just put in, and I think that's pretty key. And Juniper has been doing this for a very long time. I mean, they helped to build the original one of the Internet for those of you who -- I remember back then, but -- some people that investors get younger every day or every year. But yes. No, I think it's just -- it's the quality of the IP too. And I think that's something where maybe it hasn't had the opportunity to shine as much as both the market and the acquisition and the support we've given them have allowed them to do.

When you think about the scale-up opportunity, is there room for also scale out within sort of within the AMD system that you refer to?

Well, I mean we'll provide the technology there as well. But I think the key here is this is the first opportunity for us to do scale up, right? And I mean we had -- we had Slingshot. We had some -- again, that goes back to the Cray technology for supercomputing. But here, I mean this is with an AI server rack that we can do scale-up. And then, of course, we could do top of rack and scale-out as well. That would be -- that's obviously more on the Broadcom side.

Yes. Maybe pivoting a little bit to margins. Your networking margin guide is pretty strong. I think when you look at considering where pre-acquisition Juniper margins were where HPE's margins are so really, really strong performance. What's driving some of that? I know you've been leading Catalyst. There's been a whole bunch of other things that have been happening at HPE. So how should we think about the trajectory and the step-up here in margins?

I think there's -- part of this is, obviously, you have the synergies coming together and we're at or ahead of our synergy targets. So that's possibly like what we're seeing, what we thought was going to happen is coming through. So I think that's been a big positive in terms of bringing the companies together. I think there's been a focus, I want to make sure everybody realizes we do appreciate that we spent $14 billion on Juniper from an HPE perspective, so we're not going to starve the company. We have continued to invest and that's seen in what we've talked about with Helios and what we're seeing in terms of scale across and the silicon investments and everything we're doing there. So we do continue to invest while we're getting these margins out.

I think gross margins, there's been some benefit from that perspective, too, in terms of bringing the supply chains together and all of that. And then scale, frankly. I mean, you get scale leverage as we're growing revenues. And we're talking about around 10% revenue growth for Juniper for this year, and we guided to 8% to 12% for next year. So within that, there's opportunity. And then the Catalyst program, we're bringing in, I think, OpEx discipline, which is key. And we do -- we're not double counting. We are very careful that we have the synergies and we have, obviously, what we're doing Catalyst. But I think overall, from a company perspective, we're thinking about how can we do processes better? How can we then layer on AI because you don't want to just throw out like, "Hey, go use Copilot or hey, go do this." You have to actually change how people do work. And I think that's a pretty key part of it. But yes, no, I think there's -- and I would give Marie Myers, huge credit, our CFO. She is exceptionally focused on making sure every single dollar we spend drives value, has an ROI.

And I'm not saying it wasn't part of the core fabric of the company before, but it is absolutely something that we talk about, focus on, track very carefully. And I think that's a mind shift in the company that I think is very beneficial because everything I do at the company, I'm constantly focused on, again, given my history, given shareholder dollars. Is there a return? Are we doing -- when you care about your employees, you care about your customers, absolutely. But we definitely need to think about what can flow through to the bottom line. And I think you're seeing that in terms of the EPS guides that we've given for both '26 and '27.

And on the '26, '27, particularly '27, are you baking in continued price increases and inflationary environment as you think through because it doesn't -- it feels like it's going to be that way, but I'm curious how you'll talk about it.

I think what we've said is we expect to continue inflated environment. We're not getting any specifics on units versus pricing. But we expect to see continued pressure in terms of the supply that's out there as you look at next year. Clearly, DRAM, it's over 60% of the BOM now. I'm not sure exactly where it's at. So that's an area to watch when you think about what you would expect for pricing. There are other inflationary parts, but that's clearly the biggest focus. And I think that's on the server side. I mean, in terms of networking, there's a bit less pressure there. But clearly, from a supply chain perspective, given the significant ramp in demand that we're seeing, you have to kind of manage that through. I mean it's not the same, and I think there's been a lot of learnings, but think back to some of the challenges that everybody had in AI servers when everything was ramping and there were just shortages of various random pieces. I think we're working very carefully to try to alleviate any of those concerns before they really become an issue.

Yes. Now you also completed your H3C divestiture, and that's been great. I think those -- if you rewind 2 years ago, and people had no idea if this money would ever come your way or not and obviously...

Yes, team did a great job.

Yes. And you guys have executed on that, so kudos to you. Now that you have that, as you think about maintaining a certain level of leverage and then capital return, how are you thinking about that?

Well, I don't think there's been a change to how we're thinking about capital return, except that we brought it forward a year. So we had said that we -- by the end of '27, we get to 2x net leverage and then kick in our 75% return of cash to shareholders. We are now bringing that forward to the end of '26. So you can expect that we'll be out buying back stock more aggressively starting in '27 as well as maintaining our dividend. And when we announced our dividend increase. I think it was SAM, I can't. Anyway, whenever we did that, we talked about the fact that we'd like to -- our goal, obviously, it's a Board decision. Our goal is to be a dividend growth company so that's how we think about that as well.

Okay. Well, we're coming up on time only a couple of minutes left. So Shannon, any message you want to give investors on how to think about HPE. I mean, I'll say that when the stock was at $20, we thought it was super undervalued, it was one of the stocks that told people like it was something that could double within my portfolio, like the stock that would be a potential double and you're already 3x. So now, I guess, it still seems that the revisions are outpacing any expectations that people might have had. So would love to put that in context and your message to investors.

Sure. I think -- I'm super excited. I joined the company 2 years ago. I saw the vision that Antonio had about what we could create. I think the Juniper acquisition has been a home run and will continue to benefit us. And it's beyond just thinking about what Juniper was when we bought the company. It's where Juniper and the networking industry can go over the next several years. And the key position that networking will play as sort of the orchestration layer of the data center and what we're doing in AI data center. I think on the server side, we are sort of in a new renaissance for server again, I've been around a long time. I think this is beyond just your typical cycle. I do think that servers and the value of servers are changing, and I think that, that's been reflected in what customers are doing.

And then I also would say underlying all of this is a level of operational discipline that we placed in the company that I think, again, the Catalyst program is becoming more sort of the fabric of how we run the company. And so I think that also provides us with support from a profit perspective. And then overall, we've got the cash flow, and I think that's something that's going to be really important. We feel very comfortable with how we're managing cash. And we're -- now that we're kind of through paying down Juniper, we're going to be returning it to shareholders.

And I think that will be helpful as well. So I'm super excited. I don't think we're done. I think there's a ton of opportunities as we look forward. And I think we're just starting this journey. And I think we're in an incredibly good position. As Antonio says, we've got hybrid cloud, server and networking, and that's kind of the core of where people are going to be investing going forward.

Amazing. Well, with that, we'll have to wrap. Thank you so much and really appreciate you being over here. Thank you.

Thank you, Wamsi.

Perfect. Good morning. Good afternoon. Good morning, everyone. Good afternoon, I guess, to be on the webcast on the East Coast. Really delighted to have with us Shannon Cross, the Chief Strategy Officer, Head of Investor Relations and AI deployments at HP Enterprise. I'm going to add things to your title, Shannon.

Thank you. I have many hats.

You have many hats. Perfect. Well, really appreciate the time and being here. We don't have a lot of time, but you folks had some fairly, fairly impressive numbers last night. I think the part that surprised me was the free cash flow numbers that were out there for 2 years ago, got pulled into this year. I think same with EPS and profits.

Maybe spend a couple of minutes just recapping the earnings, you guys -- what you folks are seeing from a demand perspective, and then I'm going to dig into a couple of questions on service and networking.

Yes. And thank you very much for having me here. Hello to everyone. When I think about the quarter, we were very pleased, as you might imagine, both with what we were able to achieve as well as our guide. I think there were several areas that we've been working on for a long time that came to fruition in terms of our plans. Beyond that, we're seeing strong demand from our customers. And so overall, just came together, I think, very well in terms of this quarter and then looking forward.

Specifically, if you take the various categories, I think starting with networking, we did about 10% revenue growth in networking in the quarter. We're guiding to around 10% for the year, and our longer-term outlook is 8% to 12%, which we gave a fiscal '27 framework basically. And so within networking, we're seeing very strong demand. Our order growth is quite high. Campus & Branch, Routing and Enterprise data centers were all in the 20% plus range.

We see a significant opportunity in our networks for AI, which we took up -- we have a cumulative year-end '26 target. We took that up to $2 billion. And really, what we're seeing there are hyperscalers, enterprise, people who are very excited about what we bring to the table with the Juniper technology, what we can do with Tomahawk 6.

One of the things I'm really excited about is that we've been able to take our R&D from the two companies and kind of combine them. The Tomahawk 6 QFX platform that we've announced uses direct liquid cooling. We're leveraging the direct cooling technology we have from Cray there. So overall, I think it's a testament to the integration of the company.

And then if you go into Routing, clearly, there is significant opportunity for us on what is scale out effectively combining data centers. And that with the PTX platform has been really well received, and we're very happy with the logos we're talking to around that. Security was up 18%. So that was positive. And then we had the scale across with the QFX platform.

So overall, things, I think, in networking are going well. And the Juniper integration is at to ahead of schedule. And so when I first came to the company, we just announced Juniper, this company had never done an integration of this scale. And I will tell you the planning that went into it. The extended period of time we had to do planning helped probably a little bit, but we could have done without it. But in general, we're really pleased with how everything is coming together. So that's networking.

I think on the Server side, traditional Server, it's really interesting. I truly believe there's a fundamental inflection point going on, and there's a new TAM being developed. with regard to Agentic AI.

I mean we're seeing customers with ASPs that are significantly higher than they were 4 quarters ago, coming in with new use cases. They're buying up in terms of compute power and memory requirements on the device. And so to us, this feels very sustainable, durable, and it's a change in the way people look, I think, at their server infrastructure.

And then on the AI server business, we continue to play in the areas that we think we have the most opportunity, both from a margin and a cash flow or working capital perspective, which is enterprise and sovereign. We will look at hyperscale deals where they make sense, but I think we continue to address that market very prudently.

And then finally, I would just say, from a cash flow perspective, we're really excited about the cash that we were able to generate in the quarter, $915 million. It was up $1.8 billion year-over-year. So it was a significant improvement from that perspective. And I see our working capital management and, frankly, just our operating profit really flowing through to free cash flow.

And we did take up our net leverage target in terms of when we expect to hit or 2x to the end of this year. We had been at the end of '27. And as we've told everyone, our plan is to return 75% of free cash flow to shareholders through dividends and share repurchase as soon as we get to the 2x net leverage target, which means we'll start that early in '27.

Perfect. Thank you for that. One of the things I got a lot last night, and I'm sure you got this a fair amount, too, which is just trying to understand the durability of the growth you're focusing, especially on the traditional server side of the market, right? I think revenues were up like 33%. But orders, I think, were up triple digits.

I mean the question is like, is this just a big pull-in? Or how durable is it? Just anything you can talk on that front would be helpful.

So we -- as you might imagine, for those of you who don't know, I used to be a sell-side analyst. And so I push very hard with the team on things like pull-in and double ordering and all the things that I've heard about 20-some-odd years on Wall Street, right?

So we do a ton of analysis on what we're seeing in terms of the order book, what we're seeing in terms of our pipeline, conversations with customers. At this time, we're seeing minimal pull-ins. I wouldn't say we're not seeing any because I think that would be kind of silly. There certainly are probably a few. But generally speaking, what we see is sustained demand.

And the triple-digit orders were very positive. Underlying that, there was some AUP increase, but there was also very strong unit orders. And so when we look at what people are using it for, there's Agentic AI use cases, obviously. There's traditional data center refresh that's going on because you have effectively the ability to replace several older generation servers with one, and that saves on space, cooling, power, et cetera. So that's also helping.

And we're seeing customers -- and I've talked to a number of our EC leaders, our executive committee leaders who deal with customers all the time. And they're hearing from people about literally new use cases and also repatriation of data on-prem.

Again, I covered the space for a long time, and the cloud came and everybody said things would repatriate potentially at some point. And we do have hybrid cloud, which I think my company was one of the leaders in and is one of the leaders in. But we are absolutely, I think, starting to see customers say, because of regulatory, because of compliance, because of data latency, data security; we're going to bring things on-prem.

And then the other thing that I think is very interesting and it's early days, and we're candidly doing it internally as well; is looking at the tokenomics of what's going on in terms of all of this Agentic AI and inferencing in that. And how do you do it most cost effectively. And if you can manage to know sort of what you need on-prem, you can use open source models, you can use much more targeted models, you can use our PC AI offering, you can use traditional servers.

And I think that is something that probably is a bit underappreciated in terms of customers right now where they're at, understanding what their token costs are because we are in that journey as well. And then what's the best way to optimize their IT spend around that.

So I think that's another area where you'll probably see some more shift on-prem. I mean it's a great time to be in the hardware space. I would say that's a long time coming in making that statement, but it's very exciting.

And I think the other thing that I would just say is the combination of HPE server and HPE networking is something that I think is going to be really interesting over time, whether it's the Helios stack that we're doing with AMD or it's what we can do in the data center cross-selling because remember, networking has a better margin profile. I think the opportunity to continue to go up into the right is pretty significant.

Maybe just on networking, and we'll go back to servers as well. But on the networking side, right, one that was folks like 21% operating margins, give or take, last quarter. But the guide for '26 and then '27 actually has a really good step-up in networking margins getting back to this mid- to high 20% range, I believe. or at least improving from the levels.

What is driving this margin expansion in networking? Is it the Juniper integration? Is it revenue synergies?

Well, I think in general, we're very pleased with what we're seeing in terms of the operating margin. Keep in mind, we have -- we're having a very strong quarter and a very strong year. And so along with others in the industry, we are seeing an increase in variable compensation. So that is something that you don't think will necessarily repeat in the coming year depending on how the company does. So that is an area where we would expect to see some improvement as you look at '27. Now it's going to stay elevated in '26.

Beyond that, you do have the Juniper synergies. And again, those are at ahead of schedule, very pleased with how that's going. And then I think from a -- there are some areas where we're actually seeing some Catalyst savings as well. So that plays in.

And then just continuing the revenue growth, I think, is going to be really important as you look to '27. And we've said 8% to 12% for networking because you'll get scale leverage off of that. And that should really help us as we think about the overall operating profit.

But I think the business is being run very well. It's -- I would say the management team there is very prudent in terms of where they spend money. We definitely have a lot of oversight, which I think is good. I didn't cover Juniper, but I've heard stories about they had a lot of things that they wanted to invest in.

And I think we're -- the positive here is they're able to leverage our scale and our scope and our supply chain and our sales force and everything else that we kind of brought to the table, and it gives them the capacity to really invest where it drives incremental revenue.

Are you seeing signs of revenue synergies where you're able to bring Juniper along in deals as you sell traditional servers, AI servers? And that are you seeing net revenue synergies unlocked at all from that asset?

It's early days, I would say, but there are anecdotal stories and areas where we have been able to -- either HPE has brought in Juniper or Juniper has brought in HPE. So I think that the sales forces are learning how to work together and how to drive that.

I do think that there's -- one of the products that I'm very excited about, again, very early, we'll have to see how it all plays out is the Helios rack stack from -- it's the AI stack from AMD. And Juniper is actually designed in on a scale-up basis. And so we have Juniper trays in there. We'll have HPE's server technology in there.

I think it's going to be a really interesting use case. And again, the hyperscalers have all committed to silicon diversity. So over time, we'll see how that works. But I think we have a really good shot there.

Got it. If I zoom out a bit, servers are doing very well for you guys. Your peers are kind of seeing the same exact growth rates, if not better in some cases. Demand is fairly robust for a lot of companies. But at the same time, I think we look at IT budgets, like these don't seem to be growing triple digits or high double digits.

That would be nice.

That would be nice. Where do you think the money comes from for all this stuff from an IT budget perspective? Or where enterprises getting the money to spend on all this stuff?

I don't know. I think that there's probably a mix shift away from lesser important areas, and they're probably sweating some technology that they don't need quite as significantly or at least at present. I do think it's interesting that servers used to be what was sweated. And so apparently, that's not the case right now, which is really nice.

We're still seeing strong demand on our Storage side. I mean our Electro MP orders were up triple digits. Our revenue was up triple digits. And I think that's a testament to, I would argue, leading technology that's positioned toward AI or that's positioned toward next-generation data centers is an area where investors continue to -- or not investors, sorry, where customers continue to invest.

I do wonder -- I mean, obviously, there's labor savings. I mean you see it, you hear it across the Valley certainly in terms of what people are doing to be able to invest more aggressively in AI.

And beyond that, there's -- the one thing that we look at, and maybe this is a fair way of thinking about it, we look at AI internally because I help to lead the AI strategy of the company. And we look at it as, yes, fine, a cost savings optimization, but so much more of it is literally let's change the process, let's try to improve both for the employees as well as the customers, the experience. And we're seeing benefit there.

And I think the other thing I try to emphasize at the company with Catalyst is it's not just a cost-cutting exercise. It is literally a way that we can reallocate resources and really drive better outcomes for our customers and, frankly, for our shareholders over time. And it's funny because when I was on sell side, people say, "Oh, we're going to reallocate resources." I'm like, "Oh, okay, that makes sense."

It's like it's really hard. I mean this is not something where you just snap your fingers and things move around, people's lives are affected in that. And there's a significant amount of training, and they call it management of change where you have to go in and actually make sure everybody is sort of on the journey with you.

But I think that, that's really where you're going to see increasing investment. And again, a lot of that is -- goes back to hardware and what sort of underlies it. Obviously, software and other things play in there, too. But I think we're in a good position.

The other topic -- other dynamic on this is really -- you obviously have a very robust set of numbers that you've guided for the next couple of quarters, next 18 months really. How do you think about component availability? And how much of the memory or other things you have spoken for already versus you still have to go out and procure?

Well, we have long-term agreements. I mean we've been in this business for a very long time going back to Compaq. And I mean, I'm sure some of the components probably go back to oscillators, if you go back 80 years. But I think the key here is what we have guided to is what we see line of sight to do. Now we have a significant backlog, and we have a really big pipeline. Our pipeline is multiples of our backlog sort of across the board.

And this is one of those quarters where everything looked good. It was the -- I mean, pretty much everything was really solid. And so when you think about that and you think about our component environment, if we can procure more components, it will drive upside. But we're very comfortable with the numbers that we put out and the growth rates and the expectations that we have for the company.

Again, we're at 8% to 12% for both networking as well as Cloud & AI revenue next year. Our operating margin guidance is 12% to 16% operating margin and our EPS growth is 12% to 16%, yes, 12% to 16% EPS growth. Sorry, it's been -- it was a very late flight last night. So at the end of the day, we are very pleased with what we're seeing.

And it's incumbent upon us to execute. And that's what I keep telling everybody in the company. We -- I will tell you, we have really good assets. I've said that since the day I walked in 2 years ago. We just need to be consistent and execute. And I think we've gotten on the path where we can do that. And it's also helping that the underlying market is very strong.

So -- but I do think we are in a unique -- with networking, with Hybrid Cloud, with Server, with our services capabilities, with our financing capabilities; we are the only ones that can bring all of that to table. And we haven't even talked about GreenLake, which is the platform on which people are able to actually purchase and utilize our technology from sort of a -- on a capacity basis.

And what that provides, especially now when you think about the cost of a server and what servers have done, I mean, prices are up significantly, and you could have effectively sticker shock. But if you're able to buy it on a ratable basis as you need it, I think that makes it a lot more palatable. And again, it allows customers to do things that are a cloud-like experience on-prem, which certainly in the Agentic space right now with the concerns around data, I think, is very attractive.

On the AI system side, right, I think you talked about a $5.9 billion backlog that you're sitting at right now with AI systems, you always talk about "Hey, the focus is enterprise and sovereign." You said this earlier, "We look at hyperscalers that makes sense, but we don't want to be aggressive there."

Does that start to change as maybe other companies back away from it, like a Supermicro, for example, where the profits get more attractive, where it makes sense to engage with new clouds? Or is it really the focus on the enterprise and sovereign?

I mean, look, I think we're happy to work with anyone, and we will evaluate deals, and we bid on things. I mean, certainly, where it makes sense. I would say customers -- some customers are starting to look for alternative suppliers.

The other thing you have to keep in mind, though, is there's a finite amount of components. So if we're sitting on a bucket of components, we have a backlog, we have a very strong order book, and we have existing customers and loyal customers and maybe some new customers that we want, you have to really do -- it's one of the things that I think I'm seeing right now is a lot of account strategy about where you put the precious components you have and how you drive the best shareholder return for what you do with those components.

So make sure they go to the highest margin or you make sure they go to the customers that have the most potential long term. I mean you have to really think about some of the stuff strategically. And I think that's an area where we're working on and we've become more nimble. And I would just throw in, I think that COVID and the tariffs actually helped probably not just our company, but other companies become far more nimble in the way they address the market.

Perfect. The red light blinking over there. So I think I'm up on time. But maybe I'll turn it back to you any closing comments, anything we did not touch on that you want to flag our way?

No, I think we're very pleased with the fact that we're 2 years ahead of our plan that we put out. I think it's a testament to the hard work that the company has done and frankly, the assets that we have amassed, whether it's on the networking side or what we developed in AI server and then leveraging, frankly, our traditional Server business.

So I think we're just getting started. I see tremendous opportunity for this company over the next several years. And whether it's catalyst on the cost and the optimization side or it's everything we can do from a revenue growth standpoint, I really do think we've reached an inflection point.

Perfect. I look forward to the next fiscal '28 targets now.

Good day, and welcome to the fiscal 2026 Second Quarter Hewlett Packard Enterprise Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Paul Glaser, Head of Investor Relations. Please go ahead, sir.

Good afternoon. I'm Paul Glaser, Head of Investor Relations for Hewlett Packard Enterprise. I would like to welcome you to our fiscal 2026 Second Quarter earnings conference call with Antonio Neri, HPE's President and Chief Executive Officer; and Marie Myers, HPE's Chief Financial Officer.

Before handing the call to Antonio, let me remind you that this call is being webcast. A replay of the webcast will be available shortly after the call concludes. We have posted the press release and the slide presentation accompanying the release on our HPE Investor Relations web page. Elements of the financial information referenced on this call are forward-looking and are based on our best view of our business and the external factors affecting us as we see them today.

HPE assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-Q for the fiscal quarter ended April 30, 2026.

Figures used in verbal remarks are rounded for ease of discussion. For more detailed information, please see the earnings materials as well as disclaimers relating to forward-looking statements that involve risks, uncertainties and assumptions. Please refer to HPE's filings with the SEC for a more detailed discussion of these risks. For financial information that we are showing on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website.

Please refer to the tables and slide presentation accompanying today's earnings release on our website for details. Throughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis. Unless otherwise noted, all financial metrics and growth rates discussed today are non-GAAP and EPS refers to non-GAAP diluted net earnings per share. Certain financial information featured in the presentation today has been normalized to include Juniper Networks results as of the beginning of HPE's fiscal 2025. Antonio and Marie will reference our earnings presentation and their prepared comments.

With that, let me turn it over to Antonio.

Thank you, Paul. Good afternoon, everyone. HPE delivered an exceptional quarter with record-breaking results, disciplined execution and clear proof that our strategy is working. We made excellent progress in our Juniper integration and in our catalyst initiative with both running ahead of schedule.

Revenue in the quarter reached $10.7 billion, up 40%. Non-GAAP earnings per share of $0.79 increased 108%, significantly above the high end of our outlook. We generated $915 million in free cash flow, an improvement of $1.8 billion, driven by strong cash from operations and improved cash conversion cycle performance. Demand was even stronger than revenue growth. Orders more than doubled, significantly outpacing revenue, resulting in a record company backlog.

Customer investments in agentic AI and AI inferencing accelerated. We also saw broad-based demand strength across the portfolio driven by ongoing investment in compute infrastructure modernization, unstructured storage data growth and private cloud adoption for AI. Last year, at the security analyst meeting in New York, we laid out our strategy and fiscal 2028 financial commitments. Based on our strong first half 2026 results, our record backlog and our visibility into the second half demand, we now expect to deliver $3.40 in non-GAAP earnings per share at the midpoint and at least $3.5 billion in free cash flow in fiscal 2026.

That is 2 years ahead of our committed long-term plan. Marie will provide more detail on our third quarter and full year fiscal 2026 outlook as well as our fiscal 2027 framework which is grounded on durable customer demand and the profitability of both business segments.

Now let me turn to our business segment highlights, starting with networking. I am particularly pleased with the progress we are making on the Juniper integration. We are ahead of our integration milestones and synergies commitments, and the unified portfolio and sales force are already strengthening our market position and growth momentum. Our combined networking portfolio and vision for self-driving networks is resonating with customers and that enthusiasm, together with strong go-to-market execution is reflected in our results.

Networking delivered revenue of $2.7 billion, up double digits on a normalized basis with orders growing significantly faster than revenue. We saw increased demand in Campus & Branch network for AI and security. I am pleased with the strong demand we saw from enterprise customers for our networking portfolio. Campus & Branch orders reached a new record high, growing in the upper 20% range on a normalized basis.

We won multimillion dollar deals across multiple verticals, including retail, automotive, government and technology. WiFi 7 access points sales increased more than 7x reflecting a clear shift toward network modernization. HPE for the 20th time in a row was named a leader in the Gartner Magic Quadrant for enterprise wire and wireless LAN infrastructure. We believe this independent industry analyst validation reinforces how far ahead we are in enterprise networking beyond even incumbents.

Customers trust us with their most critical network and infrastructure decisions as they expand their digital initiatives and AI investments. One customer taking advantage of the power of our combined Campus & Branch networking portfolio is Lowe's. With over 1,750 stores across North America, Lowe's chose HPE to deliver the network foundation for a major technology transformation to support its digital on-ramp and AI-enabled operations.

The solution is built on our HPE Mist AI platform for wire and wireless networking infrastructure alongside our HPE EdgeConnect SD-WAN solution. Last month, we reached a milestone with the launch of new autonomous agents powered by agentic AI for optimizing networking performance. The self-driving network is no longer a concept, it is a reality.

The U.K. Ministry of Justice is an early adopter example. It was able to reduce the number of incidents seen by its network operations center by approximately 75% after deploying a suite of solutions that included our new HPE self-driving network capabilities. In enterprise data center switching, orders increased nearly 20% on a normalized basis. Our data center switching pipeline remains strong. Cross portfolio product integration and sales across server, storage and networking are driving deeper customer engagement and larger deals.

Security orders grew in the mid-teens on a normalized basis. We continue to make the network our first line of defense that responds to threats in real time. This quarter, we launched the HPE Juniper SRX400 series, bringing carrier-grade firewall protection to the branch for large distributed environments. We see significant runway as more customers consolidate networking and security with a single vendor forcing convergence all the way to the silicon layer of the stack where HPE will have further differentiation.

In our service provider customer segment, revenue increased double digits on a normalized basis. We're routing orders growing significantly faster than revenue. Routing orders increased nearly 30% on a normalized basis, driven by data center interconnect deployments in large cloud service providers. customers are choosing HPE because we help them scale in every dimension, scale up by increasing the performance and density of individual platforms for the most demanding AI workloads; scale out by expanding the network fabric to connect thousands of GPUs and accelerators within a single data center. And scale across by extending high-bandwidth interconnectivity between data centers, across campuses and into the wide area network.

So AI services can run wherever they are needed. HPE is developing a scale-up Ethernet switch and software designed specifically for the AMD Helios AI rack-scale architecture, which we expect will be introduced in the fall. In scale out, we lead with our AI-driven QFX switching fabric. HPE is the first OEM to productize a Tomahawk 6 based 100% liquid cooled switch with industry-leading performance and power efficient for AI infrastructure. In addition, our leading fabric management [ NII ops ] capabilities reduce congestion, latency as well as operational complexity.

We expect our road map to extend this leadership through co-packaged optics resulting in lower overall power consumption. Scale across. The Juniper PTX Series delivers 800 gigabit density with exceptional power efficiency, leveraging our distinct Express silicon and simplified AI-native automation. Because of our leading innovation and market momentum in networks for AI, we are raising our cumulative fiscal 2026 networks for AI order target to at least $2 billion.

We are laser focused on building the best networking business in the industry. Our priorities are clear: extend AI-driven automation across the portfolio, help customers scale modern AI infrastructure with secure, high-performance networking and lead in the convergence of networking and security. We have the team, the capabilities and the momentum to convert the opportunity in this segment into durable shareholder value.

In our cloud and AI business segment, we executed with strong discipline across all business lines. Revenue was $7.7 billion, up 23%, driven by exceptional traditional server orders and very strong demand in AI systems Alletra MP storage, private cloud and GreenLake software and services. Traditional server orders increased triple digits as customers continue to modernize their compute infrastructure and invest in AI inferencing. We are working very closely with our silicon and memory partners to continue to secure supply, which we factor into our new fiscal 2026 guide.

We're also engaging customers and channel partners on lead times and configuration options to help them plan effectively. We saw strong demand in AI training throughout the quarter. We booked $1.8 billion in new AI systems orders, bringing cumulative AI systems bookings to $16.4 billion. We entered Q3 with $5.9 billion in backlog, primarily composed of enterprise and sovereign orders. We are seeing a broad pattern across industries. Enterprises want the flexibility of choosing multiple AI models with the governance and control of on-premises. We will continue to manage AI systems opportunities with a focus on profitable growth and prudent working capital management. Storage had an outstanding quarter. Alletra MP storage orders increased triple digits, the sixth consecutive quarter of strong growth. Several weeks ago, we expanded the platform with new file storage in Agentic AIOps capabilities.

This extends Alletra MP into the growing unstructured data market. Our HPE Morpheus Enterprise and HPE VM Essential software offerings continue to build momentum. Revenue grew sequentially for the fourth consecutive quarter. VM Essentials customer count increased 43% in the first half with another rise in net new logos.

Private cloud AI orders increased again this quarter with a growing base of new customer wins. We recently launched our second-generation PCAI offering designed for enterprise AI inferencing and cloud-gapped sovereign environments, which position us for continued growth. More broadly, we are embedding agentic AI capabilities across our storage and data protection portfolio to help customers automate AI data pipelines and operations.

We continue to add new cloud and AI agentic services to our GreenLake cloud platform, acquiring new customers and increasing the net retention rates for our GreenLake services business, which remains near 110%. We exited Q2 with approximately 50,000 customers operating their IT in our GreenLake cloud, managing more than 6.7 million systems, up from 5.3 million a year ago. One win that brings the power of the full HPE portfolio together is the Dallas Cowboys, the most valuable sports franchise in the world. They came to HPE with a clear objective, modernize their infrastructure, simplify operations and build the right secure foundation for AI.

We delivered a comprehensive solution anchored on our HPE GreenLake private cloud offering, spanning ProLiant servers, Alletra MP storage, and HPE Morpheus Enterprise. The Cowboys are also adopting HPE VM essentials as their preferred virtualization layer. This is a strong example of the value customers can unlock when they chose HPE as an end-to-end technology partner. Lastly, HPE Financial Services delivered another outstanding quarter with record return on equity.

Financial Services deepens customer relationships supports our GreenLake cloud adoption and remains a meaningful competitive advantage as customers ramp their investment in AI. Before I close, I want to highlight 2 important upcoming events. In 2 weeks, we are hosting HPE Discover in Las Vegas. We will share updates on our networking cloud and AI strategies, including major product announcements, along with a live Q&A for investors and analysts. I hope to see you there.

Then later this fall, we will host a dedicated network in Investor Day. In closing, HPE delivered an exceptional quarter. Our results demonstrate that our strategy continues to pay off. We now expect to significantly exceed our original fiscal 2028 non-GAAP earnings per share target and generate at least $3.5 billion in free cash flow in fiscal 2026, 2 years ahead the plan. The market trends driving our performance remains strong and well aligned to our strategy.

We expect demand strength to continue into fiscal 2027 and beyond, which will accelerate durable shareholder value as we continue to scale profitably. We are executing with strong discipline, creating meaningful value from the Juniper acquisition and strengthening our position at the intersection of networking, cloud and AI. With the combined strength of HPE and Juniper, we have the portfolio, the talent and the go-to-market scale to lead in the market. I want to thank our team members for their focus and strong execution.

With that, let me turn it to Marie to take you through the financial results and our 2026 and 2027 outlook. Marie?

Thank you, Antonio, and good afternoon, everyone. I'm pleased with our outstanding second quarter results. We exceeded our commitments, delivering record revenue and EPS, driven by disciplined execution and a strong demand environment. Our large backlog, favorable industry tailwinds and improved demand visibility support a higher growth outlook. In addition, we are achieving catalyst cost savings and Juniper synergies ahead of schedule. .

As a result, we are increasing our fiscal '26 EPS outlook by over 40%. I will address the drivers behind the strong EPS and free cash flow outlook shortly. But first, let's take a look at our Q2 performance. Revenue of $10.7 billion was above the high end of our guidance range, led by traditional server as customers accelerated investments in agentic AI and AI inferencing, and by networking where we saw broad-based growth across the portfolio. Sequentially, revenue grew 15%, reflecting higher average selling prices within our server business, driven by ongoing DRAM and NAND inflationary costs and supply constraints.

We continue to work with our partners to secure long-term agreements while executing the pricing actions we discussed last quarter. Gross margin improved to 36.9% driven by mix as we shape demand to higher-margin products. Catalyst savings and Juniper-related synergies also contributed to improvement on a year-over-year basis. Operating profit was $1.4 billion, above our expectations, representing a 13.3% operating margin. As the company scales and we continue to capture accelerated catalyst cost savings and Juniper synergies, we expect operating profit growth to continue to outpace our top line.

EPS was $0.79, well above the high end of our guidance. GAAP EPS was $0.44. We delivered Q2 free cash flow of $915 million, fueled by strong operating profit. Now let's turn to our segment results. Networking delivered another solid quarter. Revenue of $2.7 billion was up 10% on a normalized basis as growth accelerated. Our backlog continues to grow, given elevated demand and supply constraints and this is reflected in the greater than 40% sequential growth we saw in our purchase commitments.

We continue to see strong demand for our networks for AI portfolio and now expect cumulative orders to reach at least $2 billion by fiscal year-end '26. Within our product categories, Campus & Branch, normalized revenue growth accelerated to 10%, again by large deals across multiple industries. Security growth inflected positively to 18%, benefiting from improved backlog conversion and solid in-quarter demand.

Data center networking and routing grew 6% and 9%, respectively, reflecting robust networks for AI demand. We are optimistic about the demand momentum we are seeing based on our growing pipeline. Across customer verticals, service provider revenue grew 13% and enterprise grew 9% on a normalized basis. Our AI-native self-driving network solution is clearly resonating as customers prioritize AI use cases and simplify their network operations.

Network operating margin of 21.6% was in line with guidance, reflecting improved operating leverage as Juniper synergies continue to ramp. The sequential decline in margin reflected 2 factors. First, Q1 benefited from certain onetime items. And second, Q2 absorbed higher variable compensation expense. We remain focused on disciplined execution, operational efficiencies and synergy realization to improve profitability and expand margins in the second half and beyond.

Moving to cloud and AI. We delivered revenue of $7.7 billion, up 23% as strong order activity and pass-through of higher cost of new orders, a traditional server and storage drove the upside, partially offset by supply constraints and timing of AI server shipments. Financial Services continues to perform well. Scale benefits drove operating profit of nearly $1 billion, up 48% sequentially and triple digits year-over-year, pushing operating margin to 12.4%, up 220 basis points sequentially and server revenue increased 33% as ASP growth and additional server more than offset supply-constrained unit volumes.

Demand remained broad-based, as orders more than doubled year-over-year and increased strong double digits sequentially. We see accelerating demand in high memory configured service, targeted and agentic AI workloads, supporting our expectation of sustainable growth. AI systems orders of $1.8 billion were more balanced and broad-based this quarter. Demand is expanding beyond AI server factories into broader AI workloads like orchestration, data movement and agentic AI. Service Provider orders exceeded the combined total of its prior 4 quarters, underscoring the inherently lumpy nature of our large-scale AI deals.

Our backlog increased nearly 20% sequentially to a new high, and our pipeline remains multiples of our backlog. We continue to expect AI revenue to improve in the back half of the year now peaking in Q4. Storage revenue grew 2%, driven by strong orders, the ongoing mix shift towards high-value owned IP and disciplined pricing execution. Alletra MP customer migration momentum accelerated sequentially, driving triple-digit year-over-year growth in both orders and revenue. Continued demand strength in private cloud and our expanding backlog are driving improved revenue visibility.

Lastly, financial Services revenue was up 6% and generated an all-time high in return on equity exceeding 30%. Turning to our catalyst initiatives and Juniper synergies. I'm pleased that we are running ahead of plan as we work on a range of programs to reduce cost of sales and OpEx across our business. As a result of these programs, at quarter end, we reported an employee base of just over 65,000, the lowest level at which we have operated as a combined company and reflecting an over 9% decline since both programs began.

Within Juniper synergies, we continue to focus on the 4 pillars we laid out at SAM. Phase 1 of the integration, which we completed in January, focused on reducing overlapping corporate functions and optimizing sales and service organizations. As our Mist and Aruba portfolios converge, we expect to optimize our R&D spend. In addition, we plan to continue to leverage overall HPE scale to improve commodity prices and consolidate our vendor footprint to drive savings through supply chain integration.

Finally, regarding customer support, we intend to leverage scale and digital capabilities inherited from Juniper to further improve efficiency and the customer experience. We expect to exceed our annual target of $200 million by the end of fiscal year '26. I'm pleased with our progress on Catalyst, and we are ahead of plan. Workforce transformation continues to drive the majority of our savings and Gen AI-enabled process simplification now represents nearly 20% of our fiscal '26 initiative savings. We are leaning into GenAI to increase productivity and reduce costs across the organization, including customer support, HR and marketing.

Our teams are driving greater automation, redefining work management and reducing costs. We are also rationalizing our global lab footprint by more than 2/3 and reducing our contractor base and supply chain customer service by over 90% through targeted consolidation. Taken together, we are building a leaner, more efficient organization and delivering meaningful benefit to our operating margin.

Turning to free cash flow. We delivered operating cash flow of $1.4 billion. Free cash flow totaled $915 million in Q2, bringing our first half fiscal '26 total to $1.6 billion, about 75% above our prior comparable period, high reported in fiscal '21. Our cash conversion cycle improved by 2 days from Q1, driven primarily by increase in days payable due to higher purchases to support future shipments. This was offset by an increase in days of inventory due to higher inventory in anticipation of second half AI service shipments.

Days receivable increased by 5 days from the prior quarter due to strong revenue performance towards the end of the quarter. Inventory ended the quarter at $9 billion, up year-over-year and sequentially, supporting second half AI installations and targeted commodity purchases. We remain committed to our capital allocation strategy. During Q2, we returned $343 million to shareholders, including $189 million in common dividends and $154 million via share repurchases. We refinanced $2 billion of debt, received gross proceeds of approximately $1.4 billion after closing our previously announced H3C transactions last month and used cash on hand to retire our term loan.

We expect the net impact will reduce annual net interest expense by approximately $75 million. Importantly, we improved our pro forma net leverage ratio to 2.3x at quarter end, down from 2.6x last quarter. Turning to guidance. We are taking up our outlook on the back of Q2 results and greater visibility into the second half demand environment.

Starting with Q3, we expect total revenue will be between $11.5 billion and $12.1 billion, driven by strong demand. For Networking, we expect revenue to grow 73% to 78% year-over-year and on a reported basis or approaching 10% on a normalized basis. We expect revenue performance and synergy realization to help offset the impact of inflationary component costs, driving an operating margin rate in line with our full year guidance.

In cloud and AI, we expect revenue to grow with the high teens, reflecting demand durability, elevated pricing and improved AI systems revenue. We expect operating margins to be in the low to mid-teens. On a consolidated basis, we expect Q3 total operating expense to increase sequentially, supporting seasonal marketing expense and networking R&D investments.

We expect our operating margin rate to be up on a sequential basis, driven by improved operating leverage. Consequently, we expect EPS between $0.88 and $0.93 and GAAP EPS between $0.84 and $0.89. For fiscal year '26, we are raising our EPS outlook range to $3.35 to $3.45. We are also raising our GAAP EPS range to $2.42 to $2.52. We are making the following updates to our outlook.

We are raising our full year consolidated revenue growth to 29% to 33% on a reported basis or high teens on a normalized basis. We are also raising our full year consolidated operating profit growth outlook to 80% to 85% on a reported basis. For cloud and AI, we expect server demand and pricing to remain durable driving sustainable revenue growth. Consequently, we are raising our full year cloud and AI revenue growth to the low 20% range from our prior mid- to high single-digit range, driven by higher ASPs in our traditional server business and improved AI systems revenue.

We are also raising our operating margin rate outlook to low to mid-teens. We are raising our full year networking revenue growth, 72% to 75% on a reported basis or approaching 10% on a normalized basis, reflecting accelerated business performance as our integration efforts take hold. We are lowering our OI&E outlook to a range of $420 million to $460 million, reflecting lower net interest expense expectations.

Lastly, we are increasing our free cash flow outlook to at least $3.5 billion, up from our prior outlook of at least $2 billion. We are confident in our new fiscal '26 outlook as we see continued order momentum in the business thus far in Q3. Based on the durability of demand we are seeing in our results, we are providing an initial framework for fiscal '27. We see sustained secular tailwinds driving consolidated revenue growth of 8% to 12% with a similar range for both of our networking and cloud and AI segments.

Our outlook assumes that acceleration in AI systems revenue growth. With the improved operating margins of 12% to 16% for the company and expect to see a year-over-year reduction in operating expense. We forecast net working margin in the mid- to high 20% range, driven by scale mix and synergies with cloud and AI operating margin in the range of 10% to 15%, depending on the mix of AI business and the pace of Catalyst savings. We expect revenue growth and operating leverage to deliver EPS growth of 12% to 16% and free cash flow of at least $4.5 billion. Our outlook is expected to enable faster debt pay down.

As a result, we now expect to reach out 2x net leverage goal by the end of fiscal year '26, one year ahead of schedule. Once we reach our leverage target, we expect to return at least 75% of free cash flow to our shareholders via dividends and share repurchases. To close, Q2 was an outstanding quarter for HPE. We scale the business, expanded margins and generated significant free cash flow. We raised our outlook and are building a stronger, more profitable HPE.

I am confident in our ability to create long-term value for our shareholders. With that, I'll turn the call back to the operator to begin the Q&A.

[Operator Instructions] The first question will come from Asiya Merchant with Citi.

Marie and Antonio, I guess folks are kind of talking about enterprise budgets, just given the price inflation that you guys are seeing through and being passed through, where do you see enterprise budget still sustaining themselves? And obviously, your guide here now into fiscal year '27. Many people are concerned that there is some kind of like demand cliff that you could see even past the more near-term outlooks and growth forecast that you're seeing. What gives you this confidence to now provide fiscal year '27 guide if you could help us understand, I see it's between networking as well as cloud and AI. What gives you the confidence that you're seeing in being able to provide an early outlook into '27? That would be great.

Well, thank you, Asiya, for the question. I think it's multiple factors. Factor number one and probably the most important one is the durability of the demand based on what my conversations with customers and the large, large pipeline, which remains multiples of the current backlog. And when you look at that demand and the pipeline is driven by the use cases, we see with the deployment of AI or the build-out of new data centers for AI, obviously, and then the modernization taking place in enterprise.

And so it's a combination of multiple things that ultimately give us the confidence to not only provide the new guide for '26, but an early view of '27. So when you think about our results in the first half, and the backlog we have and the supply that we have on hand and what is coming, that solidifies the '26. And then in '27, the momentum we have in networking is outstanding across all customer segments and as well product segments. We talked about some of the demand that we see today in Campus & Branch, upper 20% and cloud networking, which is in the 30% and so forth. And customers, when you think about budgets, obviously, they are challenged because of the price increases we have seen driven by the cost of commodity.

But I can tell you, we have not seen any pull-in. We don't see a cliff. And in many ways, I think customers are prioritizing getting access to technology now faster than ever before because nobody wants to be left behind when it comes down to deploying. I give an example in our own company. We have 1,200 use cases in AI. Marie, just next to me here, is one of the early adopters and I will say, aggressive adopter but we have more than 250 use cases, mostly agentic AI, which has been already deployed. And now we see this across the entire spectrum. I was last week in Chicago. I met with a number of customers and partners, and they see this.

And when you go through that motion, then AI inference is growing. And so we expect that the AI inference is going to be an accelerator of our demand as we go forward. And therefore, points to be durable in our demand and our ability to convert that.

The next question will come from Wamsi Mohan with Bank of America.

Really impressive set of results here and guide. Antonio, can you give us maybe some rough mix of the opportunity that you see. You mentioned scale up, scale out, scale across, especially as you look into fiscal '27, how do you see that evolve? And if I could, Marie, the growth in free cash flow is well in excess of EPS for '27, hoping you might be able to share some color on the drivers of that.

Well, thank you, Wamsi. I think it's fairly balanced across the 4 product segments, Wamsi. I mean let's start with Campus & Branch, which has been and is the lion's share of our networking mix. I think the self-driving network vision and now the execution of it is absolutely resonated with customers. We announced our road map last December at the HPE Discover in Barcelona. You will see new announcements here in 2 weeks. Our ability to support Aruba switches with Mist and cross-pollinating 2 platforms. But ultimately, that AI-driven experience is resonating, and I mentioned one of the customers, as an example, taking advantage of that.

When I think about data center networking, we grew 20% in enterprise. That obviously is driving synergies with the rest of the portfolio because now we have a full conversation with customers across server, storage and networking. Now we are introducing in the fall, the new switch with Helios stack reference architecture. That's the first time to market tomahawk 6, 1.6 terabits. That will be a tailwind as 2027 start adopting the footprint in large service providers.

And then obviously, scale across, the PTX platform is, I will say, the reference when it comes down for data center interconnect and that PTX10000 and 12000 is resonating to drive data center interconnect. So is fairly balanced, I will say, and we are early, early in the process. Obviously, you have to win the reference architecture and kind of the discussion with the customers at that level.

But then it's going to be synergies across the rest of the portfolio with compute. So I feel very good about the momentum and kudos to the team who has executed flawlessly. And when you think about an integration of this scale done as so fast because if you put it in perspective, we integrate the R&D teams, we announced the road map. We didn't miss a beat on network and innovation. We integrated the sales force in January, and we're ahead of the integration milestones of synergy.

So I think this is a reference for how to do large acquisitions in the market. So Marie, what do you want to...

Wamsi, I'll answer your question on the strong free cash flow guide to '27. And it's pretty simple. It's really just based around the expectations that we have of the operating profit growth. And obviously, that supports higher profitability, and that's translating, frankly, into cash flow. And just one other thing just to bear in mind our '26 baseline, actually, has the charges associated with the Juniper synergies, which, obviously, you're not going to see that level of magnitude repeated in '27. So that's also one of the benefits that's playing as well into the free cash flow guide. Just to close, as I said in my prepared remarks, that will get us to 2x leverage by the end of '26. And I think I mentioned that we will pull in our share repo now into early '27 as well. So I just want to sort of close with that comment.

Please limit questions to 1 per analyst.

The next question will come from Amit Daryanani with Evercore.

I can't ask a multipart question after Paul just called us out on that, I guess, now. So maybe I'll stick to one. And Antonio, this may sound like a bit of a silly question. But given these numbers are so strong, especially when I look at the fiscal '27 guide, can you just talk about what's the bigger gating factor to growth as you go forward? Is it customer demand? Or is it more component availability? And I'm really trying to understand whether the outlook reflects the level of demand you're actually seeing today? Or is there actually additional demand that could be served if component supply and availability becomes a bit more easier. Just love to understand just on the component side, what's going on.

Well, thank you, Amit. I think demand to me equals bookings or orders and so we expect that demand to be strong and durable well into 2027. I think we have an amazing portfolio perfectly aligned to the inflection point that we see today across networking, cloud and AI. And so we are uniquely positioned when it comes to demand and bookings. And as I said in my prepared remarks, the pipeline remains multiples of the current backlog, which is a record breaking at the company level.

When it comes down to potential upside on the revenue and the ability to convert that, it really comes down to availability of supply. And what we factor both in '26 and '27, first is the allocation that we already got in our supply for '26. I will say our teams have got much more proficient. By the way, using AI to really do a better supply machine with the demand that we have versus the supply that we have in terms of what type of mix you want to drive based on the capacity you've got allocated.

So that's why with Marie, we provided that new revenue guidance. There is no incremental supply in '26 at this point in time, unless somebody cancel something, and then we are able to get that. And in '27, as you know, we have long-term agreements where we lock capacity. And we divide that capacity every quarter based on the mix of orders and backlog and what we see in the pipeline. And so all of that has been factored in our guide. So if supply improves in '27 with the momentum and demand we have, we may have an upside.

But I will tell you, I don't expect the supply availability change in '27 that much. Neither the cost will continue to be elevated until these new factories will provide the yields to compensate for the incredible demand that we see across the portfolio.

The next question will come from Katherine Murphy with Goldman Sachs.

Can you talk more about the improved AI systems outlook that you talked to? And if there's anything you can share on the demand outlook across customer types? And if expectations for AI systems profitability are improved relative to 90 days ago?

Thank you, Katherine. I will start and Marie if you want to add something. Look, we have been very deliberate in our strategy to focus on the markets related to the AI where HPE can drive value and can drive the portfolio that we have, not just pursuing just revenue for the sake of revenue. And those are markets has been 3. One is enterprise. And you can see the momentum in enterprise and in particular whether AI factory for enterprise, which is private cloud AI. By the way, deep, deep integration with NVIDIA, and you're going to see more of that in a couple of weeks, which includes a lot related to software.

It's not just taking the GPUs and distributors in a server. And by the way, that now includes storage, which is the first platform to be fully certified by NVIDIA when it comes down to the file kind of [ structured ] data. Second part, obviously, is sovereign. And those are long cycles. But when you think about sovereign, I don't think about just large 1 gigawatt factory. I think about deployments that act as a sovereign and ultimately are governed under the sovereign law or [ air gapped ] to meet the sovereign requirements. And then there are large pursuits in a large scale that may take longer to achieve.

But what we see right now, Katherine, is a huge growth in inferencing. Inferencing clearly is accelerating. And that's a combination of both GPUs and CPUs. And this is why we see the momentum also on the traditional server because a lot of these inference deployments will be done on CPUs. And it will be done in locations where the customers feel confident in terms of governance, data privacy and so forth. And that's why I think we all need to realize there is a new market there. It's not the traditional market that we know or have been used to. But this gives us the confidence that we have the right portfolio at the right time to capture this market.

And I believe, by the end of the decade, much of the demand will be in the inferencing space. And that's why combination with networking and compute and storage and memory, by the way, will give us the ability to be more competitive and honestly, harvest more of the value of the gross margin as we go forward. And maybe I'll just add.

And maybe I'll just add a comment, Katherine, on the margin. So we typically don't break out our AI systems margins. But as Antonio alluded to, we do see enterprise and sovereign typically being a more profitable sort of part of the mix compared to, say, your classic service provider or model builders. So that's just some context to how to think about margins.

And last, I would say, on the service provider, we play selectively in that market. and we have been prioritizing prudent working capital management. And this is one of the reasons together with the cash commercial cycle, which obviously is slower on the AI system side compared to the traditional business side, and the fact that we have now sold 100% of the H3C stake that we can pay down that debt faster to return to the 2x leverage commitment that we gave a year earlier and that will allow us to make the right investment and return approximately 75% of capital in 2027.

The next question will come from Samik Chatterjee with JPMorgan.

Congrats on the strong results and outlook here. Antonio, if I can just on the growth outlook that you have this year and trying to compare that to next year, this year, you're expecting cloud and AI to accelerate relative to networking. But when we get to your guidance for next year, you're expecting similar growth rates or the growth rates to converge. I'm just wondering, is that more a function you think about the individual drivers being slightly different in terms of timing with your customers? Or is there more of a supply component in there as the growth rates converge next year? If you can sort of help me out in terms of what changes in the drivers.

Yes. I think in the cloud and AI outlook, that is the usual lumpiness, I will say, of the AI system conversion. And so that's one aspect. But then across both segments, that is the timing of supply availability. Look, if you think about networking for a moment, right, and you think about on an average, we grew 10% this past quarter. But we grew 2x or 3x the orders, the bookings in some of the product segments. That tells you we are growing much faster than the revenue.

And then on the Cloud AI, obviously, we have a very large backlog in servers, and then you have the lumpiness of the AI systems. And also, we have constraints on the NAND side of the equation for storage. So it's a combination of many things. There is not one specific number. But as memory becomes available, then we should see an acceleration of conversion. But again, Don't expect that to happen early on in the cycle in '27. If anything maybe at the end of '27. But once again, we factor all that in our 8% to 12% guide for 2027.

The next question will come from David Vogt with UBS.

Maybe Antonio, can we touch on networking for a second. So obviously, strong results there, really strong orders. But just trying to get a sense of how we think about how those orders flow into the business because you guided approaching kind of double-digit normalized growth for this year and effectively double-digit growth at the midpoint for next year. Is there a reason why we're not seeing an acceleration? And then along those lines, what's driving the margin uplift next year in fiscal '27 in the networking business, particularly given the supply chain constraints and cost inflation that you've mentioned earlier?

Yes. Thanks, David. Look, it's all about supply chain. Supply chain is the name of the game in networking. Some of these products have DDR4, some have DDR5, some have other components that are constrained by the wafer capacity. We continue to work with our suppliers. By the way, we believe now we are the largest OEM partner of Broadcom in the networking space and also combined with the rest of the business. So it's all about the supply availability in that moment in time to convert these orders.

And I think that's the opportunity, I will say. I think one hand is a challenge, but on the other hand, it's an opportunity. If something unlocks there, then it will be faster conversion of this amazing momentum we have in networking into revenue. So that's what it is. And Marie, you want to talk about the...

On the op margins themselves, David, what you're seeing in '27 is actually the full year benefit of the Juniper Synergies program, which you recall we started when we closed the deal. So all of that, we expect is going to flow on a full year basis from '26 into '27. And frankly, that's what's driving the margin. And I might add, it actually also helps us on cost of sales as well. So as we sort of buffer some of the impact that we've discussed here today on commodity costs, we're seeing some of those benefits help us out on gross margins as well.

The next question will come from Erik Woodring with Morgan Stanley.

Echo the congrats on the quarter and the outlook. Antonio, when you take a step back, can you just help us better understand exactly what has happened over the last 90 days in cloud and AI? And what I really mean by that is your significant price hikes were already well known last quarter. So that's not a surprise. But now you're looking obviously at low 20% year-over-year cloud and AI revenue growth versus 90 days, you thought it would be mid- to high single digits. So exactly what changed so abruptly in the last 90 days? And can you help us understand what customer base cohort did this inflection come from?

Yes. Thanks, Erik. Well, I will say at the core is demand acceleration. And I think the demand acceleration was manifested in a number of categories in the cloud AI business. Obviously, the traditional server. I talked before about the concern to get access to products and don't wait for things to improve. I think that was very clear. Second is the agentic AI definitely, there has been a key driver of demand acceleration. I think on the storage side, obviously, we have our own benefit because we have foreseen a transition to our Alletra MP because also we are end-of-life legacy products.

And then we introduced new data platforms with object, which we expect to accelerate now with the introduction of file. I think there is a combination of virtualization modernization because customers with the new commercial terms, they are very concerned about cost. When you modernize your software virtualization estates by definition, you're modernizing the infrastructure that sits underneath. That's a combination of our Morpheus dragging the private cloud business addition for virtualization. And as we grow private cloud AI, I call it AI factory factor enterprise, that infrastructure and software is pretty much the same.

The only really changes is the GPUs in the server and the Alletra X10000 in the storage. But then GreenLake also is a driver of additional adoption of technology because once you're on the platform, as I said earlier, we have a net retention rate of near 110%. And obviously as budget as constrained, we expect, obviously, the consumption model to grow over the next few quarters because you move to more of an OpEx model. So it's a combination of many things.

But the pipeline and the customer engagement are super strong. And then obviously, the networking provides a core foundation to drive cross synergies as we go forward.

The next question will come from Matthew Niknam with Truist.

I will echo the congrats. Phenomenal results. Antonio, you mentioned cross portfolio sales. And I'm wondering how prevalent these are right now? And is it in the context of more security and networking among enterprise customers? Or are you seeing more cross-portfolio purchasing across servers, storage and networking products to really bring some of these Juniper revenue synergies to fruition.

Well, thank you. I think it's the latter, and I will say it's early, even because, as I said in my opening remarks, our enterprise data center switching orders grew 20%. And that's very early, very early in the process. We see now larger deals and larger engagement because we have the scale of our sales force where the network in sales force can get access to customers that in the past, they were not able to get to.

And then there is the product integration. To give a sense of the product integration, we are integrating what is called the Apstra life cycle management or intent-based provisioning for data center switching with Morpheus. What that allows to do is to provide a full hybrid control plane for server storage and networking and also integrating the software-defined networking into the VM essential stack.

That also will drive the data center switching inside the private cloud reference architecture. Eventually, when we move into the Ethernet-based storage as the speeds continue to grow, that's going to be, of course, a Juniper switch at the 1.6 terabits. So I will say we are early -- now network and security, that's a more insulated within networking because obviously, if you think about the edge, deploying a SASE or a secure service edge. That will drive convergence between network and security. But there, we are not thinking about driving security convergence just at a software level. We are taking a bold approach, which is to drive it at the silicon level, and you're going to see more of that as we go forward with Rami and team.

The next question will come from Aaron Rakers with Wells Fargo.

Congrats on the results, very impressive. I guess my question, some of it's been a little bit asked, but I want to go back to the traditional server business, 40-plus percent year-on-year growth very impressive. But I'm curious if you could unpack how much we're seeing in terms of the ability to price through some of the inflationary component costs relative to underlying unit demand? And I guess when we look forward, does the guidance reflect a continued expectation of price increases to mitigate any margin impacts? Any kind of color of what you've done on the pricing strategy would be helpful.

Thank you. Look, Aaron, units are up, and we expect units to increase as we go forward because as prices normalize, obviously, the [ EPM ] units will rebalance. But units were up slightly this quarter. The second part of this is that the pricing, we have been very disciplined, right? And obviously, we are seeing significant dislocation on the cost. We expect that to moderate in the second half and eventually normalize.

But I will say, Aaron, that, that cost environment and pricing environment will continue to be very elevated in 2027. But the units will rebalance. And as we said earlier, right, we expect that demand to continue to be very strong as we look into 2027, especially the context is going to change because of the agentic AI deployment.

And maybe just add a couple of comments just on the margin durability. We do also see the impact of our Catalyst program, helping us out both on gross and operating margins. And I think I commented in my prepared remarks, we were slightly ahead. So that's giving us confidence around the durability of those margins. And we do expect that to see some improvement in unit volumes in the back half of the year as well.

The next question will come from Tim Long with Barclays.

I was hoping to touch on storage for a minute here. Maybe just -- if you could just talk a little bit about kind of seeing the outsized growth in server but not in storage, what you would think about kind of pull-through there. And I would assume you're -- I know there's a lot of ASP increase in service because of DRAM, but I think also some in storage because of NAND. So maybe you can just touch on that dynamic around the storage business.

Yes, sure. Look, the Alletra block customer migration accelerated, we talk about driving triple digits year-over-year growth on the Alletra MP, which is the go-forward platform in both orders and revenue. Marie talked about that. Obviously, that takes time to see in the total number, but because we have other stuff in the storage -- but overall, the storage was up 2%, but the Alletra MP, which is the platform that has both block file with object is growing triple digits, both revenue and orders.

And remember that our revenue is also somewhat impacted by the fact that we are deferring a portion of the revenue over a longer period of time. Why that's the case? Because our software is a SaaS-based solution on that CapEx, which is hardware. But the takeaway, our go-forward platform is growing in triple digits, both orders and revenue. And over time, that's going to fuel the growth, the total storage has become the biggest part of the portfolio.

Operator, this will be the last question, please.

The final question will come from Simon Leopold with Raymond James.

I think most of the questions have been asked. I guess we've heard some contradictory commentary from some of your peers regarding pull-through orders. Just curious what's the confidence that the strength this quarter doesn't reflect any of that? And what's giving you confidence in the sustainability going forward?

Yes. Sam. I mean we have no evidence in our orders or backlog of any pulls in. And honestly, unlike COVID where people maybe -- were [ doing double booking ], we don't see that at all. And we have no cancellations. So that's the answer related to that question. And because of the pipeline that we have, we feel confident about the durability of that demand, which will drive this sustained momentum. And that's why Marie and I went on and we provided a guidance for '26 as we did and the financial framework for '27.

That's what we see.

Well, good. I know there's more questions, but I know the team will follow up with you. I just want to wrap by saying we delivered an exceptional quarter with record-breaking results. Those results were driven by the strong demand that we see in the market, strong disciplined execution and honestly our strategy because our strategy is more encompassing when it comes down to a networking cloud and AI. The Juniper acquisition, in my mind, has been a home run and it's proven to be a big source of shareholder value creation. And therefore, we believe the strategy is working.

I think our portfolio is the strongest it has ever been, and you're going to see more of that here in 2 weeks because I will encourage you to log in either the keynote or [indiscernible] in person there. We're going to have [ 7 acres ] of technology on display just to put it in perspective, and you're going to see the synergies across the portfolio as we were talking about it. And the most important part is that we're building durable momentum for the future. This result is not a onetime thing. It's the combination of the quality of earnings that we are driving across the portfolio.

And my view is that we just unlocking the value that was always here in the company. And I think there is more to be done. But I'm very proud of what the team has delivered this quarter and the guide that we provided as we think about '26 and '27. So thank you again for your time. Hope to see you soon or at the HPE Discover.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the fiscal 2026 First Quarter Hewlett Packard Enterprise Earnings Conference Call.

[Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Paul Glaser, Head of Investor Relations. Please go ahead, sir.

Good afternoon. I am Paul Glaser, Head of Investor Relations for Hewlett Packard Enterprise. I would like to welcome you to our fiscal 2026 first quarter earnings conference call with Antonio Neri, HPE's President and Chief Executive Officer; and Marie Myers, HP's Chief Financial Officer.

Before handing the call to Antonio, let me remind you that this call is being webcast. A replay of the webcast will be available shortly after the call concludes. We have posted the press release and the slide presentation accompanying the release on our HPE Investor Relations web page. Elements of the financial information referenced on this call are forward-looking and are based on our best view of our business and the external factors affecting us as we see them today. HPE assumes no obligation and does not intend to update any such forward-looking statements.

We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-Q for the fiscal quarter ended January 31, 2026. Figures used in verbal remarks are rounded for ease of discussion. For more detailed information, please see our earnings materials as well as disclaimers relating to forward-looking statements that involve risks, uncertainties and assumptions. Please refer to HPE's filings with the SEC for a more detailed discussion of these risks. For financial information that we are showing on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website. Please refer to the tables and slide presentation accompanying today's earnings release on our website for details.

Throughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis. Unless otherwise noted, all financial metrics and growth rates discussed today are non-GAAP and EPS refers to non-GAAP diluted net earnings per share. 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 2025. Antonio and Marie will reference our earnings presentation in their prepared comments. With that, let me turn it over to Antonio.

Thank you, Paul. Good afternoon, everyone. HPE started fiscal '26 with a strong first quarter, delivering revenue growth at the high end of our outlook range and record earnings per share, driven by strong performance in networking and a disciplined execution in cloud and AI. Our Q1 results give us the confidence to raise our fiscal '26 outlook, which Marie will cover later in the call. Q1 revenue was $9.3 billion, up 18%. We delivered record earnings per share of $0.65, well above the high end of our outlook with strong Q1 free cash flow of $708 million. Orders significantly outpaced revenues, fueled by strong customer demand. We saw strong product orders across networking, servers and storage, driven by ongoing AI deployment, on-premises infrastructure modernization and some customer pull-ins due to ongoing commodity shortages and price increases. GreenLake remains a critical differentiator for our software and services portfolio, delivering strong order bookings, customer adoption and ARR growth. Phase 1 of our Juniper integration is complete. We remain on track to achieve our fiscal '26 synergy targets. As we move to our second phase, we are focused on building a new networking market leader by aggressively executing our strategic product and software road map while driving revenue synergies through our go-to-market scale. We are excited about what comes next for our customers and our shareholders.

Before I provide our business segment highlights, I want to address how we are navigating the commodity shortages and inflationary cost environment impacting the industry. The IT market is facing a sharp acceleration in supply tightness and increase in component costs, most notably in DRAM and NAND. We expect elevated prices to persist well into 2027. We are taking a series of distinct actions to address the current industry dynamics. First, we are focused on securing supply. We have expanded our long-term multiyear agreements with our key silicon and memory partners to secure the capacity needed to meet customer demand; second, we are protecting our margins. We have adopted an agile pricing posture with price adjustments across the entire portfolio with shorter quote commitment cycles. We have amended our quoting terms with the right to reprice existing orders for commodity cost increases between quoting and shipments; and third, we are proactively communicating with customers and channel partners, providing lead time and cost visibility, along with alternative configuration recommendations to shape demand. DRAM and NAND now make up over half of the bill of material cost of a traditional server, and the share will continue to rise as component costs increases.

As a result, we expect higher average unit prices in both our server and storage products. Networking is more insulated with memory comprising a significantly smaller portion of the bill of materials. Given the supply dynamics, our fiscal '26 strategy prioritizes higher-margin product orders, which have an impact on our AI system to revenue growth rate for the year.

Moving on to our Q1 results. As communicated at the Securities Analyst Meeting last October, we have streamlined our financial reporting structure into 2 primary segments. Our networking segment combines Juniper Networks with our historical Intelligent Edge business, while the cloud and AI segment includes server, hybrid cloud and financial services. I am incredibly pleased with our Q1 networking segment performance and with the excellent progress we have made in integrated Juniper Networks. Our strategy is paying off. We delivered strong revenue growth at the high end of our guidance with orders growing faster than revenue.

The networking segment now represents nearly 30% of our HPE's total revenues and more than half of our total operating profits. Networking revenue increased 152% and 7% on a normalized basis with orders up low double digits driven by strength in wireless data center switching and routing products with strategic wins and demand strength across the world. In campus and branch, customers are adopting our self-driving AI Ops, networking strategy and solutions. Normalized orders increased by high single digits. The WiFi 7 transition is ramping quickly. We saw more than 10x increase in WiFi 7 access points sold with devices connected to both our Mist and Aruba Central cloud platforms up 28%. In data center switching, orders increased mid-40% on a normalized basis, driven by strong momentum in AI data centers and ongoing data center modernization efforts. AI data center builders and operators at scale appreciate our speed of execution, high-touch support and innovative congestion management capabilities. Our demand for our routing products was very strong, with orders increasing mid-20% on a normalized basis. HPE now has the most competitive routing portfolio, spanning data center interconnect, AI on ramp and Edge use cases. Our recently introduced MX-301 router series is off to a great start with strong demand across all customer verticals driven by a strong order demand momentum in data center switching and routing products, we are now targeting $1.7 billion to $1.9 billion in cumulative networks for AI orders by the end of fiscal '26.

Our new combined networking R&D team continue to drive bold innovation. We showcased our leading networking capabilities last month at the Milano Cortina 2026 Winter Olympic Games, delivering the connectivity and security for Atlas to access real-time performance data for broadcasters to stream video and for fans to connect with the Olympic application. I experienced the IT operations firsthand at the games where our HP experts were there with the Milano Cortina Olympic Committee IT staff, working to ensure everything performed at world-class levels. The Olympics serves as a powerful case study for other customers to see the value of our full stack AI native networking solutions and the power of our new combined networking portfolio.

In advance of Mobile [indiscernible] Congress, we announced our expanded vision for service providers as they modernize their infrastructure to take advantage of our AI with advancements across our networking servers and software portfolios. We introduced a powerful new line of routers, the new high-density compact modular PTX series. These routers will enable service providers to modernize their core network and run infrastructure to address the rise in data traffic demands driven by AI data center interconnect and inferencing scaling.

We also announced new server innovations to speed 5G NAI deployments, enhanced security and streamline automation from the edge through the core network. These solutions enable telecom operators to manage twice the amount of network traffic on a single server with the latest network security innovations. Finally, I am pleased to announce that we have completed our network sales integration in Q1 by merging our Juniper and Aruba sales teams into a single HPE networking sales organization. Our focus now is to scale the organization while continuing to improve our overall sales productivity. With the sales portion of the integration behind us, we are well positioned and energized for the years ahead, enabled by a best-in-class networking portfolio. HP now owns the entire network and technology stack with a talent and go-to-market scale to create a new networking industry leader. We will continue to focus on our networking priorities, including driving increased adoption of our highly differentiated AI ops, self-driving networks to capture share and profitability in campus and branch, tapping into the large networks for AI investments that are happening in our industry with our world-class data center switching and routing offerings and claiming market leadership in key areas where the network and security are converging.

Moving on to cloud and AI segment. Revenue declined 3% with operating margin dollars up 18%, driven by pricing and cost discipline. We expect average unit server and storage pricing to continue to increase as the year progresses. Q1 server orders grew low double digits, driven by higher demand for traditional servers as customers expand AI deployments, modernize infrastructure and accelerate orders due to industry supply challenges. Traditional server strength was partially offset by the timing of HPC and AI systems orders. We entered Q2 with a record AI systems backlog of $5 billion, primarily composed of enterprise and sovereign orders, and our sales pipeline remains multiples of our backlog. We are seeing more enterprises adopting agentic AI into the company's business workflows. Siemens Energy, one of the world's leading global energy technology companies has recently selected HPE to provide infrastructure services to help engineers design and service gas turbines, which include AI inferencing. In storage, we remain focused on executing our shift to our own IP portfolio strategy. Our storage Alletra MP products had another strong quarter with Q1 orders up 42%, marking our fifth consecutive quarter of double-digit year-over-year growth, driven by the installed base block transition and the accelerated adoption of our object-based platform.

GreenLake continues to be a significant differentiator for HPE. In Q1, we approached 50,000 customers on our GreenLake cloud platform. Our AIR is on track to reach our $3.5 billion target by the end of fiscal '26, driven by strong subscription services across networking storage and cloud software and services, a unique portfolio of cloud management software, AI Ops and our platform-based services underpin our hybrid cloud offerings, driving significant customer interest and building a strong sales pipeline.

RBM Essentials virtualization revenue grew sequentially for the third consecutive quarter, with high double-digit new logos growth year-over-year, driven by the escalating cost of legacy virtualization software. Our private cloud AI orders increased for the fourth consecutive quarter, supported by a substantial number of new customer wins across both enterprise and service providers. Lastly, HPEFS delivered an exceptional quarter with record return on equity. During these high commodity cost cycles, HPEFS is a strategic advantage, enabling customers to maximize the value of their core IT infrastructure and provide access to certified preowned technology. And finally, we continue to make excellent progress in our catalyst modernization and cost programs. We see great returns in deploying AI across our enterprise and remain on track to deliver our committed fiscal '26 savings targets.

In closing, we had a great start of our fiscal year. We delivered a strong first quarter performance while achieving our Juniper integration and Catalyst synergies commitments. While the industry is currently experiencing significant commodity supply and cost headwinds, we are raising our net working revenue, earnings per share and free cash flow outlook for fiscal '26 and will remain committed to our long-term fiscal 2028 targets, including at least $3 in earnings per share and more than $3.5 billion in free cash flow. We are well positioned to navigate today's market dynamics while aggressively pursuing our strategic priorities, including building a new networking industry leader. I will now turn it over to Marie to walk through our Q1 financial details and our new fiscal '26 outlook.

Thank you, Antonio, and good afternoon, everyone. I'm pleased with our performance this quarter as we delivered on our commitments with strong profitability across the board. Q1 was a strong start to fiscal 2026, reinforcing our confidence in our strategy and demonstrating our ability to execute in a dynamic environment. We exceeded expectations on net earnings and free cash flow while continuing to invest with discipline for long-term value creation. This quarter was defined by 3 themes: First, strong operating discipline and favorable mix drove operating margins above our outlook in both networking and cloud and AI. Second, overall demand strengthened sequentially with orders exceeding revenue and backlog building reflecting customer investment in data center modernization and anticipation of component cost increases. And third, Catalyst savings and Juniper related cost synergies are tracking to plan, contributing to higher profitability.

Now let me walk you through the details of our Q1 performance. Revenue was $9.3 billion, up 18%, driven primarily by the inclusion of Juniper Networks and down 4% sequentially reflecting typical seasonality and lower AI systems revenue as expected. Gross margin improved sequentially to 36.6%, driven by continued pricing discipline and a favorable mix towards networking, which helped to offset higher commodity costs, particularly in memory. Operating margin was better than expected at 12.7%. Margin strength in both networking and cloud and AI reflected our conscious pivot to focus on higher-margin, more profitable components of our business.

Operating expenses also declined 5% sequentially, consistent with our outlook driven by strong cost discipline. For the quarter, EPS was a record $0.65 exceeding the high end of our guidance range. GAAP EPS was $0.31. I'm particularly pleased with our strong free cash flow of $708 million, a notable outcome as Q1 typically represents a seasonal cash flow outflow. Free cash for growth is a core pillar of our strategic framework for value creation and the results underscore the progress we've made on improving our working capital management and profitability.

Now let's turn to our segment results. Networking was again the standout performer, and the primary driver of a higher growth and margin profile. Revenue of $2.7 billion was up 7% on a normalized basis, in line with our expectations. Our expanded portfolio enabled HPE to capture strong demand in data center switching and routing. Order growth exceeded revenue and as Antonio mentioned, we now expect cumulative networks for AI orders to reach a range of $1.7 billion to $1.9 billion by fiscal year-end '26.

As we announced at our Securities Analyst Meeting under our new reporting structure that began in Q1, we are now reporting our network segment revenue under 2 different views: product and customer. Within our product categories, data center networking and routing delivered 31% and 10% normalized growth, respectively, reflecting strong networks for AI demand. Campus and branch grew 2%, fueled by accelerated adoption of WiFi 7, while security declined 5%. On a customer vertical basis, enterprise revenue was up 2% on a normalized basis and service provider revenue was up 20%. Strength in service provider customers reflects investments in high-performance data center fabrics, routing capacity and interconnect to support both AI training and inference.

Networking operating margin was 23.7%, slightly above our guidance, supported by scale, pricing discipline and early Juniper synergies. Our actions are helping to offset higher component costs while supporting our margin performance. We are improving our execution, capturing operational efficiencies and driving cost synergies as we work through the next phase of our integration. We successfully completed sales day 1 in Q1, marking an important milestone in integrating our HPE and Juniper sales organizations.

Moving to cloud and AI, which includes our server, storage and financial services businesses. Q1 revenue totaled $6.3 billion, down 3%, consistent with our outlook. This performance primarily reflects timing of AI server revenue shipments offset by growth in the traditional server business and stable performance in storage and financial services. As Antonio mentioned, in the face of higher commodity costs, we have taken decisive actions to protect margins. We implemented DRAM-related price increases starting in November 2025, shortened quote commitment cycles and are more tightly coordinated across our supply chain, pricing and sales organizations.

In addition, we are actively steering demand towards lower memory configurations where appropriate, particularly across enterprise deployments. With our strategy in place, we are dynamically passing through memory and component cost inflation, while protecting our margins and preserving profitability. These actions, coupled with strong cost discipline resulted in a better-than-expected operating margin of 10.2%, with operating profit up 4% sequentially and 18% year-over-year. Server revenue declined 3%, in line with expectations as strong AUP growth and traditional server was more than offset by the timing of AI shipments. Despite the pricing actions we implemented, we saw continued strong demand, albeit inclusive of some pull-ins aimed at avoiding the impact of rising component costs.

AI systems orders of $1.2 billion was largely Enterprise-driven. Consistent with our strategy to focus on higher profitability, the mix of enterprise and sovereign has increased as a percentage of our cumulative orders since Q1 '23. Our AI server pipeline remains multiples of our backlog. We continue to expect AI demand and revenue to remain uneven this year, primarily due to some larger suberin orders characterized by extended lead times with AI shipments expected to ramp in the back half of the year.

Moving to storage, which includes our storage, private cloud and GreenLake Software Solutions revenue was up 1%. We continue to migrate customers to Alletra MP, which grew orders and revenue strong double digits year-over-year. We also continue to see strength in our private cloud offerings. As a reminder, we are exiting a third-party non-IP business to drive greater profitability. We have reclassified this revenue with prior periods adjusted accordingly. Lastly, financial service revenue growth was roughly flat and generated an all-time high in return on equity of 27%.

In addition, we are seeing incremental demand for networking following the acquisition of Juniper. Going forward, we expect networking to be a growth engine for HPFS as we capitalize on our broader portfolio. This quarter's results reflect strong progress across our catalyst initiatives and Juniper synergies with both tracking to plan. These initiatives increase productivity, capture efficiencies and unlock operating leverage that drives sustained profitability. Our relentless execution in both drove strong profitability and keeps us on track to generate at least $3 in EPS and more than $3.5 billion in free cash flow by FY '28. Our Catalyst initiative is delivering meaningful cost savings by automating critical operational capabilities.

Across our global operations, we are aggressively deploying AI at scale to improve speed, cost and customer experience driving measurable and accelerating results as we continue to expand deployment. For example, we are using generative AI to surface technical insights targeting a 90% reduction in search time for engineers and enabling faster, higher-quality service resolution. In addition, we are leveraging AI optimized recommendations to simplify configuration workflows and improve accuracy. We are targeting 30% faster quote cycles, enabling customers to move from design to order with less friction.

We have also made solid progress against our Juniper synergy plan. We have driven key structural actions, including the achievement of our sales day 1 milestone. And networking sales team is now operating on a unified approach to engaging customers supported by harmonized fiscal '26 sales compensation plans that sharpen our go-to-market focus and execution to drive toward our growth outlook for the year. In addition, we're making good progress on integrating corporate-related functions to drive significant savings across our networking business, including optimizing our supply chain strategy, real estate footprint and marketing expenses.

Turning to free cash flow. We delivered strong operating cash flow of $1.2 billion and free cash flow of $708 million in Q1, reinforcing our disciplined approach to financial management, generating robust free cash flow and successfully integrating Juniper remain top priorities as we execute our fiscal 2026 strategy. Q1 benefited from a typical seasonality, which drove a 5-day improvement in our cash conversion cycle from last quarter. This was driven by an increase in days payable due to higher purchases to secure supply for future shipments and a slight decrease in days receivable due to favorable billings linearity and strong Juniper collections, largely offset by an increase in days of inventory due to higher purchases.

Inventory ended the quarter at $6.9 billion, down year-over-year, but up sequentially for assurance of supply purposes given industry-wide supply chain constraints, particularly in memory, and we saw our purchase commitments increase sequentially. We continue to demonstrate our commitment to a balanced capital allocation strategy. During the quarter, we returned $190 million through dividend to common shareholders and an additional $158 million via share repurchases. We improved our pro forma net leverage ratio from 3.1x after closing the Juniper acquisition to 2.6, primarily due to a healthy cash position, a lower debt balance and improved profitability.

We continue to make good progress on our previously announced H3C transactions, which remain on track to conclude in the first half of calendar 2026. Before we get into the details of our guidance, let me briefly address the macro environment, which continues to be highly dynamic and uncertain. First, as Antonio noted, we are seeing unprecedented supply tightness at a rapidly rising component costs. We are taking decisive actions to mitigate these pressures and protect profitability. Second, following the Supreme Court's recent tariff decision, we continue to monitor developments closely with greater clarity on tariff outcomes needed to fully assess the potential business impact. And third, we are closely monitoring our business in the Middle East, which remains highly fluid. Our guidance reflects our best estimates as of today, the net impact of the macro environment and our mitigation measures. We are confident in our ability to adapt as the environment evolves.

For FY '26, we are raising our EPS outlook range by $0.05 to $2.30 to $2.50. We are also raising our GAAP EPS by $0.40 to $1.02 to $1.22. We are making the following updates to our outlook. We are raising our full year networking revenue growth to 68% to 73% on a reported basis of mid- to high single-digit growth on a normalized basis, driven by our strength in data center networking and routing businesses. We are lowering our full year cloud and AI revenue growth to mid- to high single-digit growth from our prior mid-single-digit to low double-digit range.

As Antonio noted, given supply dynamics, our strategy for the remainder of the year prioritizes higher-margin product orders, which may have an impact on our AI systems revenue growth. We are lowering our [indiscernible] outlook to a range of $540 million to $590 million from approximately $650 million previously, reflecting lower net interest expense expectations.

Lastly, we are increasing our free cash flow outlook to at least $2 billion, up from our prior range of $1.7 billion to $2 billion. We are maintaining our outlook for the remaining guidance metrics provided last quarter, which you can find in our earnings presentation. And from a modeling perspective, for the second half of the year, we expect Q3 to constitute our largest AI revenue quarter. Also, we expect profitability to be weighted towards Q4, consistent with our historical linearity.

For Q2, we expect total revenue will be between $9.6 billion to $10 billion, driven by strong demand. And for networking, we expect revenue to grow 142% to 152% year-over-year on a reported basis are at the high end of our updated FY '26 normalized target growth range. This growth is driven by strength in our backlog. We expect revenue performance and synergy realization to help offset the impact of inflationary component costs or driving an operating margin rate in line with our full year guidance.

In cloud and AI, we expect a sequential increase in our AI server revenue but still expect the majority of AI deals to ship in the second half of the year. Given the mix shift towards AI server and higher commodity costs quarter-over-quarter, we expect operating margins for cloud and AI to be near the midpoint of an FY '26 target range.

On a consolidated basis, we expect Q2 total operating expense to increase sequentially, driven by annual compensation increases and marketing expense. Combined with commodity cost increases, we expect our operating margin rate to be down quarter-over-quarter by more than typical seasonality. Consequently, we expect EPS between $0.51 and $0.55 and GAAP EPS between $0.09 and $0.13.

In closing, our Q1 results reflect disciplined execution, improving profitability and strong momentum in core business. even as we navigate unprecedented commodity inflation and macro uncertainty. We remain focused on integrating Juniper and accelerating our transformation and operational efficiency to drive sustainable long-term value. With that, I'll turn the call back to the operator to begin Q&A.

[Operator Instructions]

The first question will come from Wamsi Mohan with Bank of America.

It's Ruplu filling in for Wamsi today. Antonio, do you think the current environment is or will drive more customers to use HPE GreenLake. And you mentioned some pull-ins which areas were those in? And likewise, did you see any push-outs or lower demand as you raise prices in response to the component cost increases?

Yes. No, thank you for the question. So obviously, GreenLake, the cloud gives customers the flexibility to adopt an elastic model through our subscription services, including our GreenLake Flex, which includes all the consumption of the infrastructure on a demand basis. And this is where our HPE Financial Services plays as the key strategic role and as you saw from our results, HPEFS had a very, very strong quarter with a return on equity over 20%. And during the cycles, the ability to offer precertified preowned certified products is very, very strategic. So the answer is yes, we should expect an ongoing adoption, not different, by the way, than we saw during the pandemic. So that's very important. We also announced some unique programs with HPEFS as well for financing during this transition time.

As for demand, no, demand is very strong. Demand is very, very, very strong. There is no push out. Last week, I was in Europe, where I met with many customers [indiscernible] more World Congress than I went to the U.K. and all of them understand the environment related to inflationary cost and all of them ask how we can get the product faster. So reality is that demand is strong, whether it's driven by the projects or deploying AI, obviously, concerned about the cost -- inflationary costs, but a 0 impact on demand at this point in time.

The next question will come from Katherine Murphy with Goldman Sachs.

To ask a quick one on memory pricing. Can you talk about how rising memory prices are reflected in the outlook for profitability in both your traditional data center business and then networking for fiscal '26. And if you could quantify what you're assuming for memory prices throughout the year, that would be helpful. And then to ask my follow-up, in terms of securing supply, do you have sufficient supply secured to meet the midpoint of the fiscal '26 guidance?

Well, thank you, Katherine. I will start, and maybe Marie, if you want to add anything, let me know. In our guide -- the guide Marie just provided, we have contemplated our line of sight for the supply that we need to deliver that out to a range, both on the revenue side and on the profitability side. So when we provide outlook, it's because we have line of sight on our ability to go execute that. So that's point number one. Point number two, on the memory cost increases, we will continue to see that throughout 2026. Today, against our order backlog and the demand momentum we see, we don't have enough supply to meet all the customer demand. But as I said earlier, we have line of sight for the outlook we provided. And look, you will see the reports from the industry analysts the reality is that between CQ4 and CQ1, you have been off from the industry triple digits increase in pricing. And we continue to expect double digits as we go forward.

And this is one of the things we did very well in Q1, as Marie commented earlier is that we took action on pricing early. We actually increased prices in November and then in December and then in January, and we have done it multiple times. And that's why our focus is, first, security supply to meet the customer demand. We have the supply to deliver the outlook. Second is obviously protect our margins, and we're doing that to pricing and to managing the mix. We are, of course, favoring the high-margin businesses. Networking uses less memory but it's a critical component of our demand shaping and then obviously, traditional servers. And then in AI, we focus on really enterprise first and sovereign following that.

Yes. Maybe I'll just add then in terms of the guide and how we thought about the memory pricing. As you know, we raised our guide actually. So we expanded the -- we rose $0.05, so $2.30 to $2.50. A comment about networking and comment about Cloud AI. From a networking perspective, one thing to bear in mind is that some of the revenue and synergies that we've had as part of the programs we announced do help to offset some of those inflationary costs on networking. So just bear that in mind. And then as you think about cloud and we're really focused on prioritizing those higher-margin orders. So that's how we're managing it in each business, and all of that is reflected in our guide. And obviously, look, it's a prudent guide. And if we can do better, we absolutely will.

The next question will come from Simon Leopold with Raymond James.

I wanted to see if you could talk about the topic around demand elasticity because I would think with IT equipment that with you raising prices to pass off the higher memory costs, we would see some more of a tailwind for your revenue growth rather than demand disruption. Could you help us understand what respect to this is conservatism in your view versus how customers are behaving towards accepting the higher price points.

Well, thank you, Simon. I think I should divide that question in 2 parts. One is the demand side. And I can tell you the demand continues to be very, very strong. There is no signs of slowdown at this point in time. Obviously, there is a question of unit and average unit price as we go forward. But the reality is that with the density of the servers and the ability to process more data to the servers, customers are finding the right balance there, but the demand is very, very strong. On the ability to fulfill the demand, which translates into revenue, again, Marie and I put that in the guidance and she just commented prudent in many ways. But look, we don't have enough supply for all the demand we are seeing and the backlog we have. However, in our guide, we factor the supply needed to deliver the outlook. And it's going to be interesting as we navigate the next few months. But I just said earlier, Simon, I met with a lot of customers, a lot of customers in Europe. There was no 1 single customer that told me I don't want the product because now it's too expensive or higher price than I thought. All of them said, okay, I understand the price increases. What we can do to shape the demand may be a different configuration, some may take a lower end configuration to get the product, but it was all about speed to get the product, not the price.

And maybe I'll just add, Simon, that, of course, there's going to be some impact from the increased pricing and on units, and that's really what we see more so in the second half of the year, just to follow up one, Antonio said, but I'd just clarify for cloud and AI, probably similar to many others out there, we are expecting growth, particularly for our traditional server business on a net basis. So just remember that we did guide cloud and AI to mid- to high single digits from a revenue growth perspective as well.

And let's not forget some on another part. When we sell traditional servers, obviously, it's healthy from the services attach perspective, which it may doesn't generate in-period revenue or 2026 revenue, but it's very important for '27, '28 and '29.

The next question will come from Amit Daryanani with Evercore ISI.

I guess maybe I'll stay away from memory since everyone's asking about that and ask you about networking a little bit. It's nice to see you folks taking up the networking growth expectations for the year to mid- to high single digits. Antonio, I'm hoping you can just talk a little bit more on what's driving this uptick? Is it AI? Is it campus? Is it something with Juniper's routing business on scale across I'd love to just understand what's driving this uptick here? And then maybe just related to networking, you folks at nearly 24% operating margins in Q1, which is ahead of what you initially expecting. What do you think is resulting in the guide for the full year to be low 20%? Why are you assuming a degradation of those margins given you still have some more synergies ahead of you versus not. So just touch on networking a bit, that would be great.

So I will answer the first part, and then Marie can talk about the margins for networking. I think it's 2 parts, Amit. One is demand for our products. I mean, very clear. I mean, we have a world-class portfolio with additional Juniper and the combination with Aruba and so Campus a branch, our value is -- differentiation is in the self-driving network. I saw that at the Olympics. I have to tell you, it was very impressive to see how the teams were operating using AI to manage a very complex network over multiple locations in Italy with different events taking place. and a massive amount of scale. But the CIO told me I'm doing this with less than 20 people, which was remarkable, remarkable. And our team was very small just enabling them to understand how to use these AI technologies and it went flawless. So that's an example. So we grew high single digits in the campus and branch. WiFi 7 there -- I don't know if you call it, 10x. We sold 10x more access points on the WiFi 7 than a year ago. And obviously, it's driven by the experience we can provide. But then on the data center side, on the AI build out, we had a tremendous order intake with data center switching, which is the QFX fabric, mid-40%. And so that's a remarkable amount of order intake.

And then routing, which generally tends to be a much lower growth in the past was obviously aligned with the totals now it's all allowing to data center interconnect and AI on ramp grew mid-20%. So the combination of data center switching and routing, which is what we call networks for AI. Now we expect that to grow to 1.7 to 1.9 in cumulative orders, up from the 1.5. And the question there is our ability to convert all of that as we go forward because of the supply constraints, but demand continues to be very strong. And then look, the amount of innovation, I'll give you an example of a breakthrough innovation. The new PTX router, which is half size of a rack, can manage 16 million, 1-6, concurrent sessions. Think about is London and New York, all the population will watch a Netflix moving at the same time, that router will be able to handle it.

So think about the power of connecting data center with that level of innovation. So we have an amazing product at the right time with the right talent. And then the second part of the confidence to raise the guidance is the fact that the Juniper integration is on track. I think 8 months in, the team has done a remarkable job. We onboarded almost 10,000 employees. We announced the strategy, we announced the products. We introduced many, many products. And we completed the cells integration of the workforce. So now we are focused on driving revenue synergies across the entire portfolio because we believe there is more opportunity there as we integrate the networking product with the rest of the stack.

And just to sort of add on on the margins, it's obviously really pleased with the results that we had in Q1, 23.7%. So it was above our guide in terms of the operating margin. And it was a combination of reasons due to the scale that you're starting to see in the business that Antonio had referred to, we had good pricing discipline and early Juniper synergies that came through. Now what I would just add to sort of bear in mind, as Antonio mentioned, we're just through Phase 1 of the integration itself. So we've sort of got sales day 1, but there's still more to do at this point in time. So it is the prudent thing to do at this point to keep our range, which is the low 20%. And honestly, if we can do better, as we've demonstrated, we absolutely will on it.

The next question will come from Erik Woodring with Morgan Stanley.

I wanted to maybe touch back on the demand environment. And maybe Marie, if we look back over the last 5 years, revenue has typically declined from January into the April quarter by about 3%. And for legacy HPE and similar [ in terms ] for Juniper. You're guiding to 5% sequential revenue growth in the April quarter. And in response to 1 of the earlier questions, Antonio mentioned, customers, very active or trying to get product faster given future supply risk. And so I guess my question is, is it -- shouldn't we classify that as pull forward? Or how do you maybe delineate between strong demand that has longevity through the year and some of these customers just trying to get product quickly because of the risk of supply in the second half.

Well I'll maybe start. So look, I think we are redefining our seasonality here a little bit, right? You saw that in Q1 a little bit with our free cash flow and efficiency of the working capital now have in Juniper and the work we have done with Marie and the team. But Q2, obviously, you start seeing the benefits of having Juniper and the strong momentum in the network for which obviously is helping as well. I think it's a reflection that we have been taking a large amount of orders now for a number of quarters. And therefore, the ability to convert the orders moves through the process. But that range is actually in line to what we had in our original guidance that we provided as some in terms of the year seasonality. And then in the back half, we're going to have the systems conversion come in through the process. So look, there is, of course, demand pull-in from some customers but there is also a lot of demand used for deployment, deployment of AI.

And I look at 2 key metrics in Enterprise, particularly. One is adoption of the AI in the business workflow. We see the adoption of agentic AI. Many European customers want to do that on-prem, very clear. And GreenLake disconnected is a big, big differentiator for us.

And number two is the growing in inferencing. The inferencing portion of AI is growing very better rapidly, and that aligns really nice with our portfolio, particularly with Juniper and servers. I've met many of the telcos. They are really focused on the AI influencing. And many of them also are going to play a sovereign role because they have the trough from the government to become the AI cloud in many of these countries where they are going to build some of the Giga factories. But in general, I will say, driven by the demands of driven by the demands of modernizing their infrastructure for data and then deploying AI on-premise is going to play a role for us in addition to networks for AI to build large-scale data centers.

Just to sort of reinforce what Antonio said, Erik, I mean, at this point, I sort of use as a guidepost that normal seasonality won't really apply to this year. And I think it's a combination of both the deal itself, the timing we closed that plus all the component dynamics. I think what would be important to put in your models is that cloud and AI revenue is going to be pretty much weighted to the second half. And that's really due to what I think has said on the last call, which is more the the timing of some of those server shipments. And frankly, we factored all these dynamics into the guide that we put forward today as well.

The next question will come from George Notter with Wolfe Research.

I just wanted to come back to a question earlier, I didn't hear the answer. Did you guys give us the assumption for full year revenue associated with the pull forward? And how much incremental might you get this year also based on higher pricing associated with memory. I'm just trying to sort of break down the impact here in terms of your constituent pieces.

Now look, George, I mean, at this point in time, we haven't quantified the pull forwards. I think we gave clarification on our revenue ranges, which for both businesses were actually in the mid- to high single digits for the year. So that's the way I'd be anchoring your model.

The next question will come from Samik Chatterjee with JPMorgan.

Antonio, if I can ask you to drill down a bit into the networks for AI orders that you're referencing, which you're raising today, the $1.7 billion to $1.9 billion. Is that really just expansion with the existing customers on that front? Or are there any specific sort of wins with maybe hyperscale customers that sort of are in helping you in relation to those autos just curious about some of the drivers there. And as we look at that target, should we -- how should we think about the mix between data center networking relative to routing in your definition of networks for AI.

Yes, Samik. It's a combination of existing customers buy more, but then also getting new customers on our footprint. And so it's a combination of service providers, neo clouds. And also now we start seeing the benefits of getting access to our server go-to-market because we are actually making entrances or introductions to those customers and be able to have those conversations in a more integrated way. So that's what we see today. And the pipeline is very, very strong. which give us the confidence to raise the outlook to $1.7 billion, $1.9 billion. But it's a combination of both existing customers and new customers as we go forward. In terms of the other, we don't provide that level of guidance at this time.

The next question will come from Aaron Rakers with Wells Fargo.

Kind of just going back on a lot of the other questions. I'm curious, I mean, we all talk about memory pricing, but there's also been a lot of discussion around just tightness on server CPUs and just the demand outstripping supply. So I'm curious, Antonio, how would you characterize the lead times that you're seeing on traditional servers today relative to what they were let's say, 3 months, 6 months ago. And I think in your preamble, you alluded to like you've changed some of the dynamics around order contractual things, pricing, et cetera. Can you just walk us through again what exactly you changed to kind of pass through pricing and maybe provide some stickiness to the orders that you're seeing?

Yes, sure. On the CPU side, less constrained, but constrained. And there because of our very diversified CPU portfolio, obviously, we have one of the broadest CPU set of platforms with the Pro Lion business. We are able to steer demand, although there may be 1 or 2 SKUs more constraints than others. Significantly less concerned about the CPU. But if you have the CPU, you don't have the memory, you kind of stuck in the middle, right? So right now, less concerned about the CPU, but there is active demand shaping to the right socket based on the type of workload the customer wants to run on it.

In terms of the pricing itself, right? So look, on the terms, right? Look, we have taken a very agile posture where basically we have significantly shortened our quoting cycles in terms of commitments, and we have reserved the right to increase the price from the time we put the product to the time we ship it. And so the customer has always the right to cancel the order before it gets shipped. But once again, when I had this discussion last week with all our European customers, they all understood the dynamic. What they want is lead time transparency clarity of the price increase. Think about it this way, the way I say it is like what is the memory cost and the NAND surcharge, right? So if you quote at X, now the cost is Y? What is the difference between X and Y. So you are very transparent on what the surcharge for the increase is. And that's what we're doing. That's -- look, I mean, I always said our quick note is better than alone, yes. And fundamentally, that level of communication is super important as we navigate this environment.

The next question will come from Tim Long with Barclays.

I wanted to touch on kind of the campus and branch business for a little bit. A lot going on there as well. It's been really strong. It looks like a little bit, at least on the revenue side, deceleration this quarter. But obviously, the WiFi 7 sounded like it was really strong. So could you just talk a little bit about the offsets? Are we seeing anything different in win rates? Or are there just any other type of delays or push outs. I think the orders were a little better than revenues. Just curious about the growth rate in that business and what you're seeing from a competitive landscape?

Sure, Tim. As I said, our campus and branch order intake was high single digits this quarter. And that's obviously on a normalized basis, right? And so we believe that customers now have the clarity, which path to follow between Juniper, Mist and Aruba Central. And we did a very good job laying the foundation because we now have every possible deployment capability. And in Europe, obviously, they favor more sovereign disconnected offers versus a cloud-connected offer. But when there is a cloud-connected opportunity, we lead with Juniper Mist. When there is an on-prem virtual private cloud or disconnected requirement will live with Aruba Central. And as you recall, last December, at our HP Discover event, we launched what we call the dual boot infrastructure with our Y57. And we saw a 10x increase this quarter in access points, which means customers resonate with our AIOps self-driving network in each of the platforms. And we introduced also new AI agenetic approaches to both platforms as a part of the combined innovation. So the dynamic there is that customers, obviously, they are moving forward.

We announced a number of strategic deals. For example, another interesting win, although it's in the sports space, Athletico Madrid is going to remap the entire venue, including the space outside the stadium using our offerings. But that's 1 example. As I talked before, the entire Olympic games run on the Juniper Mist infrastructure. But there are other ones in Europe that in the case of a trade moderate using Aruba Central. So we have the ability to compete against anyone in every deployment model. And we expect this to continue as we go forward because now we have 1 integrated sales organization, all selling the same portfolio and all compensated for selling the same offers. So now I'm excited about scaling this and driving revenue synergies and then sales productivity.

The last question will come from Asiya Merchant with Citigroup.

Just if I can, on AI with the majority of the backlog here in the second half a lot of it from enterprise sovereigns. Just high level, how should we think about the margins in this segment overall for cloud and AI progressing? And if you could provide any color on the attach rates that you're seeing with those AI revenue backlogs in addition to the server revenues that you're recognizing?

Yes. No. And in terms of just the margins for AI, the right way to think about it is in terms of the guide that we've given. So I think we had obviously a very strong Q1 here for the whole segment itself. But as I mentioned in my prepared remarks, we expect Q2 to be towards the midpoint of the range. And then throughout the year, we expect that to be back into about 7% to 9%. So obviously, at this point in time, those ranges are going to be impacted to a large extent by the shipment timing of both the deals themselves and the types of deals that we have in the quarter. So as more AI revenue in the quarter, we expect to see a little bit more pressure on the margin. So that's the way I'd be thinking about the correlation between the AI revenue and the margins themselves to the cloud and AI segment. And I'd say, look, overall, we're very confident about the full year margin range for the whole segment of 7% to 9%. And the key thing for us, as you've heard us talk about today is really focusing on protecting those margins and taking all the actions that we need to really navigate the commodity prices that we've spoken about.

All right. Well, thanks, everyone. We will follow offline with each of you as part of the normal process. I want to thank you for joining the call. I will end where I started which is basically we had a very strong start of fiscal year '26. You see that the combination of Juniper and HPE is paying off. The networking business outperforms outperform our own expectations. We are very excited about what's happening there from an innovation and momentum perspective. Demand continues to be very strong above both segments, but we are adjusting our strategy to make sure we focus on delivering profitable growth because now we have a great portfolio. And also, we are also focusing on managing our working capital in an efficient way. And one of the things that you see we are raising our free cash flow to at least $2 billion while we're paying out the debt. And I think we will be able to do that in even despite the environment we are navigating through today. So again, a great start. We raised our guidance, and we expect that we will deliver against this commitment like we have done in the previous quarters. So thank you again for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Thank you, everyone, for joining. Tim Long, Barclays IT Hardware Comm Equipment analyst. Thanks for joining, and happy to have Marie Myers here, EVP, CFO, of HP Enterprise. So I think you got to read a safe harbor first and then we'll get into...

Yes, I got to read safe harbor Tim. You want me to get going?

Sure go for it.

So my remarks may contain forward-looking statements. So please refer to our SEC filings, including our most recent Form 10-Q for a discussion of the risk factors that relate to our businesses. Done.

Excellent. So thanks, Marie. Let's -- I got a big list here, but I want to start with kind of the 3 popular ones we get most. And obviously, you guys just reported, so it's good we have fresh numbers and outlooks. But a lot of focus on networking, obviously, with the Juniper acquisition and it being half of profitability at this point, much different complexion for HP as a whole. So talk to us a little bit about kind of that growth expectation, I think, kind of mid-single digit. Maybe the moving parts now. There's a lot of -- you've got Campus, you got data center, you've got telco, you've got cloud routing. You got a lot of pieces. So maybe walk us through your view of kind of what's going to inform that number higher or lower when thinking about the key end markets that you're playing in?

Yes. No, first of all, excited to be here and obviously coming off a big transformative year. I think there's no doubt that this deal has transformed HPE into an AI-led networking company. And moreover, as you said, like 50% of our operating profit now comes from networking and about 30% of the revenue. So a very different company going into '26 than what we were in '25. In terms of what's sort of underpinning and driving the mid-single digits, I think what's really important, we'll disclose this, obviously, when we get to our Q1 results, we're now going to look at the business in really 4 different segments.

So maybe I'll take it segment by segment. So breaking it down by Campus and Branch, data center routing and security, and then we're going to give you a split around service provider and enterprise from a customer perspective. So I think you're going to get plenty of disclosure in terms of how to think about the business and then how do we think about the customer profile. In terms of just what's underpinning the mid-single digit, I would add that in the earnings announcement, I did clarify for folks as we're going through the whole resegmentation we did move out $300 million of sort of revenue into our corporate others. So those were businesses that we consider somewhat stranded that we took out of the networking segment. So going forward for '26, we really anchored the guide around $11 billion. So that's the number we're looking at in terms of networking.

And thinking about that on an as-reported basis, that 65% to 70% growth on a year-on-year or mid-single-digit as I said on the call. So obviously, a significant opportunity. I would couch it and say we're pleased with the performance that we saw in Q4. But what could tip that either way, let me talk about sort of tailwinds and headwinds. We are early days in the integration. And our folks are super excited about the numbers we posted, that we do have a really significant signpost in terms of the integration coming up in January. So we're in the middle of combining both of our sales organization. So the first couple of weeks of January, we will actually go live with our integrated sales force. So by the time we get done with Q1 earnings, Tim, hopefully we can give you more color on how that's going.

But we're being prudent because candidly, integrating 2 sales organizations of the scale and the magnitude of these 2 companies is no small undertaking. And for the most part, we don't have significant overlap, but there is a heavy lift, I'd say, plenty of wood to chop in North America. So that's going to be the one that we've got to watch and spread the needle on very carefully. And obviously, we've done all the work that we need to do to get in place the right sales plan, but still in an integration of this scale and magnitude, there's just a lot to get through in terms of sales day 1. So that's one of the biggest milestones in the integration. Like I said, we'll be done with that by the time we get through Q1 earnings. So we'll be able to give you an update on how it's going. But I'd say that's one of the bigger integration milestones that could impact the performance of the business.

And then obviously, I think you and I are going to get into a breakdown of all the different subsegments and how they're going. But there's clearly opportunity in data center. I think it's one we're super excited about. We're seeing new opportunities that we never saw before where we can actually bid contiguously together on deals that are bringing both server and networking in. So lots of excitement and growth opportunities on both data center routing. And then I know we'll talk more about all the other segments.

Yes. Yes. Actually, my follow-up was going to be on the synergies. Obviously, there's a heavy lift, as you mentioned, integrating sales force. But -- and I think when the deal was announced, there weren't really revenue synergies planned at that point, but it sounds like you're starting to see opportunities. I know HPE had their own networking stack, but it was pretty small. So Juniper is pretty well respected technology-wise in that area. So maybe talk to us about how you see that synergy, particularly for the data center switching. That seems like the most obvious. You're selling a lot of servers, a lot of storage, not hard to try to bundle in the networking. So is there -- is that like a separate time line than getting the sales force? Or is that something that can happen organically now?

Yes. No, I think when we closed the deal, we were really clear that the deal was predicated on cost synergies, right, not on revenue synergies. So from a cost side of the house, we did announce at the Securities Analyst Meeting that we were going to see line of sight to $600 million, right, over the next couple of years, which I think was very positively received. And it's sort of like $200 million each year, $00 million in '26, $200 million in '27, et cetera, and we're well on track in terms of just the initial sort of out the gate cost work that we're seeing. From a revenue perspective, we didn't give any revenue synergy. So we said that we needed to get into the deal and do the transaction to see how that would evolve. What I would say, look, if we start out with Campus and Branch, obviously, I think Rami articulated the strategy there around how we're going to integrate over time, both platforms.

So we're seeing, I think, good progress in terms of sort of layering in different capabilities amongst Mist and amongst our Aruba Central platform. So in Campus and Branch I think there's a fairly solid story. Obviously, we're #2 in that space. And we'll continue, obviously, to play and win in that market. The areas that I think folks are getting really excited about is data center. Now obviously, in data center, we're starting off a fairly low base. So there's opportunity there when you're coming into a roll market, which is fairly nascent and new. We just announced last week in Barcelona, had some really exciting product announcements we came out with our QFX, I believe, sort of first to the market. Liquid cooling, Tomahawk 6, so clearly, putting our -- planting the flag there in terms of being out early in the market with a product, which I think the market should get really excited about it. Frankly, we're excited about it.

So opportunity there on data center. I think the other piece underscoring that is just the bids like we're starting to see for the first time the chance to actually bid on deals across both server and networking. So that's quite promising. I think the other one that's starting to get a bit more air time is routing. So this is a new space for us at HPE, but certainly Juniper brings sort of a beachhead capability here that I think is going to be very promising going forward in terms of routing and then obviously, security, just a significant market opportunity there in terms of Zero Trust. I think that market is over $30-plus billion.

Now all of that today, when we did guide the company and we reaffirmed our -- we actually upped our guide for the business, for the outlook for the year, we said all of that is in the guide right now, Tim. So in terms of EPS and revenue, everything is in there. It's a prudent guide. We've got some commodity headwinds against us. I think we're going to talk a bit more about that. So between where we're at in the deal and the commodity headwinds, we feel like we've captured everything that we know. It's prudent. If we can do better, we obviously will, Tim.

Okay. Great. Great. Yes. We'll probably come back to some networking, but let's hit on a few others. AI servers I feel like particularly investor perception of this business has done a little bit of a yoyo over the last 2 years. Initially, HP wasn't participating like some of the peers in the really low-margin stuff and then margins seem to have gone down even more. So maybe talk high level about the strategy with much more of the focus on some of the enterprise and sovereign opportunities, obviously, being more careful about margin and working capital. So maybe just walk us through kind of your view of how you can play in your own way in the AI server world?

Yes. So certainly, as you said, this market has gone through its sort of trials and tribulations. I'd say we've stepped back and sort of come forward with a framework that we're using to manage that business. And I'd say we're really anchored around 2 key variables. One is profit and the other is cash flow and working capital. So we feel as a company that we're really best positioned to win and play, particularly post the Juniper integration in both the sovereign and enterprise space. And I think we said on the call that more than 50% of the order backlog right now is actually a combination of both sovereign and enterprise. So we see the service provider segment as being one where if there's a deal that to be had that makes -- it sort of makes economic sense, absolutely. But what we see from a customer perspective and company perspective that we're best placed in those 2 categories.

What I would say with the announcement we just made last week in Barcelona, we announced Helios, which is sort of scale up both in terms of networking and server. What we see is that the sovereign folks really, from an architecture perspective, we have a chance with the Helios stack and with just our experience on the Cray side to really sort of position our architecture very well there. And the same to be said on the enterprise side. I think both of our experience and our heritage makes us a natural winner in those places. And also from a profitability perspective, as a CFO, I'd rather see us play, frankly, in those categories as well. So we've made that intentional decision to be really intentionally focused on those areas.

What I would say is with that, it does bring more lumpiness to the business. So definitely, sovereign is a -- I think we've said it in the past, it's a lumpy business. These large deals, they'll come into the pipeline, they'll come into delivery and they'll move through. And certainly, sovereigns, just by their nature, because they tend to be government focused, et cetera, also have a different dynamic in terms of customer acceptance. So we also expect that, that will impact the lumpiness.

And we said on the call that from an AI perspective, right now, what we see is those deals are very much, much more loaded in the back half of the year. So I think I said 46% of the revenue is going to be in the first half. The remaining will be in the back half of the year, similarly with EPS. So clearly, this business is more -- is competitive, does put pressure on your margins. But I think you saw our performance in Q4. We're back in the core server business back in the 10% range, and we guided to slightly above the range for Q1.

Okay. And I imagine in the non-sovereign or like neocloud where it's more competitive, HP will still look and if there's opportunities that fit the framework, then you can participate. It's just whether or not it fits the margin framework? Is that how to think about it?

I think the right way to think about it. Yes, I think we're being very -- as I said, very intentional around where we want to compete. And those deals definitely come in. I see those deals come in. And obviously, we look at the framework we've got. And if they apply, absolutely, we'll go out there and bid against the business. But we need to be very judicious around profit and around cash flow. And I think we laid out a 3-year vision of a cash flow target and returning 80% back to our shareholders, and we want to remain on track. That's our North Star, I would say, in terms of how we think about the business going forward, particularly post Juniper, we have -- we're very committed to our leverage ratio. We want to get down to 2x by '27. So for me, personally as a CFO, cash flow and returning equity back to investors is -- back to our shareholders is super important. We want to hit those milestones we laid out at our Securities Analyst Meeting.

Okay. Great. Great. Maybe one of the other topics, GreenLake and kind of the ARR and the whole SaaS type of model. It's done really well for HP. I think HP is kind of a little bit more at the forefront of that transition for the larger hardware-related companies. So approaching 10% of revenues, if you do a little ARR math. Talk to us about what you're seeing there, how you see that business progressing? And is there a ceiling? Or how should we think about the mix of ARR type business of the total as we move through the next several years.

Yes. No, I think at the Security Analyst Meeting, we said we hit $3.2 billion ARR for the year. Obviously, we've got a significant lift there as we brought the Juniper business into the portfolio. Juniper is very highly concentrated in terms of SaaS software. So we saw all of those benefits flowing through into ARR. In fact, I'd say, literally, I think around about 80% plus of our ARR today is driven by SaaS and software, which is really where you want to be. By the end of the year, we said we get to $3.5 billion. It's obviously a nice growth trajectory continuing.

And really, that ARR is driven by both software, SaaS and GreenLake. A moment on software SaaS. Now what you're starting to see, I think, Tim, is just the benefit of both the Juniper portfolio. Obviously, Mist, Aruba Central as well, obviously got a significant amount of SaaS and software embedded in their businesses. But also just -- I think the flags that we planted over the last few years, whether it's OpsRamp, Morpheus, Zerto, all that software mix is starting to play through. Now what I really like as a CFO is that these AI businesses obviously have a much richer gross margin profile. Certainly, the gross margins we posted in Q4, what we're expecting to post in Q1, there -- this mix plays into supporting that gross margin.

So clearly, super important to us in terms of the revenue stream, but more importantly, also just in of the gross margin profile. As the businesses continue to evolve, we've got a strong focus in the company around AAR and driving performance in these spaces. Then on the GreenLake side of the house, I think we announced 40,000-plus customers in this space. So we're seeing traction. And obviously, customers as we go through the AI journey, I think, are definitely looking to this GreenLake portfolio as one way to achieve some of their goals. So pleased with the progress we've made and continuing to keep it as a strategic focus for the company going forward.

And is this the type of area where maybe there's different sales compensation or incentives to move it along? Or is that something that doesn't necessarily need to happen and still...

It does need to happen, Tim, absolutely. Selling SaaS ratable revenue is completely different to selling product revenue. So I think for a company like ourselves, who has had -- we've had a strong DNA as a product-led sales organization. So to get a salesperson to really understand how to sell software is definitely a shift, and we've had to clearly put the incentive structures in place in the sales force to ensure that the right incentives are there for them to sell this type of mix. Because if you're a product salesperson, it's a different -- very different motion when you're out there.

So yes, it's been a transition. I'd say Antonio has really driven this at the top of the company, all the way through from everything you can imagine through to order management through to sales, all needs to be rewind to sell with this type of mentality. And I would say that one of the great things I see with Juniper also coming over is Juniper had a really good sort of intuitive DNA around how to win in this space, too.

Great. Maybe if we touch on kind of traditional enterprise end markets, and we have to talk about NAND and DRAM and commodity cost...

I was waiting for that to come.

Yes, it's not a huge focus for me. I know it is for a lot of investors. But maybe just give your perspectives on, call it, DRAM for servers and NAND for storage more or less. Is it pass-through? What are the near-term, midterm impacts, pricing changes? How -- what's the strategy around rapidly changing commodity environment?

Yes, we're certainly entering a very volatile period of time here around commodities. And as you rightly said, both DRAM and NAND are sort of leading at the front in terms of what we're seeing out there. Now obviously, a lot of this has been driven by just the tremendous demand pressure that's been out there with AI. And the last couple of months, I think we've all witnessed some pretty significant price changes in both NAND and DRAM. So in terms of what we're doing about it, first and foremost, we expect, I would just say quite clearly, to pass on a lot of these increases in commodity costs to customers. In fact, I would say we already started pretty early in some of the service space already trying to get out there ahead of what we saw coming in terms of the market itself.

So first and foremost, that's how we're playing in that space. Now obviously, we had pressure from tariffs over the last few quarters. So we've all learned how to sort of get out there and reprice in the market. So we've got -- we're leveraging that infrastructure that we built on the tariff side. We had wall rooms focused on pricing, focused on quoting. So we're just using those existing wall rooms and practices to help us really manage through and navigate what we're seeing out there. So first is pricing, right, being able to pass on the majority. The second is obviously demand shaping. So using what we have and then getting out there and demand shaping in the market as the market continues to play out. So we'll -- we use those techniques. We've done it before during COVID times. We'll do it again in terms of demand shaping.

And then I think, obviously, leveraging purchase commitments where we can as well. And you'll see that we expect to increase our purchase commitments on a quarterly basis as we file our disclosures. So these are all the different techniques that you use. It is a volatile time. I would say that we're -- we've got all of what we know in the guide as we can at this point in time. And it's just volatile. I'd say if we can do better, we will. We're trying to remain prudent, Tim, obviously. And I would just add that given that now the more than 50% of our operating profit comes from networking, networking is somewhat less impacted by this. So it's also good in terms of business mix from a portfolio perspective. It is really server first, storage second and sort of networking third is the way to think about it in terms of impact. So as you think about our peer base, you got to put that context out there, too.

Right. Okay. That's helpful. Maybe on to storage. It's been pretty good moves on own IP storage. So maybe walk us through how that evolution has gone and how much more room there is? And it seems like it's been pretty decent growth as well for the business.

Yes, absolutely. So we made a fairly bold strategic move in our Securities Analyst Meeting to really focus on our own portfolio, which is our Alletra MP platform. So really going after our owned IP and putting less emphasis and really deemphasizing the sort of the non-IP part of our storage business. I would say that the owned IP -- the Alletra MP platform has been very favorably received by the market. We've seen tremendous triple-digit growth in orders. It's been one of the fastest ramps, I think, in history of a product for HPE. And we've actually -- the third and most important metric is to me is market share. We've gained share and points in a fairly competitive market.

And so that's a proof point that when you invest in your own IP and you win, you definitely got -- you've got the right strategy. So certainly focused on Alletra MP and more to go in that space. And so we've reengineered the business. We've moved -- also, I would just add, we've collapsed our hybrid cloud portfolio and our server portfolio into one segment. So going forward from a reporting perspective, as we go to report our Q1 results, we'll be reporting that under the cloud and AI segment. And we will call out storage revenue specifically, so you get a much cleaner disclosure around storage going forward too, too.

Okay. Great. And then maybe on the server side, a lot of discussion about server upgrades for power reasons. And it's also been a fairly good enterprise server year for the industry. So maybe touch on how sustainable you think that business would be?

Yes. No, absolutely. As we -- most recently, we went through the announcement of both our Gen11 and Gen12 products. They constitute today probably upwards of about 90% of the revenue on the traditional server side. Now clearly, these generations of servers just have high performance, high compute power. And if you're running a data center today, you've got enormous pressure both in terms of space and power. So I think it's been a fairly easy choice for CIOs to move into newer generation and new performance because I think one, Gen11, Gen12 replaces a multitude of older servers like Gen8s and such. So if you're just doing sort of server economics and you're a CIO, it is certainly -- you have -- upgrading becomes a much easier decision when you've got all these pressure points in terms of just the space available and then also power.

Now clearly, the commodity cost environment is going to put some pressure there. There's no doubt that you're going to face some rising server costs. But the expectations are that the performance will continue to just outweigh some of those server economics. So we continue to be optimistic about server -- continued performance of traditional server. We've had a good year, I'd say, in '25 after we got through what was perhaps a correction in Q1. The remainder of the year, I'd say, went really well in terms of traditional server economics. We're expecting that to continue. I'd say the only sort of headwind there is going to be certainly commodity costs as we go through '26.

Okay. Great. Wanted to go back to networking with our last time here. One of the things that was interesting, Juniper deal took a while to close and there's overlap in Campus and Branch and WiFi. But both businesses did pretty well, which is kind of rare because your competitors are going to go in and say, "You can't go with them, you don't know what's going to happen." So walk us through, from your standpoint, how is that business different now that's it's all done and you're starting the integration. Does that position the combined asset to be even stronger than the 2 pieces before? Or any color on that would be helpful.

Yes. No, absolutely. I think you're spot on. I mean a lot of times in deals like this, things can go awry in your sort of core part of your product portfolio. What I'd say, particularly in Campus and Branch, we're clearly very strong #2 today, which is excellent. And I think Rami gave a big shout out to the product teams. I think they've done a tremendous job of trying to navigate the 2 platforms, both Mist and Aruba Central. And last week in Barcelona, I think Rami articulated quite clearly what the plans are. And I think his strategy is really to cross-pollinate the best of both platforms into each other so that customers see that stickiness in terms of the commitment that they've made to the respective platforms.

I know on the Mist side, I'll give you an example here. We've sort of taken the back engine of the LLM that we had on Mist and now applying that to Aruba Central. So Rami's team had years of experience. They built up on just networking, both in terms of understanding like Zoom performance, video performance. We've taken all that leverage to all of that learning now, and we've sort of applied that to Aruba Central as well. So that's great. So that means that those customers now can avail themselves of all the years of learning, et cetera, that came out of Mist into Aruba Central. So I think that strategy that Rami has taken around cross-pollination onto both platforms has hopefully given customers a sense of security that there is commitment there and they can understand that they're going to -- the platforms themselves are going to scale up in terms of just the capabilities over time.

So I think that has really helped us. Plus, I'd say there's just an opportunity on areas like WWAN in terms of Campus and Branch. And honestly, at the end of the day, one of the things that Juniper probably lacked that today that we're going to have is an expanded go-to-market portfolio. Juniper operated, I think, in about 30 countries, more than double that, just joining the HPE family today. We've got the opportunity to open up that entire platform to more than 2x of those countries around the world. So our partners community is super excited because now they can sell a much more expanded portfolio than they could before, and we can take the Mist platform and vice versa and plant that into our very strong enterprise backbone that we've had many years. So I think that it was a very good deal on a lot of fronts, but perhaps folks underestimated a lot of those strengths out there, Tim, that we had because Juniper just didn't have that scale and reach from a go-to-market perspective.

Right. Right. Okay. Good. Maybe we'll end with financial 1 or 2 for you. You talked about some of this at SAM, but when you think high level about margin opportunities for the company, obviously, you have some of the restructuring that's happening or the cost savings from Juniper. What do you think are the big drivers when thinking about gross and operating margin in the next few years?

Yes. No, look, I think headwinds and tailwinds, obviously, the headwind we talked about here is just commodities on gross margins. But what I would say is that on a tailwind side, we announced at Securities Analyst Meeting a combined synergy plan for both Juniper and Catalyst of $1 billion plus and really pleased with the performance that we've seen there. That's certainly a tailwind for us as we continue to execute that through '26, '27. We expect a lot of the hard work on restructuring will be done by the end of '27. So you'll start to see that flow through margins in the back half of '26 and then obviously well into '27. So that should provide, I think, a nice tailwind there into the business.

And what I would say is, look, we've seen pretty good performance already just out the gate on margins alone in Q4, particularly on the networking side and actually even on our cloud and AI business, and we expect that to continue into Q1, particularly on networking as well and cloud and AI. And candidly speaking, I would say that we were pleased with cash flow. We didn't talk much about cash flow, but we had really good solid performance on cash flow in Q4. We actually were able to improve working capital on core Juniper just by taking our own credit collections process and even applying that to Juniper, we got a nice uplift on cash flow. So early days yet, Tim, but I'm sort of optimistic about just the progress we'll make on the actual integration of the deal itself and the flow-through economics that we'll see on margins and cash flow.

Okay. Great. You took my follow up on cash flow, I didn't even have to ask you.

Did I? There you go.

All right. I think we're coming up on time here. So really appreciate the time. Thank you for coming. Thank you everybody for joining.

Thanks, Tim. My pleasure. Thank you very much. Great to be here.

Good afternoon, and welcome to the Fiscal 2025 Fourth Quarter Hewlett Packard Enterprise Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Paul Glaser, Head of Investor Relations. Please go ahead.

Good afternoon. I am Paul Glaser, Head of Investor Relations for Hewlett Packard Enterprise. I would like to welcome you to our Fiscal 2025 Fourth Quarter Earnings Conference Call with Antonio Neri, HPE's President and Chief Executive Officer; and Marie Myers, HPE's Chief Financial Officer. Before handing the call to Antonio, let me remind you that this call is being webcast. A replay of the webcast will be available shortly after the call concludes. We have posted the press release and the slide presentation accompanying the release on our HPE Investor Relations web page.

Elements of the financial information referenced on this call are forward-looking and are based on our best view of the world and our businesses as we see them today. HPE assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HPE's annual report on Form 10-K for the fiscal quarter ended October 31, 2025. For more detailed information, please see the disclaimers on the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions. Please refer to HPE's filings with the SEC for a discussion of these risks.

For financial information we have expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website. Please refer to the tables and slide presentation accompanying today's earnings release on our website for details. Throughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency. Antonio and Marie will be referencing our earnings presentation in their prepared comments. With that, let me turn it over to Antonio.

Thank you, Paul. Good afternoon, everyone. HPE finished a transformative year with a record quarter of profitable growth and disciplined execution. Q4 revenue of $9.7 billion increased 14% year-over-year with non-GAAP operating profits growing faster, up 26% year-over-year. Non-GAAP operating margin was a record high at 12.2%, including server around 10% and networking at 23%, matching the high end of our expectations. Non-GAAP diluted net earnings per share of $0.62 exceeded the high end of our guidance. Stronger profitability also resulted in higher-than-expected free cash flow of $1.9 billion for the quarter, capping a solid fiscal year '25 performance. The underlying demand environment was strong throughout the quarter with orders growing faster than revenues.

We saw an acceleration in orders in the last weeks of the quarter, signaling solid demand for our portfolio. The strong finish, coupled with the steps we have taken throughout the year to transform our company, positions us well in 2026. Reflecting our continued confidence and ongoing technology leadership, we are raising our fiscal year '26 non-GAAP diluted net earnings per share guidance and the midpoint of free cash flow guidance. Marie will provide more details about our Q4 financial results and our new fiscal year '26 outlook in a moment. We intend to capture the opportunity in 2026 and beyond by pursuing the key priorities we outlined at the Securities Analyst Meeting in October.

These are building a new networking industry leader, profitably capturing the AI infrastructure build-out opportunity, accelerating our high-margin software and services growth through our GreenLake Cloud, capitalizing on the unstructured data market growth with our leading Alletra MP Storage offerings and driving the transition to our next-generation server platforms. This strategy underpins our long-term financial framework. By fiscal year '28, we are committed to generating at least $3 in non-GAAP diluted net earnings per share and more than $3.5 billion in free cash flow with improved cash conversion cycles. Also want to highlight that we recently announced agreements regarding our H3C stake in China. We will sell our remaining 19% stake for approximately $1.4 billion, which we expect to close during the first half of calendar year 2026.

These transactions support our plan to reduce our net leverage to around 2x by the end of fiscal year '27. Looking back at fiscal year '25, I am proud of what a transformative year it was for our company. We celebrated our 10-year anniversary, a decade of focus, innovation and technology leadership. We completed the acquisition of Juniper Networks, strengthening our position in the networking market to create a new industry leader. We scaled our GreenLake Cloud, hybrid cloud software, Alletra MP Storage and AI businesses to new heights, and we continue to improve our cost structure through our Catalyst initiatives to operate more efficiently. Overall, HPE delivered full year revenue of $34.3 billion, a 14% increase year-over-year.

Our revenue growth reflects solid performance across our 3 largest business segments and the addition of Juniper Networks. We exceeded our full year outlook for non-GAAP diluted net earnings per share and free cash flow, delivering $1.94 and $986 million, respectively. Networking played a pivotal role in our success. Segment revenue increased 51% in fiscal year '25, achieving $6.9 billion with the addition of 4 months of Juniper results. Orders for the new combined Networking segment grew at a faster rate than revenues in fiscal year '25 as the market recovered. We saw strong double-digit order and revenue growth across our key segments of the networking market on an as-reported basis.

Regarding the integration of Juniper, I am pleased with the significant progress we have made in forming a new unified leader in networking. In the 5 months since closing the transaction, we have brought together our teams, technologies and go-to-market strategies and the response from our employees, customers, partners and the industry at large has been overwhelmingly positive. They are already seeing the benefits of our combined portfolio, the innovation we are driving and the cohesive customer experience we now deliver. Across the industry, stakeholders have expressed enthusiasm for combined company ability to accelerate innovation, deliver greater value and help organizations build secure, modern and high-performance networks for the future. The new combined networking team is performing exceptionally well. We increased orders and revenues on a pro forma basis during the first full quarter as one team. As a combined company, we are able to better compete with our comprehensive industry-leading networking portfolio.

We saw good traction with our core customer segments, enterprise and service provider. As we integrate Juniper Networks and HP Aruba networking, we are building a modern secure AI-native networking portfolio, one that encompasses campus and branch, data center switching, routing and security. By combining our unique strengths in AIOps, Agentic AI, silicon IP and go-to-market scale, we are positioning HP to capture greater market share and revenue synergies. Our networks for AI solutions grew in fiscal year '25, where we saw notable strength in both WAN and data center switching. We are on track to achieve networking for AI cumulative order target of $1.5 billion by the end of fiscal year '26. The Campus and Branch business had a strong performance in fiscal year '25 with revenue up double digits with orders growing above revenues.

Our AI for network solutions leverage both Mist AI large experience models and Aruba Agentic AI models, driving clear differentiation that is resonating with our customers. In our Service segment, fiscal year '25 revenue grew 10% year-over-year. We signed $6.8 billion in new AI system orders in fiscal year '25. Sovereign and enterprise bookings now account for more than 60% of the cumulative orders since Q1 of fiscal year '23, demonstrating our strategy to prioritize profitable AI infrastructure build-out opportunities. In traditional servers, revenue grew double digits year-over-year, benefiting from a refreshed cycle as customers upgrade to the latest generation 11 and 12 servers. These support greater workload performance with quantum-proof security, higher density and lower power consumption. I am pleased that we have returned server operating margin to approximately 10% in Q4. As we look to 2026, we will draw on our supply chain expertise to secure critical commodity supply and exercise our pricing management discipline.

We expect DRAM and NAND costs to continue to increase in 2026, the majority of which we expect to pass to the market while monitoring demand. Hybrid cloud revenue grew 5% in fiscal year '25. We added approximately 7,000 new customers to GreenLake, ending the year with approximately 46,000 customers. Total company ARR was $3.2 billion, up 62% year-over-year with the addition of Juniper. We continue to differentiate ourselves in a market with unique cloud-native software, AIOps and services, which together represented over 80% of ARR. In storage, we continue to make excellent progress in shifting our portfolio to our own IP. We closed the year with strong demand for HPE Alletra MP with 4 consecutive quarters of double-digit growth in both orders and revenue.

We have now shipped over 7,400 Alletra MP Storage arrays, more than doubling year-over-year. We added more than 1,300 new customers in fiscal year 2025, further solidifying our leadership in this space. Demand for our newer differentiated private cloud solutions, private cloud AI and private cloud for virtualization with our HPE Morpheus VM Essential software ramped throughout the year. We set new milestones, including approximately 100 new PC AI customers. Total orders for our Private Cloud Solutions, which also includes Private Cloud Business Edition and Private Cloud Enterprise offerings, increased more than 20% year-over-year. HPE is proud to have been named a leader in the 2025 Gartner Magic Quadrant for Infrastructure platform consumption services, positioned highest in execution and furthest in vision.

This acknowledgment spotlights our innovative cloud-native software and services experience, which help customers accelerate transformation and drive operational efficiency across their hybrid IT environments. This week, more than 5,000 attendees participated in our HPE Discover Barcelona customer and partner event. We introduced new innovations and demonstrated the considerable progress we have made in bringing together HPE and Juniper in a short period of time. For example, in AI for networks, we announced new AIOps capabilities and common infrastructure products that deliver a consistent self-driving experience across both HPE Aruba Networking Central and HPE Juniper Network in Mist cloud platforms. This is an important milestone in achieving a unified experience across campus and branch and demonstrates our commitment to quickly cross-pollinating our platforms and driving common infrastructure products for investment protection.

In networks for AI, we announced the first OEM switch to leverage Broadcom Tomahawk 6 silicon. To address performance hungry computing for AI inferencing, our new HPE Juniper networking data center switch connects GPUs within data centers with the world's highest performance ultra Ethernet transport-ready switch, delivering 102.4 terabits per second total capacity. And our new HP Juniper multiservice edge router brings AI inferencing closer to the source of data generation with performance up to 1.6 terabits per second with full duplex 400 gigabits per second connectivity. Also in Barcelona, we extended the NVIDIA AI computing by HP portfolio, introducing new solutions for AI factoring scale and performance. In HPE's AI factory networking solutions, we introduced the new HPE Juniper network in edge on-ramp and long-haul data center interconnect with our HPE Juniper Networking MX and PTX high-speed routing platforms.

Integrating our Juniper routing solutions with NVIDIA Spectrum-X Ethernet networking and NVIDIA BlueField 3 DPUs enables high-speed, secure and efficient edge on-ramp and AI data center interconnect use cases. We also announced the first AMD Helios AI rack-scale architecture with integrated HPE Juniper scale-up Ethernet networking. The solution leverages purpose-built HPE Juniper networking data center infrastructure and software to accelerate performance and deployment of at-scale AI training and inferencing for cloud service providers and sovereign clouds. In storage, we announced new solutions to accelerate AI data pipelines.

The new HPE Alletra Storage MP X10000 data intelligent nodes transform the X10000 into an active data layer that enriches data in real time for AI pipelines. Finally, last month, at Supercomputer 2025, we demonstrated our next-generation liquid cool Cray GX and supercomputing platform at data center scale. We have already won contracts to build 5 large sovereign systems utilizing this technology, including a second-generation exascale AI supercomputer for the United States Department of Energy. These announcements highlight the strength of our innovation to deliver the best network in AI and cloud solutions for our customers and partners.

As I reflect on the past year, I want to highlight a few critical milestones we have achieved as a company. First, we repositioned our business, creating a new networking leader by combining the strength of HPE Aruba Networking and Juniper Networks. Second, we scaled our AI business with focus on sovereign and enterprise customers, representing more than 60% of our bookings. Third, we advanced our cloud business with innovative offerings such as our own Alletra MP Storage for both structured and unstructured data, cloud ops suite software, HPE Morpheus Enterprise, VM Essentials and Private Cloud AI, which are all underpinned by our GreenLake cloud scale and experience. And lastly, we continue to improve our cost structure through our catalyst initiatives to operate more efficiently by leveraging automation and new AI technologies. We enter fiscal '26 with a world-class portfolio and a stronger market position. Networking, cloud and AI remain the 3 pillars of our strategy. Our organic investments are focused on higher-margin opportunities.

And with a disciplined approach to the Juniper integration, we are positioned to accelerate value for shareholders. On behalf of the HPE management team, I want to thank our customers, partners and team members for their dedication this year. Your support has been instrumental in making fiscal '25 a transformative year for HPE. We look forward to successfully executing on our strategy to achieve our fiscal '26 and long-term plan commitments to our shareholders. With that, I will hand it over to Marie for a detailed review of Q4 financial results and our outlook for Q1 and the full fiscal year 2026.

Thank you, Antonio, and good afternoon, everyone. Fiscal year 2025 has been a transformative year for HPE. We took significant strides towards aligning with our long-term strategy, delivering on our commitments and positioning the company for sustainable growth. We closed the acquisition of Juniper Networks, our largest ever, which has expanded our reach into the data center and significantly bolstered our scale in the networking sector. The integration of Juniper is a top priority, and I'm pleased to share that our execution is progressing well. While it's early days, the initial synergies we are seeing are encouraging, reaffirming our belief in the potential of this acquisition to drive higher margin and higher growth opportunities for HPE. We have established a robust foundation to transform our cost structure through catalyst initiatives, which combined with the synergies from Juniper, are targeting approximately $1 billion in annualized structural savings by fiscal 2028.

We are pleased with the significant Catalyst-related cost reductions we captured in fiscal '25. We exceeded our target of achieving 20% of $350 million in annual run rate cost savings as our results track ahead of plan. As part of Catalyst, we continue to optimize and streamline our portfolio to become a more agile and efficient organization. Turning to fiscal year 2025. Total revenue reached $34.3 billion, up 14% year-over-year. Non-GAAP diluted net earnings per share was $1.94, and free cash flow was $986 million, exceeding the outlook ranges provided at our Security Analyst Meeting in October. GAAP diluted net earnings per share was a loss of $0.04, below our outlook range, primarily driven by accounting adjustments related to the acquisition of Juniper and treatment of preferred stock.

We returned $886 million to our common shareholders through dividends and share repurchases, further demonstrating our commitment to delivering value to our investors. Non-GAAP operating expenses of $7.5 billion increased 11% year-over-year and declined 60 basis points as a percentage of revenue. Excluding Juniper, non-GAAP operating expense was down modestly year-over-year, driven by ongoing cost management initiatives. Let me highlight some key segment-related metrics from our fiscal 2025 results. Networking emerged as a standout performer of the year. The acquisition of Juniper was instrumental in driving this success, particularly in our WAN business.

Overall, networking orders were up strong double digits year-over-year on a pro forma basis. Meanwhile, our AI server business also had good traction with orders totaling $6.8 billion for the fiscal year and cumulative AI orders since Q1 fiscal 2023 reaching $13.4 billion. Additionally, we saw a strong double-digit year-over-year growth in Alletra MP Storage orders, signaling momentum as we focus on HPE developed intellectual property and innovation. Now let me walk you through our fourth quarter performance. Revenue for Q4 was $9.7 billion, up 14% year-over-year and 6% sequentially, coming in slightly below the low end of our outlook range due primarily to the pushout of some AI shipments. This growth was primarily driven by our acquisition of Juniper Networks and robust performance in the HPE Aruba Networking, partially offset by declines in server and hybrid cloud revenue.

Our Q4 profitability was another highlight of the quarter. Non-GAAP gross margin reached a record 36%, driven by a favorable mix shift to networking, stable gross margins across our 3 largest business segments and disciplined pricing strategies. Non-GAAP operating expenses rose 40% year-over-year, primarily driven by the acquisition of Juniper. Excluding Juniper, non-GAAP operating expenses increased by 3%, reflecting our ongoing efforts to streamline our cost structure and maintain disciplined management of discretionary spending.

Non-GAAP operating margin expanded to 12%, an improvement of 110 basis points year-over-year and 370 basis points sequentially. These improvements were supported by our catalyst cost savings and Juniper synergies. For the quarter, our non-GAAP diluted net EPS was $0.62, exceeding the high end of our guidance, while GAAP diluted net EPS was $0.11. The difference reflects the exclusion of certain items, including amortization of intangible assets, Juniper-related acquisition costs, stock-based compensation expense and cost reduction plan expense, partially offset by adjustments for taxes and other adjustments.

Our annualized revenue run rate, or ARR, grew by 62% year-over-year, reaching $3.2 billion. This growth reflects the strength of our GreenLake platform, the accelerating adoption of our software solutions and the incremental contributions from Juniper. GreenLake continues to grow its footprint, adding around 2,000 new customers in the quarter, bringing our total to approximately 46,000 customers by year-end. I'm particularly pleased with our Q4 free cash flow of $1.9 billion, well above our expectations, bolstered by strong Juniper collections and better-than-expected profitability. Now let me provide some color by segment, starting with networking, which is the cornerstone of our transformation strategy. HPE is uniquely positioned to lead in the networking market, offering an industry-leading secure AI-native networking portfolio that spans campus and branch, data center switching, routing and security solutions. In Q4, networking generated revenue of $2.8 billion, representing a 150% year-over-year increase and a 62% sequential growth.

Q4 revenue benefited from the first full quarter contribution of Juniper results alongside continued growth in our HPE Aruba networking business. We saw double-digit growth pro forma year-over-year across WAN, campus and branch and Security. We are particularly encouraged by the profitability of this newly consolidated networking business, which delivered an operating margin of 23%. While this represents a 140 basis point decline year-over-year, it marks a 220 basis point improvement quarter-over-quarter, driven by robust gross margin performance and higher revenue. Although we will not report Juniper's results separately going forward, we are pleased to note that integration synergies have already been materializing, enabling Juniper to deliver an 8-year high in operating profit margin during Q4. We remain focused on continuing to unlock the value of this integration. We are combining our 2 networking sales teams into a unified organization and implementing a new sales coverage model to drive efficiency and alignment.

Starting in January, we will also introduce a unified sales compensation plan, promoting consistency across the integrated networking team. These actions position us well to build on the momentum we have established and capitalize on the significant market opportunities ahead. Moving to our server business. In Q4, server revenue totaled $4.5 billion, representing a 5% decline year-over-year and a 10% sequential decrease. This performance primarily reflects the timing of AI server shipments during the quarter and lower-than-expected U.S. federal spending. Despite these headwinds, we were encouraged by robust server order growth across both traditional server and AI offerings with demand significantly outpacing revenue in this period. Momentum in traditional server was driven by the continued shift toward next-generation platforms, which contributed to higher average selling prices. Our Gen11 and Gen12 platforms now comprise approximately 98% of our traditional server revenue mix.

As we look ahead, we will maintain a disciplined focus on balancing profitability and unit growth for our traditional server business, emphasizing volume and services attached to support sustainable long-term cash flow. Turning to AI systems. Orders were strong in the fourth quarter, reaching $1.9 billion, largely fueled by demand for sovereign customers. Additionally, our AI server pipeline remains multiples of our backlog, underscoring the substantial interest we are seeing from sovereign and enterprise customers. It is worth noting that we expect AI demand to remain uneven as some of our larger sovereign customers are placing orders with extended lead times, which may defer shipments to future periods. We successfully delivered an operating margin of approximately 10%, consistent with our outlook.

We improved our margin performance by 340 basis points sequentially, a result of our disciplined approach to managing AI volumes, executing on traditional server pricing and reducing operating expenses. Moving to our Hybrid Cloud segment. We reported revenue of $1.4 billion for the quarter, reflecting a 13% decline year-over-year and a 5% decline sequentially. While below our outlook for flattish revenue quarter-over-quarter, this performance reflected our strategy to sharpen our focus on higher-margin HPE developed solutions while intentionally reducing our exposure to low-margin non-IP-related businesses. As part of the strategic pivot, we are encouraged by the continued momentum in our innovative offerings.

Orders for Alletra MP grew strong double digits year-over-year, underscoring the growing traction of the solution in the market. We are also seeing good growth in private cloud AI orders, which more than doubled sequentially, and we closed the year with approximately 100 new logos in this space. Hybrid Cloud operating margin for the quarter came in at 5%, representing a 280 basis point decline year-over-year and a 90 basis point decline sequentially. This reduction primarily reflects the scaling of operating expenses as we continue to invest in innovative and transformative solutions. Turning to Financial Services. Our Financial Services business delivered $889 million in revenue, roughly flat sequentially and down 2% year-over-year. Financing volumes totaled $1.5 billion, reflecting consistent demand within the segment.

Operating margin expanded meaningfully to 12%, up 230 basis points year-over-year and 160 basis points quarter-over-quarter, driven by a favorable lease portfolio mix and lower bad debt levels. Our Q4 loss ratio held steady at approximately 0.5%, while return on equity reached 21%, our highest level in over 5 years. These results underscore the strength and resilience of our financial services portfolio. For the quarter, we delivered strong operating cash flow of $2.5 billion and free cash flow of $1.9 billion, reinforcing our disciplined approach to financial management. Generating robust free cash flow and successfully integrating Juniper remain top priorities as we execute our fiscal 2026 strategy. Our Q4 cash conversion cycle improved last quarter by 5 days to 30 days. This was driven by a decrease in days receivable largely due to strong collections for Juniper, including early payments and a decrease in days of inventory due to lower purchases, offset by a decrease in days payable due to higher vendor payments.

Inventory ended the year at $6.4 billion, reflecting a 19% decrease year-over-year and an 11% sequential decline. We continue to demonstrate our commitment to a balanced capital allocation strategy. During the quarter, we returned $171 million through dividends to common shareholders and an additional $100 million via share repurchases. At the same time, we reinforced our financial strength by improving our pro forma net leverage ratio from 3.1x to 2.7x, primarily due to an enhanced cash position resulting in a net paydown of $2 billion of term loan debt. In terms of portfolio optimization, as announced previously, we are selling the entirety of our remaining interest in H3C in transactions valued at $1.4 billion, subject to regulatory review and approval. We expect to conclude both sales in the first half of calendar 2026 and intend to use the proceeds to further deleverage our balance sheet, aligning with our strategic objective of maintaining a strong and flexible financial position.

Before I get into the details of our guidance, let me first address the industry-wide commodity cost inflationary environment and provide some context around the actions we are taking. We are monitoring the DRAM and NAND markets daily and taking mitigating actions to preserve our margins. This includes partnering with our suppliers, taking pricing actions and working with our customers to shape demand. Overall, we expect to pass through the majority of component cost increases while monitoring demand elasticity with our customers. These dynamics are factored into our outlook with our server business most exposed, followed by storage and then networking.

We will continue to focus on what we can control while navigating the environment as it evolves. Turning to our FY '26 outlook. We are reaffirming our revenue growth outlook range of 17% to 22% on a reported basis or 5% to 10% on a pro forma basis as was provided at our Security Analyst Meeting. We expect our revenue mix to be approximately 46% in the first half and 54% in the second half, which is a bit more back-ended than our typical seasonality given the composition of our AI server backlog and pipeline. We are raising our full year networking revenue growth outlook to 65% to 70% on a reported basis, implying approximately $11 billion as we see strong traction in the marketplace for our combined portfolio. The approximately $11 billion in revenue now translates to a mid-single-digit growth on a pro forma basis. Our FY '25 pro forma baseline shifted approximately $300 million related to the move-out of noncore assets to Corporate and Other, aligned with our restated financials for the new segmentation effective November 1, 2025.

We are optimistic about our networking outlook with the commencement of our sales day 1 on January 1 when we combine our sales forces. We will update you on our progress as we move through the integration. We expect operating profit margin in the low 20% range, driven by top line growth and our cost optimization initiatives, resulting in networking constituting greater than 50% of our total operating profit for the year. We are reaffirming our cloud and AI revenue growth outlook of mid-single to low double-digit rate growth and operating margin of 7% to 9%. Given the increasing mix of sovereign customers and our AI backlog, we expect the majority of the backlog to be realized in the second half and beyond. We remain focused on prioritizing profitable server growth, implementing pricing actions to counter rising commodity costs while balancing the shift to higher-margin owned IP.

We are raising our fiscal 2026 non-GAAP diluted net EPS outlook range to $2.25 to $2.45. We expect to recognize approximately 53% of EPS in the second half. Our revised outlook for seasonality versus what we provided at SAM reflects the rapidly shifting component environment. We now also expect a higher GAAP diluted net EPS range of $0.62 to $0.82. These estimates reflect a fully diluted share count of $1.44 billion, non-GAAP tax rate of 14% and OI&E of approximately $650 million. In addition, given faster-than-expected benefits from the integration of Juniper, we are raising the midpoint of our FY '26 free cash flow outlook and now expect a range of $1.7 billion to $2 billion, which includes approximately $700 million in costs related to the Juniper and Catalyst programs.

Our slightly increased cash expense outlook reflects accelerated implementation of Catalyst-related initiatives in FY '26. For Q1, we expect total revenue will be between $9 billion and $9.4 billion, with sequential revenue decline roughly in line with historic seasonality. For networking, we expect revenue to grow 145% to 155% year-over-year on an as-reported basis or the high end of our updated pro forma revenue growth target range of mid-single digit. This growth is driven by strength in our backlog and Juniper seasonality. We expect continued strength in the business and synergy realization to drive an operating margin rate in line with our full year guidance. In cloud and AI, we continue to see the impact of lumpiness in AI server revenue and expect a sequential decline in the AI server revenue with the majority of AI deals shipping in the latter half of the year. Given the expected mix shift towards traditional server and benefits from recent pricing actions, we expect operating margins for cloud and AI to be slightly above the high end of our FY '26 target range.

On a consolidated basis, we expect Q1 total operating expense to decrease sequentially. Combined with our commodity cost pricing mitigations, we expect our non-GAAP total operating margin rate to be up slightly sequentially. Consequently, we expect non-GAAP diluted net EPS between $0.57 and $0.61 and GAAP diluted net EPS between $0.09 and $0.13. In closing, FY '25 was a year of transition for HPE as we reposition the company for this next phase of growth, completing the integration of Juniper and taking decisive action on our cost structure. There is more work ahead, but we believe we have the right strategy, the right portfolio and a clear path to making HPE a leaner, more efficient company aligned with the networking, cloud and AI needs of our customers. I'm confident in the opportunity in front of us, and we remain firmly committed to consistent execution and the financial framework that we outlined for profitable growth and strong cash generation. With that, I'll turn the call back to the operator to begin the Q&A. Thank you.

[Operator Instructions]. The first question will come from Amit Daryanani with Evercore.

I guess if I look at the fiscal '26 EPS free cash flow guide, you folks kind of raising both those numbers, while revenue guide is relatively unchanged. I assume this is just networking mix that's helping you a bit over here. But can you spend just some time talking more about how are you thinking about the memory headwinds in the fiscal guide versus what you were expecting back at SAM? And how do you think this memory cycle ends up being different versus what we saw back in '17, '18? That would be really helpful.

Amit, this is Antonio. I will start and then Marie will provide further details. Look, we are very confident in the new guide we provided, which obviously raises the EPS and the free cash flow. And it has to do with the combination of the mix of the business, obviously, networking revenue increased now to the mid-single digits and the continuous actions that we take across the company, right? Catalyst is slightly ahead of what we wanted to be. But net-net, the driver of this is all the execution that we have seen now in Juniper. Now we are a networking-centric company, clearly drives all of that.

And then on the component side, look, it looks a little bit the early part of the COVID time frame with -- it's all about the allocation of supply as we go forward, that drives cost increases. We already, by the way, Amit, have implemented price increases in the month of November. So that's already in place. And we have very strong capabilities in our supply chain to secure the allocation of components we need, and we have discipline in passing through the cost through our pricing, which, again, we already did in November. Everything we know as of today is in our guide. So what we know today is already included in the guide for both revenue and EPS.

And Amit, maybe I'll just add, just to clarify on the guide itself. So you're correct, we did raise the guide, the midpoint by $0.05, and that's actually driven by the revenue that moved out of Q4 into Q1. So we got some profit benefit there. And also, as you correctly said, some of the stronger networking backlog that we're seeing. So overall, look, it's a prudent guide. If we can do better, we will. And we're pleased with the cash flow as well. I think that's a great example of just some of the strengths that we saw in Juniper collections in Q4 because we had very good cash flow in Q4, and that's actually trickling through into '26 as well. So overall, they are the 2 drivers of the increases in the guide, Amit.

The next question will come from Samik Chatterjee with JPMorgan.

I guess, Antonio, just following up on the response to Amit's question. You did talk about acceleration in orders towards the end of the quarter and you're referring to price increases in November. Maybe if you can just sort of help us in terms of how you're interpreting the increase in orders that you saw towards the end of the quarter? And do you see sort of them largely being in response to price actions you're going to take in November? Just trying to understand what the drivers are, what you're seeing at your end.

Yes. Thank you, Samik. We saw a very linear quarter in Q4. And in the last few weeks, we saw an acceleration of that, and it's true across the entire portfolio. Look, we closed the first quarter as a fully integrated networking business. The commodity cost has limited impact in the networking business because, obviously, DRAM and NAND are not really applicable to the networking business. And that business did really, really well. We saw orders growing faster than revenue there. Then we saw a continued momentum in Alletra MP Storage with double-digit year-over-year growth in both orders and revenues. And then the traditional server business orders did well. It's early to say if there was a pull-in of sorts on demand. But I will tell you that we felt prudent at this point in time, considering the early signals we got from our suppliers on DRAM, to take the actions on pricing.

And we expect that the NAND part will follow in 2026, and therefore, we will do the same. The customers obviously have budgets that end on December 31. Most of the customers are on calendar year budgets. And so you should normally expect an acceleration of orders in the last part of the year. But we have conversations with customers about what we expect on commodities so they can make the right decisions and place the right orders. We really focus on conversion short term versus guaranteeing pricing long term because obviously, all our agreements have price protection. And therefore, we will be very upfront with customers when to place the orders and what to expect in terms of supply.

Next question will come from Tim Long with Barclays.

I wanted to ask on the ARR and the GreenLake side, if I could. Could you just talk a little bit about traction you're seeing with the as-a-service models more broadly? And then obviously, the ARR jumped up a little bit with Juniper Mist being added. If you could just talk a little bit about what adding Juniper does to this part of the model? Does this help maybe accelerate, obviously, the networking part, but are there any broader benefits by having the 2 companies combined on the GreenLake side?

Yes. Thanks, Tim. Look, all the ARR we added from Juniper is in the software subscription services because remember, our ARR is a combination of, call it, the SaaS, which is the software subscription on GreenLake and that's a combination of networking with Aruba Central, obviously, all the hybrid cloud software with Morpheus, VM Essentials, Zerto, OpsRamp and the like and also the storage business, right, with Alletra MP. And then we have the GreenLake Flex, which is the pure consumption model, which obviously is inclusive of hardware and financing and the financing is only for the operating leases part of the equation. But the addition of Juniper comes all the software subscription that are tied to things like Mist and Apstra and so forth.

In fact, one of the key announcements we made yesterday when I was in Barcelona is the integration already of Apstra with OpsRamp as a part of GreenLake. That's an acceleration of AIR. But look, we now have a baseline that represents 80% of AIR is software and services. And that's very, very high. And as we continue to grow the networking business, which now we are at the core, I would argue, a networking-centric company with a tremendous amount of innovation. If you look at the innovation this week has been significantly higher than any other event we have had in the last few years. Rami came strong and articulated the strategy about cross-pollinating the Mist and Aruba Central.

That means both will get the benefits of each other, which means more software added through the AIOps in addition to the fact now we support dual hardware on both platforms. We also announced the new Juniper QFX fabric, which is first direct liquid cooling. He took advantage of our direct liquid cooling. And that has also a component of software that will go into the subscription. So that's what we're seeing. And so obviously, now we have a $3.2 billion ARR. And from there, we expect to continue to grow at a bigger base, obviously. And that's where we are excited about what comes next with GreenLake. And all the AIOps intelligence we built around it.

Next question will come from Erik Woodring with Morgan Stanley.

Antonio, I'm going to go back to kind of where Amit and Samik were touching on, on the commodity stuff. I just really want to understand your thoughts on the pass-through and demand elasticity because we can look at server DRAM contract pricing up 50% in 4Q alone. DRAM is obviously a considerable -- considerable part of the server bill of materials. I guess simple math would say you'd have to raise pricing 15% just to account for the contract pricing in 4Q alone. So I guess maybe just -- is that the implication that you're kind of referencing here? And second, what are you assuming for demand elasticity just because if we take your kind of cloud and AI guide, it does assume a notable acceleration in growth through the year. So I'd love to just understand, are you talking about pricing increases that considerable? And two, how do you expect demand to respond?

Thank you, Eric. I think you are spot on. I think you're not that far, to be honest with you. You may be a little bit short, in fact, I will say. Look, we have made pricing changes to reflect exactly what you say, which is the DRAM cost and the percentage of the mix of that in the BOM in our servers. And we expect that the NAND part of that will follow as we go forward. As demand elasticity, look, there are benefits to upgrade because we have shown customers that you can take a Generation 10, which is maybe 4 years old, down to 1, 7 Generation 10 servers down to 1. That helps reduce your energy cost by 65%, get better performance on a per core basis, more density.

And at the same time, you can pay off that investment in less than 2 years. So the depreciation of that return is very, very fast. So as we said in my remarks, we are going to monitor the cost and the demand. And I think you will see a rebalancing over time between units and revenue. But remember, more than 2/3 of our AUP is structural. So I believe there are unit growth that we'll continue to see, but maybe a little bit more muted than maybe expected 6 months ago. But on the balance, the revenue will grow as implied in our revenue guidance because of the AUP mix shift. And I think you're spot on in your thesis.

I'll just add, Erik. Look, we're using multiple tools. You hit on pricing. But also, look, we've been down this track before. We know that other tools like demand shaping are critical to use through this process. So we will be looking at how we can shape demand with the parts that are available while we try to balance some of our key customer relationships. But as Antonio said, our guidance really reflects the best estimate of the impact of commodities and the actions as of now.

And by the way, another point, Erik, is that when we have frame agreements, think about large enterprises that buy on a catalog of preconfigured products. They are priced protection guarantees there. So obviously, there is an ability for us to raise prices as a part of the changes we see in the industry.

Next question will come from Wamsi Mohan with Bank of America.

I wanted to clarify some of the comments around seasonality. In your slides, you talked about the $9 billion to $9.4 billion in 1Q is a decline consistent with historical seasonality. But I think, Marie, you said that there were some pushouts of servers from 4Q to 1Q. So should that not be driving much better seasonality and sort of a higher outlook in fiscal 1Q? And similarly, you noted that the AI server lumpiness and sort of timing would drive the second half of the fiscal year much higher relative to the first half. It's like different seasonality. So I'm just trying to piece those pieces together, what's baked in from pushouts into 1Q? And would the seasonality have been even worse had those pushouts not occurred. So hopefully, you can just maybe put that all in some context.

Sure. No problem, Wamsi. So why don't I just clarify the seasonality with respect to Q1, then I'll turn to Antonio to talk about the AI timing. So with respect to Q1 seasonality, the way to think about it is spot on, we did have some AI deals that moved out of Q4 into Q1. But just bear in mind that from a Q1 perspective, it is in line with our normal sort of historic seasonality for Q1 revenue. So sort of use that as an anchor to think about the year. And I think in the prepared remarks, I did mention that we have a split between revenue of 46% in the first half and 54% in the back half. So use that as another way to sort of think through the seasonality. So hopefully, that gives you the context on Q1. And then I'm going to sort of turn it to Antonio to talk specifically about the back half and how we see the AI shipments sort of placing themselves throughout the year. Antonio, over to you.

Yes, Wamsi. Look, on the AI conversion, right, because now more than 60% of our orders are in sovereign and enterprise, and obviously, enterprise is a very large number of deals that get through, but they are smaller in size compared to potentially a sovereign AI cloud, which obviously is much larger. But when I think about that, look, they are longer to convert for a number of reasons, right? Number one, obviously, is the whole procurement process is much longer to get the funding locked and so forth, the data center readiness, the availability of power and cooling and the like.

And some of these deals, by the way, are not current technologies, maybe they are for the back half set of technologies, particularly with NVIDIA, Vera and Rubin. So you have a combination of factors there. In regard to the pushout of the deals, look, there were some deals for the government related. They take time. They take time to really get the machine up and running again. Remember, we're just now a handful of weeks here since they came back online. That may take an extra full set of weeks. And then there was one particular deal that they didn't -- they weren't ready with the data center. And so we deploy a number of parts and those other parts will take a number of incremental weeks to get it done. So we expect that the back end of the year will have the biggest part of the AI revenue conversion. But at the same time, we continue to stay focused on those 2 segments because they are -- the focus is because of our ability to play and win with the right margin profiles and the right working capital.

Next question will come from Aaron Rakers with Wells Fargo.

I wanted to ask about the networking business. It looks like on a pro forma basis using Juniper's results, you grew kind of in the low to maybe mid-teens range year-on-year this last quarter. It looks like you're guiding kind of the pro forma number to kind of grow in that mid-single-digit range next quarter in that range for the full year. I'm curious why necessarily you see a deceleration in that? Is that conservatism? And if you can, can you talk a little bit about Juniper's positioning in some of these AI fabric build-outs, what your discussions has been with customers thus far? I think Juniper's had a position in some larger build-outs in the past.

Yes. No worries. Why don't I just talk a little bit about the revenue and how we're thinking about it. Yes, you're right. Look, really pleased with the results, I'd say, for Q4, both in terms of both revenue and operating margins for the business. I think you're seeing the transformative power of those 2 networking companies coming together and just what we can drive here. What I would say, as you think about the rest of the year, we have kept revenue -- we did raise revenue actually in terms of the range that we gave you for networking. And a couple of things just to bear in mind. We do have a critical milestone in the integration that's taking place in this current quarter, which is actually the integration of both of the sales forces. So it's early days.

And I think at this point, we've got a prudent outlook given where we're at relative to the integration itself. So a couple of things just to bear in mind in terms of drivers. There is some seasonality I mentioned earlier. We see some commodity pressures that you heard us talk about on the call. And then obviously, we've got the product mix in terms of a bit more cloud and AI. But I'd say, overall, we're comfortable with the guide that we've given you so far for networking for the year.

So Tim, look, this is -- in my mind, it's very simple. We have an incredible portfolio in the campus and branch, we continue to make tremendous traction. Both platforms are winning in the market. There, it's more about integrating the sales force, getting them stabilized from an account coverage perspective. I think the channel will be the opportunity for us to drive upside because they are all super excited about that part of the business. And look, we had major wins on both sides. And so we expect that to continue in 2026. On the data center switches side, we expect that business to grow at or above market as we go forward. Networking for AI, we said we expect to achieve $1.5 billion by the end of 2026.

Obviously, some of that will carry into '27 because you have the backlog conversion that has to take place. The one area that I am actually more excited in many ways is the routing business. The MX platform is the standard for on-ramp cloud. It is an amazing product that really is winning in the market. And even the PTX for the DCI, meaning the data center interconnect for long haul is the reference. And that business has a very large backlog that will convert later in the year. And Marie referenced to this, I think it's important that all of you remind yourself that Juniper is a back-end loaded conversion to revenue. That has been always the case.

And that's why we have given this seasonality in line to also what HPE is going to do. But based on what we know today and the line of sight of the integration and still have to go through the sales integration on January 2, we still raised the revenue guidance to now, call it, the mid-single digit, call it, the 5-plus percent which is almost double of what we gave you at the Security Analyst Meeting and at the midpoint, which was between 2% and 5%. So that tells you we are growing confident. And as we go forward, we will see how the team executes. But look, we believe there is a tremendous opportunity. And the goal there is -- the goal for us is all about execution.

And your final question today will come from Asiya Merchant with Citigroup.

Marie, if I can just ask about the sale of the assets that you have and how that is reflected in your OI&E. I believe the OI&E figure didn't really change from what you provided at the analyst event. So how should we think about the sale and how that should be factored into the OI&E.

Yes. Look, Asiya, at this point, I assume you're talking about H3C. Look, everything is factored into the OI&E numbers that I gave in my prepared remarks. We'd actually plan for this all along in '26. So it's all captured there in the prepared remarks that I gave you in the call today, Asiya.

Yes. No, thank you. Thank you for the patience today. Look, Marie and I provided a lot of details. We provided a lot of data. I'm sure you will have follow-up questions that the IR team will handle. But we felt that this was the right time to give you as much data as possible as we enter 2026. And look, I will say that 2026 is a year where HPE has the opportunity to not only deliver what we committed, but really drive the transformation of this company to a new height based on the fact that we are now a networking-centric company. And on that foundation, with the latest innovation, we will deliver great experiences or growth opportunities in both cloud and AI. But we will maintain that strong discipline, focus on growth and operating margins that ultimately drive profitable growth and free cash flow. And I believe our strategy is working and the Juniper integration is working. And so that's what I will leave you today. And I take this opportunity to thank you for your coverage and feedback. And if I don't speak to you, I wish you and your families happy holidays.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

All right. Good afternoon. Welcome. For those of you who don't know me, I'm Paul Glaser, I'm the Head of Investor Relations, and welcome to HPE 2025 Security Analyst Meeting. Thank you for joining us here in New York, and thank you to those who are listening on the webcast.

In our executive session today, you will hear from Antonio Neri, President CEO; and Rami Rahim, EVP, President and General Manager of Networking; and Marie Myers, EVP and Chief Financial Officer. Following the presentation, we will take questions from the live audience moderated by Shannon Cross, our Chief Strategy Officer.

Before I pass it to Antonio, let me start with the disclosures. 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 investor.hpe.com. This presentation also includes presentation of certain non-GAAP financial information. While we believe that providing these non-GAAP financial measures alongside the corresponding GAAP measures provides a supplemental view to understand our historical and prospective operating performance, these 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 analysis of HPE's results as reported under GAAP.

With that, let me turn it to Antonio.

Good afternoon, and welcome. Welcome, and thank you for joining us today, whether you're here at the New York Stock Exchange or watching us on our webcast. This morning, I joined my colleagues to ring the opening bell to celebrate the tenth anniversary of Hewlett Packard Enterprise, which we mark on November 1.

Throughout the past decade, the IT industry has experienced dramatic change driven by the on ramp to digital, the growth in cloud and the explosion in AI. I am personally very incredibly proud of how we have transformed HPE and how we took a disciplined approach to capitalize on the multiple industry disruptions and turn them into value for our shareholders.

Today, HPE is a vastly different company than it was 10 years ago. We are leaner, more innovative with a differentiated portfolio, positioned to capitalize on the growing opportunities ahead. With the recent completion of our Juniper Networks acquisition, we move forward with renewed excitement. In this new chapter, I'm focused on accelerating value for our shareholders through higher profitable growth and increased capital returns. HPE was created with a bold vision to redefine and modernize enterprise IT for the era of digital transformation and the new age of insights.

We architected a cohesive strategy aligned to the IT megatrends and implemented a series of strategic initiatives to reposition the company for the future. We intentionally focus on what will differentiate us across networking, cloud and AI through organic innovation and targeted strategic acquisitions. We simplified our company, improving our cost structure by reengineering our processes and incorporating automation. And we never lost focus on our culture, including recruiting and developing the best talent to compete and win in the market.

As a result of these deliberate moves, we significantly increased the relevance of HPE in the market, delivered solid shareholder value, and we set the foundation for what comes next. Now we turn the page to HPE's next chapter, one that unleashes HPE as a leader in high-growth, high-margin networking market. Our strength in networking will enable HPE to increase our participation in the AI and cloud markets with a stronger and stickier value proposition.

HPE strategic priorities over the next 3 years are clear. We will build a new networking industry leader, capture AI infrastructure growth profitably, with a focus on sovereign and enterprise customers, accelerate our high-margin software and services growth through our HPE GreenLake Cloud, capitalize on unstructured data market growth with our own IP through Alletra MP Storage and drive customer transition to next-generation server platforms.

As we pursue these strategic opportunities, we will continue to focus on improving our operating leverage. And we are committed to delivering annual run rate synergies by 2028 of at least $600 million through the Juniper integration and at least $350 million from our Catalyst initiatives, which are designed to accelerate revenue growth, while driving structural cost savings. That will allow us to return to 2x EBITDA leverage range by the end of fiscal year '27, we will generate more than $3.5 billion in free cash flow by fiscal year '28 and we'll accelerate capital returns through higher dividends and increased share buybacks.

I am confident in our ability to deliver on these strategic and financial priorities, which position us for success. HPE is playing to win in 3 strategic IT markets: networking, cloud and AI, each one serves as an essential building block for modern IT. These markets are all growing at an accelerated pace, driven by advancement in AI and the swift expansion in data center build-outs.

We anticipate the overall total addressable market across our portfolio will increase to over $1.1 trillion by fiscal year 2028. Our portfolio is well positioned to capitalize on all 3 growing markets. I believe the networking market will reach a significant inflection point becoming the core foundation of the new AI technology stack.

This will require faster innovation to keep up with the disruptive innovation already experienced -- we've already seen in the server and storage markets. Through the acquisition of Juniper Networks and our unique expertise in data center scale, the Rack Scale solutions that we developed, HPE is well positioned to capitalize on the growth of the AI infrastructure in service provider, sovereign and enterprise customer segments.

And let me tell you how. AI at the core requires vast amount of accelerated computing and data. Our AI systems are leading the market today with very strong solutions. Today, HPE ProLiant servers and Rack Scale Solutions delivered sustainable accelerating computing for training and inferencing deployed at scale across the market. Our unique fanless direct liquid cooling innovation is a point of differentiation for HPE. Our global manufacturing services footprint provide us with a unique ability to compete around the world.

And we complement this expertise with our market-leading supercomputing portfolio of HPE Cray EX solutions and systems, enabling the world to solve some of the biggest challenges through simulation modeling and now the accelerated adoption of AI. These capabilities are particularly important for sovereign and neocloud customers. Data fuels the development of AI models and applications, unified, high-performance storage, accelerate access to insightful data, directly improving AI mobile outcomes.

And as a result, organizations need scalable, integrated data solutions to expand AI initiatives. Our HPE Alletra MP Storage provide enterprise customers with a scalable cloud native and AI ops-driven platform for structure and unstructured data, helping them reduce both CapEx and OpEx expenses. And then there is cloud. AI workloads are the true definition of hybrid. Hybrid and multi-cloud control are essential for flexible, cost-effective AI deployments.

Our GreenLake Cloud enables enterprise customers to manage AI workloads across multi-cloud environments, simplifying operations and insurance compliance while reducing operating costs through a unique agentic AI approach. Lastly, our financing and asset life cycle capabilities set us apart. By providing enterprise customers with financial capacity for AI investments through sustainable approaches, HPE lowers the barriers to AI adoption.

And again, our recent acquisition of Juniper Networks position us to be the clear choice in networking, offering the industry-leading secure AI-native portfolio of networking spanning campus and branch, data center switches, and wide area router and infrastructure. There is a clear advantage to such an expansive and integrated portfolio for our customers. We had a well-developed vision for the combined portfolios of Juniper Networks and HPE Aruba networking where we announced the acquisition in January 2024.

Our market thesis has been further validated since then as customers ramp their AI infrastructure investments further and faster. Customers are attracted to HPE's open architecture and distinctive approach across the entire IT stack. Before the acquisition, we already had a strong portfolio of server, storage, networking and cloud offerings, along with global scale through our go-to-market reach. And now we are combining all those strengths as well our extensive partner ecosystem with Juniper to create an IT powerhouse.

I want to reaffirm our confidence in the success of this integration. My confidence is grounded not only in our rigorous governance and execution framework but also in our proven success in integrating acquisitions that drove and continue to drive now strategic growth, whether it was from Aruba to Cray to Silver Peak to Morpheus Data to OpsRamp, we have consistently demonstrated our ability to bring companies together, unlock both revenue and cost synergies and accelerate portfolio innovation.

And let me be clear, Juniper will be no exception. We are driving this integration forward with a dedicated program management office, which is led by our Chief Operating and Legal Officer, John Schultz. John and the integration team offers support and oversight and track commitments and milestones around combining functions, operations and go to market. An executive steering committee oversees the program management office and reports directly to the Board of Directors who established an integration committee to ensure strategic oversight and accountability at the highest level of our company.

We have strong collaboration and cultural alignment across the teams with key talent from HPE and Juniper, working as a one team, already delivering on integration decisions and jointly engaging with customers. These early signals reinforce our belief that we will deliver at least $600 million in annual run rate synergies by 2028, as we have committed to shareholders, which many are here in the room. Together, HPE and Juniper will disrupt the status quo in the networking market and unlock even greater value for our shareholders.

And now to speak more about how we will deliver on our networking vision, we will welcome Rami Rahim, who leads our new HPE networking business. But first, let's see what some of our customers have to say.

[Presentation]

Thank you very much, and thank you, Antonio. Good afternoon, everyone. It is exciting to be a part of HPE and to be here with all of you today. I am privileged to lead the new HPE networking business, and I'm here today to give you a clear view of our strategy for growing revenue, securing market leadership and ultimately disrupting the networking industry. Now as I share our plans, first, I will talk to you about the market opportunities we are pursuing.

In this new AI era, networking has become mission critical. And as a result, we expect to capture market share in key network product segments that are both large and growing. Next, I will walk through our strategy for building a highly competitive, highly profitable networking business powered by the combination of HPE and Juniper Networks. And third, I will highlight the unique and competitive advantages of our secure AI native networking portfolio and how our innovation and go-to-market scale can accelerate value to shareholders.

Now finally, I will discuss the results we intend to deliver and how we will track our progress over the next 3 years, okay? So let's dive right in. As Antonio mentioned, at HPE, we focus on 3 essential building blocks for modern IT: networking, cloud and AI. In the era of AI modern, high-performing and integrated infrastructure is crucial, and the role of networking cannot be overstated. Connecting infrastructure, applications, users, data more securely and efficiently is at the core of cloud and AI performance.

So whether it's connecting people or scaling up and out to connect thousands of GPUs, Networking is the foundation to delivering the business outcomes our customers need. But here's just thing, legacy networks lack the necessary scale, reliability, intelligence and automation needed for the modern AI era. Network performance is just no longer about speeds and feeds. It is about delivering a best-in-class experience to network operators and end users, whether those end users are people or AI agents.

And to achieve this kind of performance, organizations need a network that is purpose-built with AI and for AI. So when I say with AI. That means leveraging AIOps to simplify network deployment, stay ahead of security threats and enable proactive troubleshooting to streamline operations, lower cost and deliver an exceptional user experience. When I say for AI, it means customers deploy and manage high-performing networks that minimize AI training and inferencing times, maximize GPU utilization and secure sensitive AI workloads and data.

30 years ago, I was fortunate enough to have a front-row seat as the Internet exploded to what it is today. But I am sincerely more excited today than I was about the opportunity back then because cloud and now AI have changed everything, creating new and even bigger growth opportunities for all of us. So we see that growth opportunity in our overall networking TAM, which is -- which will grow to $169 billion by the year 2028. With HPE's acquisition of Juniper Networks, we now have the entire networking technology stack. We have the talent, the go-to-market scale to win in this growing market segment.

Now our vision is to deliver unparalleled secure AI native networks that empower our customers to meet their technical and their business objectives. To fuel this vision, my key priorities for the next 3 years are as follows: first, we will drive increased adoption of our highly differentiated AIOps solutions to capture share and enhanced profitability in AI for networks.

As our leading AIOps platforms come together and become even smarter, we will realize this vision of a self-driving network, which will increase our differentiation, drive both revenue growth as well as margin expansion. Second, we will tap into the large networks for AI investments that are happening in our industry, to grow revenue and deliver shareholder value. Here, our greater R&D scale will enable us to innovate faster across networking, silicon, systems and software to not just participate in the AI data center market opportunity but to be a leader in it. By providing a complete solution, including routers, data center switches, firewalls, servers, storage, you name it and the services all around it, we will win with our customers, and we will grow our revenue.

Now third, we're going to claim market leadership in key areas where the network and security are converting. Our approach to integrated security means that we deliver best-in-class efficacy, breadth and flexibility, giving customers supreme confidence in our solutions. And as a result, we're going to be able to grow mind share and market share.

Now we plan to execute these strategic priorities in alignment with 4 distinct areas of the market opportunity where we have a competitive advantage that will accelerate value for our shareholders. So let me address each of them. I'm going to start with one that I know is top of mind, campus and branch. This area represents a significant market opportunity for us as both the largest segment of the networking TAM and also the largest part of our business today.

We have strong momentum and recognition from the market with 18% market share and a robust ARR growth, now exceeding $1 billion. Our track record of innovation in the campus and branch is honestly second to none. We were first with a virtual assistant that uses generative AI conversation interface to solve problems using natural language queries. We were the first company with Agentic digital twin technology that finds and fixes problems without users having to be present. We were among the first to introduce WiFi 7 access points and have seen triple-digit growth this year in that market, and we were the first to introduce the concept of a self-driving network, which is a game-changing approach to network performance measures focused on Agentic AI and auto remediation.

Now as we build on this track record of innovation, there are 3 powerful reasons why our momentum is accelerating both with our customers and against the competition. okay? The first reason is that we have 2 industry-leading network AIOps platforms, Juniper Mist and HPE Aruba Networking Central, both with proven results, delivering up to 90% reduction in trouble tickets and on-site service calls.

Each of these platforms has unique and compelling strengths that actually complement each other. For example, Mist was purpose-built for public cloud deployments, while Central excels at private cloud and on-prem deployment as well as virtual private cloud architectures. Together, they support every deployment option our customers want.

And over time, we will unify the experience of these 2 platforms by cross-pollinating features and capabilities of each on to the other. And in so doing, we will protect our customers' investments while accelerating innovation and all at greater levels of engineering efficiency. So we're already moving really quickly to bring the best of both of these platforms together to all of our customers and I look forward to showing exactly what that looks like at HPE Discover, Barcelona, in December.

The second reason for our momentum is that we have one of the industry's largest data lakes. Our 2 platforms have been delivering powerful AIOps capabilities now for more than 10 years. We've been collecting anonymized network user experience data from billions of connected devices over that entire time frame. This gives us a very rich pool of data, which grows by more than 1 trillion telemetry points every single day, which means that our AIOps get smarter and more effective every single day, creating more powerful competitive moats around our solutions.

And third, we have consistently embraced forward-looking AI strategies evolving from traditional prediction engines to GenAI capabilities like optimized search and chatbots and now agentic AI paving the way for a truly autonomous network. This progression reflects our ability to anticipate and lead industry shifts delivering cutting-edge solutions today while positioning ourselves for future leadership.

Our momentum is only accelerating, and the market is taking notice. In the 2025 Gartner Magic Quadrant for wired and wireless, both HPE and Juniper Networks were named leaders while the long-standing incumbent was not. This milestone signals a significant shift in the industry and validates our growing market leadership. Now the next strategic market growth opportunity we see is in routing infrastructure solution, okay?

Some people might know what a wireless LAN or WAN. AI adoption is driving unprecedented traffic demand, not just within the data center, but between them. This presents a clear opportunity as we have innovative solutions that drive compelling scale, performance and power efficiency advantage that our customers need. So the surge in AI traffic and AI training and inferencing is creating a massive data center interconnect or DCI opportunity with bandwidth demand expected to grow up to 6x in the next 5 years, as enterprises and hyperscalers race to link GPU dense facilities with low-latency, high-capacity networks.

Furthermore, cloud providers are rapidly expanding their direct connect offerings with some now delivering up to 400 gigabits per second of dedicated bandwidth per link. So these cloud capabilities are enabling enterprises to move massive AI workloads between on-prem infrastructure and the cloud with predictable performance and low latency.

Our HPE networking routing solutions, such as PTX for DCI and MX for Direct Connect use our proprietary silicon offerings and our Junos operating system, and our differentiated innovations were custom built for scale and performance, uniquely positioning us to capture share as this space evolves. And in addition to the AI opportunity, of course, we will continue to take advantage of technology upgrade and refresh cycles among service providers to drive revenue at healthy margins in that customer segment as well.

Okay, third is the data center market. And this, of course, represents one of HPE's networking fastest-growing opportunities today. Now customers have varying data center needs on their location, industry growth trajectory. It depends on many different factors. So one size fits all data center solutions are just not going to cut it. We will win in this market by pursuing both traditional enterprise data center opportunities and the fast-growing AI data center market.

For traditional data centers, we will leverage our secure AI native networking platform for campus and branch and cross-sell into the data center space. In addition, we will integrate into HPE's hybrid and private cloud enterprise stacks to simplify deployment and day-to-day operations across compute, storage and networking. Now data center builders and operators need efficient management solutions like Apstra to meet their operational and regulatory requirements, their cost objectives as well as their security imperatives. Apstra is truly unique in that it is the only solution that supports multi-vendor data center switching. It offers deep, actionable insight into networking events and its intent-based approach, it just abstracts away complexity from operators while ensuring that data center is always running as expected.

For the AI data center market, success requires intimacy with cloud builders, including neoclouds and sovereign cloud providers. Here, agility and speed of execution are absolutely key to success. And over the last couple of years, we have demonstrated an ability to do just that. We were first to market with an 800 gigabit Ethernet switch from our QFX series. We've landed meaningful front-end and back-end AI cluster wins from small to multi-hundred thousand GPU cluster networks.

And as we look to the era of 1.6 terabits per second Ethernet interfaces, we expect to continue our leadership. Liquid cooling is going to become critical for AI data center networks in the near future. And we will be able to incorporate our industry-leading direct liquid cooling technology from HPE Slingshot products into our AI switching portfolio. HPE's experience and market leadership in the AI data center deployments around the world has already started opening doors for more networking opportunities.

Some cloud builders, especially sovereign clouds prefer to work with a single technology provider for all aspects of their AI data center builds. HPE's ability to combine compute and networking into end-to-end data center solutions with expertise and services creates a big and growing opportunity for HPE networking.

Network security. Now network security cuts across all of these markets and presents our fourth area of opportunity where we have a competitive advantage. The philosophy around network security is changing as customers demand security that's not bolt-on, it's built in. So our objective in security is to strengthen our solutions, especially in the campus and branch and in the data center markets. And as we execute our network and security convergence strategy, we will align ourselves to a growing trend of UZTNA, or Universal Zero Trust Network Access that many enterprises are starting to embrace.

This advanced security framework applies zero trust principles consistently across all environments, whether users are remote, on-prem, hybrid or using unmanaged devices like IoT. This is an emerging trend, and we have a distinct advantage to lead in this space as we bring together our SASE, NAC, firewalls and AIOps to create a complete end-to-end solution. By integrating security directly into the network, we protect our strategic solutions from stand-alone security players that are entering into the networking space. And we will tap into a nearly $33 billion and fast-growing security market through an integrated approach and attach sales motions.

So look, we have a differentiated technology portfolio. We have market momentum, and we have the innovation prowess to bring this vision to life. But perhaps more importantly, we have the team we need to deliver on every promise we are making here today. I have been incredibly impressed with how well our 2 teams have come together over the last few months. And I have immense confidence in how we will continue to serve our customers and drive growth in our business as one networking team.

And speaking of customers, HPE Networking has some of the best customers in the world across practically every industry, whether it's customers like Carnival Cruise Line, which deploys solutions from across the full HPE Aruba Networking and HPE Juniper Networking portfolio, institutions like University of Notre Dame, or convenience retailers like 7-Eleven, all our customers have one thing in common, and that is that their networks are absolutely mission-critical to their organizations.

Now I recently had the opportunity to see one of our customers' deployments in action at the 2025 Ryder Cup. I also have to tell you that I'm better technologist than I am a golfer, but I found that both aspects of that event were actually pretty impressive. With an integrated solution, including HPE networking, HPE private cloud AI and a custom-built operational intelligence dashboard, we created one of the world's largest temporary smart cities on Long Island. Our solutions powered the tournament connections for everything from digital media to retail operations, to course management to the fan experience for more than 250,000 spectators. Take a look.

[Presentation]

I love that video, too. Look to help us deliver on this kind of customer success. We have a robust and engaged partner community through which we do about 90% of our sales. When we closed this deal, there was only around a 10% overlap in partners between HP Aruba Networking and Juniper Networks. We now have more than 47,000 partners around the world selling our HPE Networking portfolio. So harmonizing partner programs and driving our combined product portfolio through a broader partner community represents a compelling source of revenue synergies for us.

Additionally, as an accelerator to enable our partner community and capture new customer wins, we are harnessing the power of HPE Financial Services to make it easier for our customers to choose us. HPE FS will help our networking customers and partners upgrade their technology at the pace and with the investment structure that they desire.

Look, our networking segment is not just a growth engine, but the most significant contributor to HPE's financial strength. Over the next 3 years, we are committed to delivering strong results, which will translate to enhanced returns for shareholders. This means that we will accelerate the adoption of our AI-native networking solutions as we pursue customers across every major industry.

Accelerating customer adoption will enable us to achieve global market leadership in key segments, including wireless LAN and data center networking. And we will deliver revenue growth with healthy margin expansion. Through this margin expansion, we will expect to increase networking's contribution to HPE's non-GAAP operating profit to nearly 60% by fiscal year 2028.

HPE Networking was created to give the industry a new leader, a leader with a bold vision and a clear path to success. We have an immense opportunity to disrupt the status quo in networking and deliver unprecedented value for our customers, our team members, our partners and our shareholders.

I'm excited to be leading this business. I am confident we have the right strategy and the right team in place to capture the opportunity ahead. So I want to thank you all for your time and I look forward to sharing updates on our success with all of you as we move forward. Thank you.

Thank you, Rami. We are excited about the momentum we are building together within Networking and across the rest of the Hewlett Packard Enterprise. So thank you for joining us, Rami. Networking has become truly mission-critical, not just for connecting infrastructure, data and users, but to powering the next wave of AI-driven innovation across every industry, but networking alone is not enough.

The future of IT will be built on the seamless integration of networking, cloud and AI. So let's discuss cloud and AI next. Our cloud and AI strategy positions HPE to create value across several rapidly growing parts of the market. And our key priorities are: first, we will capture AI infrastructure growth profitably with a focus on sovereign and enterprise customers.

In sovereign, we will leverage our supercomputing customer base in the case of expertise to capture the incremental AI business. With enterprise customers, we are pursuing market share gains with our industry-leading turnkey AI factory solutions, including HPE Private Cloud AI and AI factories of scale with our AI servers. In addition, we will accelerate high-margin GreenLake software and services growth, including virtualization with expanded offerings.

To grow our profitable HPE CloudOps software suite, we are also scaling our go-to-market investment in Morpheus Enterprise, OpsRamp and Zerto. And next, we will capitalize on the unstructured data market growth with our own IP through our unique Alletra MP storage platform. And finally, we will drive the enterprise transition to the next-generation server platforms like HPE ProLiant Gen12 while balancing units and profitability with higher services attach. So let's start with how HPE plans to profitably capture the tremendous growth opportunity that AI presents today.

Our AI offering has positioned us competitive across customer segments, including AI model builders and service providers, sovereign and enterprises. Model builders and service providers comprise a significant portion of the market today, but deals in this customer segment are often very large, highly competitive with limited services attached and a very low margin. We continue to be very selective in pursuing these large-scale AI deals, ensuring each of them meet our working capital and profitability criteria.

Our go-forward strategy in this market is to lead with networking as we continue to look for opportunity for growth. However, the halo effect that comes from these high-profile model builders sales help us drive enterprise server and private cloud business. So it continues to be a very important part of our mix. The sovereign AI market is growing at an accelerated pace and diversifying. For example, IDC Research reveals that more than 50% of organizations in Europe are either already using sovereign clouds to build AI solutions or plan to do so within the next 12 months.

And HPE is uniquely positioned to capitalize on both the rapid expansion of sovereign and neocloud AI data centers driven by regulatory mandates and national security priorities. Our decades of HPC leadership, trusted government relationships and our ability to deliver air-gapped private cloud solutions give us a unique competitive edge in enabling compliance, secure national AI infrastructure.

Sovereign entities are responding to these advantages. An example of that is in Q3 fiscal 2025, sovereign AI orders grew 250% quarter-over-quarter underscoring strong momentum in this emerging segment. In recent months, we inaugurated the fastest AI system in the U.K. It's called Isambard-AI with the University of Bristol and the U.K. government. And with Orange and the French Armed Forces Ministry, we inaugurated Asgard, Europe's largest classified AI supercomputer. In the U.S., the University of Utah plans to invest $50 million in AI, which include NVIDIA AI computing by HPE. The build-out is forecast to increase university's computing capacity by 350%.

We are leveraging our competitive advantage to accelerate this momentum and our leadership. HPE's clear supercomputing leadership and expertise give us a distinctive advantage in AI. 6 of the top 10 fastest supercomputers in the world has been built by HPE on HPE Cray EX technology. In fact, along with the U.S. Department of Energy, we launched the world's top 3 fastest supercomputers, El Capitan, at Lawrence Livermore National Laboratory; Frontier, at the Oak Ridge National Laboratory; and Aurora at the Argonne National Laboratory.

In addition, the supercomputer segment enabled us to pioneer new advanced technologies, such as industry first 100% fanless direct liquid cooling architecture, which enables more efficient operations for computing at scale. One interesting factor is that we already have direct liquid cooling system deployed in more than 20 countries around the world, and the adoption continues to increase. HPE offers a compelling value proposition for enterprises accelerating their AI initiatives.

As AI adoption scales, HPE is uniquely positioned to lead combining advanced infrastructure, integrated services and strategic partnerships to meet this growing demand. Many enterprises are turning to HPE in response to the urgent need for scalable, easy to deploy AI infrastructure. They do not want to take time, resources to custom build and integrate. So our private cloud AI solution is redefining enterprise AI deployment. This unique offer is different from the traditional architecture offered by our competitors. It is a fully pre-integrated solution that's ready to run in just a few steps.

It is available both as a cloud managed and air gap, making ideal for enterprise customers with unique data compliance requirements, including sovereign use cases. A key strength of our PC AI solution, it is the comprehensive integration of high-margin HPE software and storage. The platform comes equipped with NVIDIA accelerated compute with our ProLiant servers. The system also incorporates the HPE Cloud Ops software suite to simplify operations and NVIDIA NIM micro services to bring a true plug-and-play experience to users.

We launched this last year and it was already named by IDC for private -- as a leader for private AI infrastructure systems, our PCI has now doubled new customer acquisition every single quarter to Q3 2025, building a pipeline that's bigger than $500 million in just the first year.

So as we look ahead, we anticipate substantial growth driven primarily by more enterprise adoption. A great example is Carbon3.ai, a U.K.-based sovereign AI platform provider is adopting HPE's private cloud AI solution, which they are planning to operationalize now in less than 6 weeks. This will enable immediate revenue recognition and provide cost control and data sovereignty, which were critical factors when Carbon3.ai made their decision. For customers that require AI infrastructure that offer greater scale than our private cloud AI does today, we offer AI factories at scale.

These tailored solutions combine high-performance compute with advisory and support services. Customers include one of the top 3 retail banks in the U.S., several other financial services firms and leading automotive manufacturers that rely on HPE AI servers to accelerate development of driver assist systems. We are leveraging our manufacturing and services capability to win in global markets. For example, we have deployed one of largest NVIDIA GB200 clusters in the world with an AI model builder pursuing an extensive large language model data center build-out. In Japan, our customer, KDDI will open a major data center to support start-ups and enterprises in developing AI applications and training large language Japanese models.

Another example, TELUS, one of the Canada's most innovative communication technology companies, is leveraging our solutions and advanced computing infrastructure to launch Canada's first fully sovereign AI factory. This operational facility is delivering cutting-edge AI compute capabilities, empowering organizations to build breakthrough AI solutions while maintaining complete control over the data and innovations. Sovereign and Enterprise Customers segment now represent more than 50% of our cumulative AI orders book, while Enterprise AI orders have grown year-over-year in every quarter since the beginning of fiscal 2024.

Now shifting from AI to cloud. Over the last 2 years, we have expanded our market leadership in the hybrid cloud segment by introducing GreenLake cloud-native innovations in highly attractive growing markets. We are focused on building a high-growth, high-margin hybrid cloud business with an emphasis on leveraging our intellectual property and core differentiators.

At the center of our strategy, GreenLake is the leading cloud delivering a unified platform experience that allows enterprises to simplify IT, reduce cost and transform faster as they incorporate their AI deployments.

Today, we have 44,000 GreenLake customers, an increase of 7,000 new logos, up 20% from a year ago. We help these customers manage more than 5.8 million devices and over 8 exabytes of data, generating over $2 billion in ARR. In June, we introduced GreenLake Intelligence, our industry-first agentic AI ops framework, which is multi-cloud and multi-vendor. GreenLake Intelligence uses agentic AI to simplify the IT operators experience across storage, networking, compute, run time and applications.

The power of AI for networks that Rami discussed earlier will accelerate the vision of GreenLake, which is already powering tens of thousands of HPE Aruba networking users with cloud-native and AI-driven networking and observability services. One of GreenLake's competitive advantage is its software. In June 2025, we introduced HPE Cloud OpSuite, which is a software suite that includes cloud management orchestration for Morpheus, observability from OpsRamp, continuous data protection from Zerto and now run time from Morpheus VM essentials. It is complemented by our GreenLake Intelligent agentic framework which provide an integrated AI-driven experience.

We are the only vendor that provides these capabilities across multi-cloud and multi-vendor environments. Great example is the state of Vermont. This proved to be a valuable differentiator unmatched by our competitors. OpsRamp provides the observability and automation backbone for managing Vermont's hybrid cloud infrastructure, streamlining operations and reducing complexity. OpsRamp also supports intelligent monitoring and incident response, allowing the Vermont's IT staff to shift from routine tasks to higher-value projects.

In addition, OpsRamp natively integrates with leading ITSM platforms such as ServiceNow, for effective IT trouble ticketing management. And so looking ahead, we will accelerate higher-margin GreenLake software and services growth with expanded offerings and scale out our go-to-market investment in Morpheus Enterprise, OpsRamp and Zerto.

In addition to deploying AI enterprise, customers around the world are also reevaluating their virtualization needs driven by the recent Broadcom bundling and pricing changes. In fact, 74% of Gartner Peer Insights community members polled are actively looking to VMware alternatives. In response to these market conditions, we enhanced our private cloud offerings by integrating Morpheus software as a standard component. This addition not only enables seamless multi-cloud orchestration between public and private clouds, but also support a broader partner ecosystem, empowering customers with greater choice and flexibility.

HP Morpheus Data VM Essentials was designed to help customers adopt as an alternative virtualization solution without compromising on the enterprise-grade reliability. Our solutions deliver significant value by reducing customer licensing costs by up to 90% compared to VMware. Danfoss, a Danish manufacturing company is our first customer to implement this offering. With the company's existing hypervisor contact about to expire, HPE introduced VM Essentials as an alternative helping Danfoss avoid costly renewals and also gaining at the same time a self-service cloud experience. And Danfoss can shift now from what we were doing today to more an as-a-service model because of our standardized private cloud edge solution using HPE VM Essentials is now being enrolled globally at their 65 remote sites.

And we plan to continue to increase customer value by integrating now intellectual property from Juniper switches and the software-defined networking that Juniper brings to HPE with all our HPE private cloud solutions. And this tight integration exemplifies the power of uniting cloud, AI and networking capabilities through our GreenLake cloud, reinforcing our better together value proposition for our customers.

The growing adoption of AI application has made data management a key focus for enterprises. The effectiveness of AI is directly correlated to how well customers can access and manage distributed data across their operations. And as a result, there is a growing demand for HPE's data fabric, HPE storage and data protection solutions. Our Alletra MP is the world's fastest-growing all-flash structured data platform. It pioneered the world's first disaggregated storage architecture and offers a true cloud-native experience through GreenLake. These unique features resonate with customers have resulted in HPE taking market share for 4 consecutive quarters.

In fact, we gained 3 points of market share in block storage year-over-year in the second quarter of calendar year '25, growing 7x faster than the market in all-flash block. The Alletra MP platform now also supports unstructured data and cyber resiliency use cases, broadening the presence in the rapidly expanding AI market while complementing our networking and server offerings. And our customers are responding.

A great example is Qualitas, Mexico largest auto insurer, knows that every second of downtime threatened millions of customers and interactions and claims. They work with us to scale computer storage capacity to support the data analytics and ensure high availability for their mission-critical workloads, helping reduce operating costs without sacrificing performance. It also enabled them to build a flexible foundation for AI and hybrid cloud adoption.

The Alletra MP architecture deliver unmatched performance, service level agreements and total cost of ownership for Qualitas. With the Alletra MP success demonstrated to date, we are now ready to take the next step in the transition of our storage portfolio. Historically, our storage portfolio sales rely on a combination of both own IP offerings and third-party products. Now we are evolving our model to focus on HPE-developed storage solutions, reduced independence on third-party products, except where we collaborate on very specific differentiated customer solutions with a very few curated strategic partnerships.

This shift demonstrates the maturity and the strength of our storage offerings as well as the completeness of our portfolio. And we are confident with the investments we will continue to make in our own intellectual property, we are better positioned to support our customers through our unified architecture and customer experience. In our core server segment, we are managing profitability in units in a balanced way with a focus on volume growth and services attached to sustain profitability and cash flow generation long term.

As we have demonstrated this year with the transition to our HPE ProLiant Gen 11, each generation transition drives revenue growth through richer configuration and higher average unit prices. While we already began the ramp into Gen 12, the rest of the transition will provide a further tailwind. For our customers, the transition to our newest servers has delivered significant better computing performance, along with real estate and power savings through rack consolidation and improved energy efficiency.

And in fact, when you upgrade any Gen 10 server from any vendor to an HPE ProLiant Gen 12 server, that upgrade yields 65% annual power savings and a 71% reduction in the data center footprint. And through our HPE Financial Services, we are enabling customers to allow capacity through financing and IT life cycle services to support capital required to modernize the servers -- the server infrastructure.

Finally, we will continue to expand our global manufacturing footprint, including new server production capabilities already in place in India and Saudi Arabia. This local manufacturing strategy gives us a competitive advantage to serve high-growth emerging markets, including the Middle East and Africa.

HPE NonStop -- we have a lot of products. HPE NonStop is where customers turn to run their most mission-critical transaction workloads. We recently introduced our next generation of HP NonStop servers, which is triggering now a refresh cycle for this very lucrative business. NonStop is vital for payment processing and fraud detection. NonStop is also categorized as an AL4 with uptimes of 99.999% or even higher.

In the Financial Services vertical segment, 6 of the top 10 full-service global retail banks use NonStop for high-volume payment processing, ATM functionality and core banking capabilities. Our next generation of HPE NonStop solutions, we just introduced, double the amount of memory and bandwidth, providing our mission-critical customers with the latest technologies to maintain that uptime and improve business resiliency.

Finally, quantum computing is an emerging opportunity that's rapidly gaining momentum. Over the last few quarters, interest in quantum computing has started to translate into real customer demand. Specific for systems that tightly integrate quantum capabilities with high-performance networking and computing. Our HPE Labs, networking now with an amazing team that we built together with Rami and supercomputing organization have been at the forefront of innovation critical to this space and their work has created opportunity for us.

By leveraging this expertise and by taking a vendor-agnostic approach to integrate in third-party quantum technologies with our network and HPC software intellectual property, we will provide customers with options they need to unlock the full potential of quantum. HPE has generated interest in these capabilities with several customers and engagement is ramping quickly. And with the acquisition of Juniper, we now have the ability to accelerate our role in delivering quantum scale-out systems over time.

And over the next few quarters, you will see us demonstrating some of these capabilities and the progress we are making together with our customers and Quantum Partners. One key aspect of our portfolio that has only become more relevant in the AI era is HPE Financial Services, which accelerates adoption of AI through financing and IT life cycle services as the captive finance arm for HPE and preferred financing vendor for HPE Inc., HPE Financial Services help customers and partners transform their enterprises at the pace and investment structure of their desire.

We will leverage the unique value proposition of our technology renewal centers to expand a residual-based leasing portfolio to accelerate our customer adoption of the full stack of networking, cloud and AI technologies. HPE Financial Services' a unique combination of financial discipline, IT life cycle services and experienced team that we have enables the business to deliver a consistent and steady return on equity of approximately 16%, operating profit of 10% and predictable financing volume.

So while financial services helping customers transform with flexible financing and life cycle solutions, we're also taking bold steps internally to transform how HPE operates. And this is where Catalyst comes in. Catalyst is a set of company-wide initiatives to make HPE faster, smarter and more efficient. It goes beyond cost savings. Catalyst invests in AI and data platforms, better data governance and smarter ways to manage information. The goal is to embed AI in everyday work, automate key processes and unlock insights from data, so HPE can focus on high-growth areas, while remaining agile and competitive. With Catalyst helping us become more nimble and efficient, our differentiated portfolio and our talented team, I have great confidence in HPE's next chapter.

Before I turn it over to Marie, I want to sum up what we have discussed today so far. Our priorities for the next 3 years are clear. We will strengthen our market position in establishing leadership in networking, expanding profitable opportunities for growth in AI, boosting growth in hybrid cloud software and services through GreenLake, capitalizing on the unstructured data market growth with Alletra MP and guiding our customers towards advanced server technologies, and we are committed to driving operating leverage by delivering approximately $1 billion in annualized structural cost savings to shareholders by fiscal year 2020.

And we will do this by realizing synergies from Juniper Networks integration and execution of Catalyst initiatives, both designed to accelerate revenue growth and generate substantial structural cost savings. All these actions will enable us to generate more than $3.5 billion in free cash flow by 2028, and deliver greater shareholder returns through growing our dividends and share buybacks.

As I look ahead to HPE's next chapter, our commitment to innovation and shareholder value has never been stronger. And to share how these strategies will shape our future and deliver a lasting impact, I'm delighted to welcome Marie Myers to stage. Marie will discuss how we are building a modern company and provide more details, which all of you are waiting, I know that, on how HPE will drive greater value for our shareholders to our financials. Marie, the floor is yours.

And thanks for joining us today. I'm thrilled to speak with all of you during such a pivotal moment in HPE's journey as we embark on the next chapter of our growth. As many of you know, I joined HPE. It's hard to believe it was only January last year. And I joined the company, as many of you also know, from HPQ because I believed in the vision of this company, I saw substantial opportunity for HPE then. And now I see even more. We have many new chapters of growth ahead of us. And I'm excited to speak with you today about how we intend to set ourselves up to capture the significant opportunity available to us over the next few years.

Now that we have closed the Juniper acquisition, we are uniquely positioned to evolve HPE into a modern AI-led networking company. We are transforming not only the profit profile of the company, but we are also fundamentally rethinking how we operate and how we work. By embedding AI across our operations, we are driving smarter, faster decision-making and unlocking new levels of agility.

This transformation is about building a more responsive, scalable organization, one that can adapt quickly and compete in what is an incredibly dynamic market. Moving forward, we will further simplify our operating model, helping us sharpen our focus to deliver more profitable revenue growth. And as you heard from Antonio, accelerate greater capital returns to our shareholders.

However, we will continue to invest in our portfolio while staying disciplined as you would imagine, with our cost structure to drive that profitable growth. We will create the operating leverage that supports meaningful earnings expansion over the next 3 years. Today, I'm going to share our plan to achieve that acceleration of value. First, I'll walk you through a quick recap of our Q3 year-to-date '25 results. Then I will share our progress on the transformation that we've been undertaking.

And then third, I will explain our go forward shareholder financial framework that prioritizes generating more than $3.5 billion in free cash flow by '28. This will enable HPE to reduce our financial leverage and increase capital returns. And then finally, I know you've all been waiting for it, I'll look up -- I'll wrap up with forward guidance. So let me begin with a quick recap of what we have accomplished so far in fiscal '25.

We have momentum in AI, and you have seen a meaningful recovery in networking, which puts us on track for strong revenue growth. For Q3 alone, top line revenue is up 14% year-over-year. And we've worked hard to increase operating profit with a disciplined focus on margin recovery in the traditional server business. And our results are further supported by 4 consecutive quarters of operating margin expansion in hybrid cloud and a larger contribution from networking.

We have also maintained strong non-GAAP earnings per share through disciplined cost management and operational efficiency. And today, we are reaffirming our FY '25 non-GAAP outlook. However, as previously noted, revenue may be impacted by lumpiness and deal timing in AI. And in addition, we are updating our Q4 GAAP diluted EPS guidance from what was a range of $0.50 to $0.54 to $0.11 to $0.15 and for the full year, from $0.42 to $0.46 to $0.03 to $0.07. This reduction is -- our expectations is driven by certain unanticipated events that occurred after we issued our Q4 guide, included losses on disposition of certain nonbusiness assets, acquisition-related accounting adjustments updated to forecasted tax expense and other items.

Free cash flow guidance remains unchanged at approximately $700 million, impacted by working capital dynamics and Juniper-related costs. We anticipate strong free cash flow growth over the next 3 years. And I will talk shortly about a 10% increase we are announcing in our dividend for common shareholders starting in Q1 '26. You have heard us talk about our Catalyst program and Juniper cost synergies throughout this year. I'd like to take some time now to describe why this is so critical to simplifying and transforming HPE, while improving our operating leverage.

Our teams are hyper-focused on achieving structural cost savings through Juniper-related synergies and Catalyst initiatives. And our 2 targeted sets of actions are designed to increase productivity, capture efficiencies, unlock operating leverage that will drive long-term sustained profitability. Together, they're expected to deliver approximately $1 billion in structural annualized run rate cost savings by '28. This includes at least $600 million from Juniper and other $300 million from Catalyst.

We expect these initiatives will reshape us entirely, making HPE a much more nimble, cost-efficient company. Savings will benefit both the cost of sales and operating expenses, while supporting investments vital for long-term sustainable growth. We established a strong Juniper integration framework and program management office. Our integration plans are on track as we begin building the best-in-class networking business with Rami, and we remain confident in achieving both near-term financial synergies and long-term targets.

We began our integration process with corporate function overlaps, streamlining combined functions to eliminate duplicative roles and improve efficiency. While workforce reductions are always challenging, they are necessary to align resources and to drive productivity. Most integration-related reductions will occur in year 1 post close with some extending into year 2 and year 3, for more complex integration areas.

We will complete integrating our sales teams across regions by Q1 '26. And we will continue to align channel programs and sales tools through next year, so that we can enable partners to sell the full portfolio and unlock further growth. And in terms of product rationalization, we will take a very measured approach to preserve our customer experience. However, we will begin aligning R&D spend to the strategic priorities that Rami referenced earlier, while converging product road maps and eliminating duplicate R&D projects. We are leveraging the combined scale of HPE and Juniper to unlock efficiencies in logistics, materials pricing, warehousing and repair services. We expect to begin realizing these synergies in the first half of '26. And then we are also deploying AI to further optimize material costs and refine our manufacturing footprint, including aligning headcount to our go-forward operational needs.

Additional synergy savings will come from areas like real estate consolidation, IT optimization, including software, support services and actually reducing reliance on third-party contractors. And these efforts combined will deliver meaningful structural savings while preserving critical operational capabilities. Overall, we expect to realize about $200 million of Juniper related cost synergies in year 1 post close with the balance of $400 million split evenly between years 2 and 3.

These synergies will require approximately $800 million of investment to achieve between '26 and '28. Most of that is going to be tied to headcount, supply chain optimization and portfolio rationalization. The bulk of the integration expense will occur next year. I haven't discussed Catalyst, our multiyear cost reduction and efficiency actions with you since we launched it earlier this year. Catalyst is about fundamentally reshaping how we operate, reducing processes, creating capacity to reinvest in that growth that we've talked about, and most importantly, transforming the company for long-term competitiveness. And I've got to say, I'm really encouraged by the progress we've made in just this year alone.

We are just at the beginning of this journey to drive improved operating leverage for our company and frankly, better experiences for our customers and all our team members. Catalyst is anchored on 4 strategic pillars: workforce transformation, portfolio optimization, operational excellence, and finally, leveraging AI.

First, workforce transformation. It's by far our greatest opportunity. And frankly, we are redesigning our work to deliver better results with fewer resources. I shared earlier this year that our efforts alone had reduced the head count at HPE to the lowest historical levels ever pre-Juniper. And frankly, we continue to proceed with simplification principles in mind, streamlining, organizational spans and layers, centralizing roles and frankly, encouraging our teams to concentrate innovation and high-value activities.

Second, portfolio optimization. We're sharpening our focus on strategic assets. For example, we exited a noncore business at the start of this fiscal year, divesting our communications technology group, and we will continue to evaluate our noncore assets in the future, including pursuing smaller-sized divestitures to prune our portfolio. We're also actively reducing SKUs, continuing to trim our product offerings to improve speed and efficiency.

And third, with respect to operational efficiency, we are revisiting business operations and instilling greater discipline across our businesses. And a prime example of that is what we've done with pricing. We've actually embedded AI and advanced analytics to improve deal visibility, reducing unnecessary discounts and maximizing margin capture across the entire portfolio.

And I'd like to highlight one of the recent projects we're actually partnering with Deloitte, a big shout out to the Deloitte team that are here today to co-source several processes in my own organization that will greatly streamline operations and allow our finance team to move forward in a much more agile AI scalable way. We are also driving flexibility through vendor optimization and real estate consolidation.

Finally, the category I'm most excited about, AI. That's because it led our technology-minded workforce operate smarter, faster and with precision. We are using AI as a transformation lever to free up resources across the company, making us much more agile in the market. And we are building a robust internal data foundation and adopting an AI-first approach across the company.

Let me share a few examples of where we're taking a fresh look at the work we do. Marketing content creators at HPE today are using generative AI to accelerate how quickly they develop smart campaigns and reduce production costs. And in finance and sales, believe it or not, it's improving forecasting, reconciliations and opportunity management. And to improve our financial insights, we have also been partnering with Deloitte to develop an AI platform to transform our financial operations. It's something we are commercializing through our own private cloud AI infrastructure and making it available to actually other CFOs and customers.

As you can tell, we are enthusiastic about streamlining how we operate, centralizing functions using AI tools to drive speed, agility and competitiveness. And finally, Catalyst will allow us to target at least $350 million in annualized run rate cost savings by the end of '27. And we're executing well against our plan and expect to achieve our target of 20% of total savings by the end of '25. And as you know, that has a direct impact on both OpEx and cost of sales. And as we disclosed earlier this year, these things will require approximately $350 million in charges to fund workforce reductions.

So Catalyst is not only reshaping our cost structure and improved financial flexibility, but it's reshaping the way we work. And it will provide us with the capacity to reinvest in growth. I'm pleased to say we're on track to create a leaner, much more competitive company that will continue to deliver proper growth to our shareholders.

Today, we are also announcing a framework for simplified segment reporting and disclosures, starting in Q1 of next year. Historical segments will, of course, be restated back to Q1 FY '24. We will also provide visibility into each new segment going forward. I believe you will gain a clear line of sight into the growth trajectory of our portfolio, while having the ability to compare much more easily across our peer set. This new structure aligns with the main markets in which we operate and where we see the greatest growth potential.

It's simple. It consists of 3 segments. The first segment, networking includes Juniper Networks, and Intelligent Edge. The second segment includes cloud and AI, and it consolidates server, storage and financial services. And finally, our third segment, Corporate Investments and Other will be largely unchanged. Networking will have a larger footprint within our results. And as you've heard, it now represents, on a pro forma basis, nearly 30% of our total revenue and over 50% of our total operating profit. Given our increased scale and strategic objective to establish ourselves as the industry leader in networking, we want to provide you with more detailed financials.

And in this segment, we will report quarterly revenue by customer group, enterprise and service providers as well as by product line, campus and branch, data center networking, routing and security. This will provide important visibility into our traction with key customers. It also allows you to see product line highlights for what we consider are core strategic and market priorities. And then annually, we will disclose our outlook for cumulative networking for AI orders. And then for cloud and AI, this segment signifies the importance and the rise of AI as customers implement and scale these technologies.

Incorporating HPE Financial Services within this segment demonstrates how financing is playing a key strategic role in helping enterprise customers adopt and consume these technologies. This underscores that our focus is simply not just about hardware, it's also about recurring revenue. Here, we will report disaggregated revenue results as server, storage, financial services and other. And the other subsegment will also include non-IP storage.

As you heard from Antonio, this is an area we are deemphasizing as we transform our storage portfolio to focus on the success of our own Alletra MP products, and I will discuss more on that later. We will also share additional quarterly disclosures. For server offerings, we will disclose AI orders and revenue as well as AI customer mix. And within the storage category, we will provide Alletra MP orders growth. And other financial services, we will provide return on equity to show the profitability we generate our investments that we make for our enterprise customers.

And finally, we will continue to provide visibility into AAR, which is a key forward-looking metric for our long-term recurring revenue. AAR growth will moderate due to a combination of factors. Going forward, given that we have built up such a large base of AAR, we will make it an annual disclosure on a consolidated basis. And this new structure streamlines our reporting framework and aligns with how we operate our business on a day-to-day basis. I believe it also gives you all a much clearer picture of where we are driving growth and increasing value for our shareholders.

Now I would like to walk you through our strategic framework for shareholder value creation. At the core of this strategy is our free cash flow growth. It is the engine that powers everything we do. It enables us to reinvest in innovation, scale our business, strengthen our balance sheet and return capital to shareholders. As we enter our next chapter as a company, our portfolio has been designed to win in networking, cloud and AI. And the sustained profitable growth we envisage is supported by cost discipline, structural improvements and capital efficiency. And we expect this operating model will deliver higher durable free cash flow over time.

And now we are driving this free cash flow through 3 key levers. The first lever is profitable revenue growth. We are scaling in high-growth areas like AI services and networking where we will transform our portfolio to deliver differentiated value. And then there's operating margin expansion. Through disciplined execution and cost reductions, especially those around Juniper and Catalyst, we will deliver sustained margin improvement.

And finally, we have balance sheet efficiency. We are managing our balance sheet with rigor and unlocking liquidity through tighter operational discipline. As Antonio discussed, our strategy to generate free cash flow of $3.5 billion is core to us, and we expect to achieve that by '28. We expect annual free cash flow generation to improve in '26 and then continue to ramp over the next 3 years. And we expect to generate approximately $700 million in '25, rising to $1.5 billion to $2 billion in '26 and increasing further to $3.5 billion or more than $3.5 billion in '28.

In FY '26, we will incur the bulk of the Juniper integration expenses, Catalyst-related cash costs and a higher interest and acquisition-related debt. Together, these levers are building a stronger, more resilient free cash flow profile for our company, giving us the flexibility to execute on 3 financial priorities. First, we are accelerating repayment of Juniper-related debt to ensure a strong financial foundation. With our commitment to maintain an investment-grade credit rating, our goal is to reduce net leverage to 2x by the end of '27 through both net reduction -- net debt reduction and EBITDA growth.

We've already made progress with a $1 billion repayment post Q3. We expect our liquidity position to strengthen further as we grow free cash flow, pay down our obligations and diligently manage our balance sheet. Starting in fiscal '26, we are increasing our annual dividend by 10% to $0.57 per common share, reflecting our confidence in the outlook and commitment to deliver reliable income to common shareholders.

And then lastly, we are managing dilution in the near term through '27, and we expect to accelerate repurchases in the latter half of '28. Today, we are announcing a new $3 billion share repurchase authorization, bringing our total to $3.7 billion. As we generate increasing levels of free cash flow over time, we intend to return a significant amount to our shareholders. With our focus on reducing debt through '27, we will return nearly all of our free cash flow to debt and equity holders over the next 2 years. Thereafter, we will target returning at least 75% of our free cash flow to our shareholders in the form of both dividends and share repurchases.

Our focus on these core financial priorities at our new capital returns commitment will ensure we remain shareholder focused and committed to long-term value creation.

Now let me walk you through our 3-year financial outlook. We expect consolidated revenue to grow at 5% to 7% CAGR on a pro forma basis, including Juniper. In networking, we project revenue to grow at a 5% to 7% CAGR over the next 3 years on a pro forma basis, in line with what Rami shared in terms of our estimate of the addressable networking market.

Our enhanced scale and competitive positioning gives us confidence that over time, we will outpace market growth in our key focus areas. While Juniper's current margins are below historical HPE networking business, we expect to offset dilution through cost synergies and scale efficiencies. As a result, we expect networking margins to reach 25% to 28% by FY '28, driven by Juniper-related cost synergies and operating leverage as we scale revenue and absorb fixed costs over a broader base.

And in Cloud and AI, we expect revenue to grow at a 4% to 8% CAGR over the next 3 years with margins in the 8% to 10% range. And let me provide you some additional insight on the strategic drivers for the segment. First, AI systems, as Antonio mentioned, represents a significant opportunity as adoption expands beyond service providers and model builders into more profitable enterprise and sovereign segments. We are differentiating ourselves by maintaining our discipline in the pursuit of profitable growth, evaluating each opportunity to ensure the right balance between revenue and margin and working capital. As a result, AI systems revenue growth may trail the broader market as we focus on free cash flow generation.

Next, GreenLake, it's central to our strategy and is driving over 75% of our $3.1 billion AAR in Q3 '25 coming from software and services. And looking ahead, we expect AAR to grow approximately to $3.5 billion by the end of '26. And in storage, we are doubling down on our Alletra MP product strategy, which is significantly more margin rich. We are seeing strong traction for our Alletra MP platform. And this success enables us to pivot away from selling our non-owned IP, which tends to dilute margins.

As a result, we expect margin improvement over time, positioning us for stronger long-term profitability. And in traditional service, we are balancing units and margin while expanding our installed base and services attach opportunities to drive further profitability. We expect traditional server growth will be fueled by ongoing IT modernization and data center expansion. And finally, our Financial Service business remains a key competitive advantage. Our disciplined underwriting approach allows us to finance high-quality customers, which deliver a strong return on equity of nearly 18% as of Q3.

Given these segment dynamics, we expect the overall company non-GAAP operating profit CAGR to be 11% to 17% on a pro forma basis, driven by a higher mix of networking, a favorable mix shift within cloud and AI, structural cost reductions and enhanced operating leverage. By FY '28, we expect non-GAAP diluted EPS to grow to at least $3 and free cash flow to exceed $3.5 billion.

Turning to our '26 outlook. We anticipate revenue growth of 5% to 10% on a pro forma basis. Our revenue growth reflects the lumpy nature of AI transactions. Segment-wise, networking revenue is expected to grow at a low to mid-single-digit rate on a pro forma basis, driven by continued momentum in campus and branch, SASE and security and data center. We also expect networking for AI demand will improve during the year, with cumulative orders increasing to $1.5 billion by the end of '26, up from $600 million of orders generated during this fiscal year.

Cloud and AI revenue is projected to grow at a mid-single to low double-digit rate, reflecting solid execution in our server business as we capitalize on IT modernization and AI investments, maintaining our focus on profitable server markets and offsetting revenue declines from exiting our non-IP storage business. It's important to note that historical seasonal trends will not be indicative of future performance.

As synergies ramp throughout the year, we expect margin performance and net earnings to strengthen significantly in the second half of '26, making the second half significantly stronger than the first. From a profitability standpoint, we expect non-GAAP operating margin to improve year-over-year to a low double-digit rate. This includes networking operating margin in the low 20% range, supported by top line growth and deal synergies.

And for cloud and AI, we expect stable margin of 7% to 9% for the year, driven by normalized margins on traditional servers, a shift to owned IP and storage and continued investment to scale our hybrid cloud business. Margin variability from AI deal mix and near-term scaling costs will be managed prudently. And from a cost perspective, total costs will be up year-over-year due to a full year of Juniper contributions. But we expect and continue to expect that our cost initiatives will deliver the projected savings accounted for in our non-GAAP diluted net EPS guide.

We expect FY '26 non-GAAP diluted net EPS to be in the range of $2.20 to $2.40, up approximately 20% at the midpoint of our outlook. This reflects several items. Growth in the core business, 8 months of incremental contributions from Juniper, juniper related synergies and Catalyst costs, offset partially by nonoperational headwinds, including approximately $650 million in OI&E, and lastly, a full year diluted net share count of $1.44 billion.

Additionally, we are revising our non-GAAP tax rate to 14%, down from 15% due to the benefits from the Juniper acquisition. GAAP diluted net EPS is expected to be in the range of $0.57 to $0.77, and we expect FY '26 free cash flow of $1.5 billion to $2 billion, which includes $600 million worth of costs related to the Juniper and Catalyst programs.

In closing, we have built a portfolio designed to win in the next AI era, positioned at the intersection of networking, cloud and AI. I believe HPE stands out as an exciting and compelling investment. We believe our operational discipline and execution will drive profitable growth and our cost initiatives will unlock meaningful operating leverage. Our business will enable us to realize robust free cash flow expansion expected to exceed $3.5 billion by '28. This financial strength gives us the flexibility to invest in innovation, scale strategically and deliver accelerated capital returns through consistent dividend growth and share repurchases.

With a clear commitment to shareholder value, we believe that HPE is well positioned for long term success. I appreciate this company's enthusiasm for the transformative steps we are taking to build our next chapter of growth. I'm privileged to work alongside Antonio and the rest of our leadership team as we enter the next phase of this journey.

Thank you all. Now we're going to take a short 15-minute break. Thank you.

[Break]

Thank you all. As those of you don't know, I'm Shannon Cross, Chief Strategy Officer here and obviously, used to be one of all of you. So very happy to have everyone here for our Q&A session.

So today, we're obviously welcoming Antonio, Marie and Rami back to the stage. Joining them, we have Fidelma Russo, who's our EVP and General Manager of the Hybrid Cloud business. She's also our Chief Technology Officer. We have Neil MacDonald, who is our EVP and General Manager of the Server business. And we have Maeve Culloty, who is President and CEO of HPE Financial Services.

So before we begin, please do review the risk statement that was referenced by Paul at the beginning of today's meeting. And additionally, since this session is being webcast, kindly state your name and company before posing your question. [Operator Instructions] So with that, let's go to Amit. He was first to raise his hand.

Amit Daryanani, Evercore. Obviously, I really appreciate the 90-minute presentation. It's concise and appreciate it a lot. I think one of the things that I think folks will struggle with is the networking guide for next year of low to mid-single digits. So I was hoping if you could just talk a little bit in terms of what's going into that assumption because from afar, it looks like Juniper's order momentum was very strong exiting last year that should give you a lot of momentum on the growth. So just talk about, what are you assuming this low to mid-single-digit revenue expectation on the networking side? And then Marie, the free cash flow number for '26?

Antonio, why don't you start with and then go to Rami for some insights.

Yes. I mean, we just started the integration of the business. We believe we have tremendous opportunity. When I think about the campus and branch, definitely, we have momentum, whether it was HPE Aruba or Juniper Mist. Obviously, when you think about the AI, data center switching, it's going to take a little bit of time because as you go through, there is a footprint to be won, which takes the sale cycle because you have to win the technical reference.

As Rami said, there is a process to become more intimate with some of these new cloud service providers and the like. Also, Rami is integrating the switches and any other assets with Fidelma and Neil's portfolio. So we want to make sure we give the team the time to do that. And also, we have a big sales harmonization that's taking place at the beginning of fiscal year '26 because as you recall, we are finishing our fiscal year on October 31 for HPE, but Rami and team still working all the way to October 31. And after that, there is a period of harmonization, which we have great plans.

So the reality is that I feel very good about the campus and branch, routing. It's a cycle. We know that, and that will be a lot of attached to the AI deployments. SASE and SSE and all of that is already gaining momentum. But ultimately, is the speed of that growth will be also dictated by the growth in data center network. And I don't know, Rami if you have any...

I think you covered it well. I'll just -- I mean you know our business pretty well. When you're looking at our revenue growth for next year, just keep in mind that the bulk of our business is camps and branch and routing infrastructure. These are great markets, but they're not the fastest growing, right? Data center is growing very fast right now. We all know that. That doesn't represent a very big part of our total business. But certainly, it is a massive opportunity for us to go and pursue together and it happens to be the area where I'm most excited about revenue synergies.

We did not bake revenue synergies into 2026 for a specific reason. I have a lot of work in 2026 to integrate 2 businesses together without disrupting any customers. I think I can do that. So we were a bit cautious about expecting too much in that time frame. I think over time, through both commercial and technical integrations, we can see revenue synergies, but that's just going to take a little bit of time.

Consider prudent.

Yes.

Let's go to Wamsi.

Wamsi Mohan, Bank of America. I guess on free cash flow, Marie, we're starting off '26 at $1.5 billion to $2 billion, and it's going fairly significantly to $3.5 billion. Can you talk about some of the puts and takes? How much of restructuring is embedded into your fiscal '26 numbers? And is there any in the fiscal '28 numbers. And you made a comment about seasonality. If you could just address if the fiscal '26 seasonality was a comment about both revenue and earnings? Or was that just an earnings comment and what maybe some book ends for that might be?

Sure. Thanks, Wamsi. Maybe I'll hit the second part of your question first. So the seasonality comment was really in regard to EPS because as you think about it, the synergies themselves are going to materialize throughout '26. So it will take time, and they will be mostly back-end loaded. Revenue will follow our normal sort of seasonal path, but it will be much more in terms of the EPS growth itself.

And then with respect to cash flow, as you bridge the puts and takes from '26 to '28, first of all, start out by looking at the actual -- just the earnings growth itself. If you look at the sort of top line, I mean, we're going to see single-digit revenue, but you're seeing more than 2x sort of growth in terms of earnings power. So you're seeing the real -- 2 companies coming together, really unlocking that capability as we get into '28.

As you bridge down from that, I think as I mentioned in my prepared remarks, most of the cost of both Juniper and Catalyst is really anchored in '26. So that's why you see the cash flow sort of walk from '26 to '27. Then by -- largely by the end of '27, most of the restructuring costs are out, and we see '28 as a pretty clean representation of what our cash flow should look like for both combined companies, plus we've got some better working capital there as well.

Actually, one way I'd like to explain in a different way. If you look at the true generation of cash, is actually it's close to $2.4 billion, $2.5 billion. But then you have to pay for the $600 million related to OI&E and the expenses of the Juniper synergies and then obviously Catalyst.

So the way I think about this is more like $700 million this year because we closed the transaction, and obviously, we had a lot of working capital tied to AI. Next year, think about that $2 billion on a progression to more than $3.5 billion. And obviously, as we go to '27, '28, the expenses start going down, whether it's interest on the debt repayment, which we are committed to bring it down to 2x leverage in '27. And obviously, as the expenses of the restructuring related to Catalyst and the synergies on Juniper goes down, you have the extra lift as we continue to expand our operating profit, which obviously is double digits.

Let's go to Asiya since she's got the mic, and then we go over to the other side.

Asiya here from Citigroup. As you look at -- there's pretty significant TAM that was shared as you think about what HPE -- combined with Juniper, HPE's market share could be across those various segments that you talked about. If you can level set where are you now, what does that revenue growth expectations that you've outlined, what kind of share aspirations that you have across networking -- now your refined segment of cloud and AI across that SAM.

Well, let's start with our traditional businesses, right? So obviously, in the server business, we have a large footprint, but there is profitable share growth, not share for the sake of share. And that has been our strategy for a longer period of time now. But as I said in my prepared remarks, is balancing units, growth or unit market share with the expansion in [ AUP ] to drive the services attached that ultimately makes us in the traditional servers, probably the most profitable business in the server category.

So there, that's the balance. In storage, you saw that we gained 3 points of share this past quarter. That's unheard of it. Fidelma has been in the storage business much longer than I, and we've never seen a 3 points of share in just 1 quarter. And that's because we are growing 7x faster than the market. And there, we expect to continue to gain share. Our share combined is in the, call it, 10% to 11%. So we expect to continue to grow that share.

And then in campus and branch, starting with networking, for example, obviously, we have a now larger footprint. Rami talked about being already 18% market share. There is a large pool of people they are competing today. It's at least 6 to 7 just here in the United States. And obviously, outside the United States, you have more players. And our goal is to gain more share also outside the United States because that's an opportunity, particularly with Chinese vendors being dislocated.

So with that in mind, our goal, and Rami can speak more about is to become the #1 in WiFi. We already have market leadership and that also drives an opportunity in the campus and branch switching because every time you do this refresh from 6 to 7 to 8, eventually, there will be a campus branch switching refresh. And now we have a complete portfolio. And then through the convergence with security, obviously, we have an amazing converged security offering. Now combining Juniper assets and HPE Aruba networking with our Silver Peak acquisition we did with SASE and SSE. So that's our aspiration.

And in AI, it's hard to define what the market share is because ultimately, every day, every week, the market with announcements of investment and the like, it's hard to predict. But there, our goal is to gain share in the sovereign space, where we already have a large footprint with our supercomputer, obviously, in enterprise, which is our main focus, through the offers between Fidelma's offerings in private cloud, AI and Neil's offer in the AI scaled servers. And there, we have the right to play, not just because our infrastructure but because of our GreenLake value proposition and the integration of the software that comes with it. Anything you want to add?

Aaron?

Yes. Aaron Rakers with Wells Fargo. Rami, I'm going to ask you a little bit more deeper about networking. If I guess, if I'm doing the pro forma numbers right from this last quarter, Juniper grew like 20-some-odd percent. It looks like a very strong quarter for you guys. So I'm curious, how would you help us understand your positioning in some of these cloud AI opportunities? Where exactly do you find a Juniper's position today? And then do you have any thoughts around, there's a lot of architectural stuff going on. Where do you guys stand as far as like co-packaged optics, scale-up opportunities, et cetera, anything that you'd like to talk to.

Yes, certainly. So the this is the network for AI opportunity. Basically, the infrastructure that goes into data centers, and there's really 3 distinct opportunities that are really interesting for us. The first is in data center interconnect. I talked about this earlier. It's about connecting AI data centers together. Many of the big cloud builders, including hyperscalers are building out their WANs, wide area networks to connect data centers together. And you know this, we have significant footprint in there that we can leverage to upgrade 400-gig, 800-gig.

The next is a direct cloud connect opportunity. All the hyperscalers need sophisticated routing infrastructure to offer direct connect services as on-ramps to their AI cloud data centers. This is right up our alley, especially with the MX product line because it's not just about speeds and feeds, it's about logical scale. We can have an offline discussion about what logical scale means.

The third is in the data center, data center switching infrastructure. Here, where, as you know, not in the hyperscalers, but anything other than the hyperscalers, we have significant wins from small, medium and large, front end and back end. And the opportunity there is immense because there's massive investments that are happening there.

So I mean, those are the 3 opportunities that we have to pursue. And I mean think about the relevance we just gained over the last -- since the close of the last few months. Neil, Fidelma, all these -- and Antonio pulling me into conversations with cloud providers, whether they be neoclouds or sovereign clouds around the world, that's pretty interesting. It's just going to take us a little bit of time.

And as far as co-packaged optics, liquid cooling, these are absolutely going from a mode of nice-to-have to you will not be able to compete in the 1.6 terabit Ethernet generation without it. And our position in being able to implement these technical capabilities in our switching has gone from like where everybody else's, which is experimentation to years and years of actual production products, which is game changing.

Okay. Samik?

Samik from JPMorgan. Maybe if I can change gears and ask you about the AI compute business, specifically where you're outlining the focus on enterprise and sovereign customers. In the backdrop where we've seen a significant amount of announcements from Tier 2 CSPs, how are you trying to balance? What guardrails are you putting on that business in terms of businesses that you go for margins on that AI server business to sort of balance profitability and growth? And how should we think about -- as you sort of think -- how should we think about enterprise and sovereign mix tracking from here on? Should we expect that mix to increase or sort of stabilize at this sort of 50% level that you've outlined for the last quarter?

Do you want to -- Neil, you take it. Then, Antonio...

Yes. So when you think about the structure of the market, there's a sizable volume involved in big model builder and service provider buildouts. And there's a very rapidly growing set of opportunities in sovereign, which also includes some service provider space and in enterprise. In Q3, we saw a 250% growth in our bookings in the sovereign space, and we're very excited about the momentum that we've had in recent months, as Antonio mentioned.

We've commissioned the U.K.'s sovereign AI infrastructure that we delivered. We've commissioned the French [indiscernible] and their infrastructure for AI, which is the largest classified AI system in Europe. That's just 2 examples and there are many others in which we're engaged. Part of what enables us to create value there is the ability to shorten the time to deployment. With the work we do around modular data centers, with the integrated direct liquid cooling, we can deliver these systems production much faster than these entities can do on their own. And that's been a driver for us.

We will continue to be very selective in model builder and hyperscaler opportunities in the space, being careful to ensure that our requirements around working capital and profitability are balanced with the need to participate in that space for the halo that it creates in the enterprise market, where we are also seeing momentum and growth and where our reach and our services delivery capability creates more value that sometimes isn't needed by the big model builders and the hyperscalers.

Okay. Erik?

Erik Woodring, Morgan Stanley. Rami, I wanted to kind of build on Amit's question, which was you started the presentation about kind of 9% CAGR in the networking market and how core it is to kind of the new found HPE. Over that same period, you're guiding your own networking business to 5% to 7% growth. So inherently implying that you're losing share. Can you kind of maybe help us square together that dynamic of kind of guiding to losing share versus your clear kind of optimism around what HPE -- combined Juniper and Aruba networking business could do?

Yes, just again, keep in mind, you've got to look at the mix of our business, right? The mix of our business is not identical to the mix of the total TAM between data center, camps and branch and routing infrastructure. The bulk of our business is in routing infrastructure and camps and branch, these 2 market opportunities are growing in the, like low to mid-single-digit range. So you're not going to see a total growth rate for HPE networking that's going to look like the total growth rate of the total networking TAM that has a totally different mix shift. So just keep that in mind.

And to be a bit more specific, we're going to take share in camps and branch, we're going to take share in routing infrastructure. I believe we can even take share in SASE and security. We're being a bit prudent right now in data center as we go through the integration of our 2 businesses. There are a lot of dynamics happening in the data center space between White Box switching, Celestica coming into the mix, NVIDIA coming in with their product. There are a lot of dynamics.

But at the same time, I will reiterate, if there's one area I am most excited about from a revenue synergy standpoint just because of the relevance that HPE brings to the table, the ability to leverage liquid cooling -- direct liquid cooling technology, the ability to open doors for us internationally where Juniper had very little presence, the ability to give us more relevance with the AMDs and NVIDIAs and the other GPU providers of the world, that is something that's very excited, but I -- we haven't baked that into our numbers.

Yes. Look, in a different way to think about it. We will grow faster than the market in campus and branch and routing. We believe we can do that the same in the security in the convergence space. We have seen that in our own numbers when it comes down to SASE and all of that. And then in data center networking, right, obviously, we will see the benefits in the enterprise data center because the work Rami is doing with his colleagues.

But in the AI space, just by winning one customer at some point, that simplifies the whole story. And that may take a little bit of time because he needs to go build that intimacy now through the door openers that we're driving with the rest of the team. And there is continue to sell to the ones we have and then get new logos. But Rami is right, there is a lot of transitions that happen next year in technology. We want to be there first with the 1.6 terabits. That will give us a footprint and the sale cycle is a little bit longer, and then after that time to revenue is a little bit longer because it's a little bit lumpier as well.

But once you win 1 or 2 customers, the whole thing becomes bigger. And therefore, we have been prudent in baking numbers that we don't have yet the whole story lineup from an integration, technology and then go to market, which we are building as we speak.

Okay. Let's go to Simon.

Simon Leopold with Raymond James. First, just a quick clarification, if I might. The growth rate for fiscal '26, if you could clarify the baseline given that you acquired Juniper midway through the year. And the thing I wanted to ask about was your vision of how enterprise adoption of AI initiatives affect spending in that, how much will your customers employ on the public cloud versus investment in their own data centers, which is really your served market. How do you see that playing out? What will they buy and when will they buy it.

So maybe you want to answer the baseline?

Yes. No, it's -- so as I said, the '26 guide is low to mid, and that's off a pro forma basis, including Juniper, and then we moved to 5% to 7% in the long-term guide. So this is all pro forma and you should see that in the 8-K that came out in terms of the pro forma financials.

Yes. We'll have the 8-K out, it should be out now. You'll be able to -- I apologize, rebuild your models. But...

Yes. As you look at the reporting, it's going to be much higher because remember, we have 4 months of Juniper in our numbers this year and 12 months next year. So it's going to be very high double digits by reported standards. And then on the private cloud versus the public cloud, maybe Fidelma you want to take that question about how enterprises are using, combination of both?

So as we've gone through the last maybe 2 years with really engaging with enterprises of all sizes. What we've started to see is within very, very large enterprises, they look like CSPs at the top end. But within their IT organizations where they don't have the skills and where they're really trying to drive productivity across different functions like support, help desks, that's where our turnkey system like private cloud AI is really beginning to play. And so we're seeing growth quarter-over-quarter, and it's beginning to accelerate. And so that gives us -- the market in the enterprise is a lot slower, but we're also seeing people starting to experiment on the public cloud.

And then when they go to deploy within the enterprise, they're making the choice because of costs, security, compliance, to move it on-prem. And so we're starting to see the acceleration of that motion through enterprise customers across board.

And if I can add, if you think about certain segments of enterprise, while their technical requirements look a lot like the service providers as Fidelma rightly just said, that's not their core business. And so there's a lot of opportunity for us to deliver infrastructure at scale that looks like service providers scale, but with a much richer set of capabilities for delivery and service, and we've been doing that with customers around the world all the way through FY '25.

And it's true in financial services. All right, I don't know...

Tim over there.

Tim Long at Barclays over here. 2-parter, if I could on -- maybe we could touch on GreenLake a little bit. Curious on 2 aspects. Number one, it's obviously been growing nicely over the years. What does the addition of Juniper mean to the pipeline for GreenLake. And number two, kind of related to that last question as enterprises evolve with their AI journey and start to bring more on-premise, do you see that potentially as a catalyst to ignite some higher growth in GreenLake?

Fidelma?

So thank you for the question and the acknowledgment that it's had nice growth over the years. We actually, Rami and I see tremendous opportunity for Juniper within GreenLake. In fact, sometimes when we deploy a GreenLake solution, we actually already have Juniper switches. So we have customers who've been deploying GreenLake with Juniper. And so we're working together to really figure out how to move that along, and we see that as an opportunity to really start to grow more within the GreenLake business.

The second piece that you asked about on AI and the enterprise. We have, for instance, on PC AI, we have an offering through GreenLake, and we have an offering on normal CapEx. And right now, what we see is probably about 30% of the number is coming through GreenLake and the other 70% is coming as CapEx. They just want to buy it and own it outright. And so again, within GreenLake on AI, we're really following the, like do it profitably and make sure that the deals really work for us and the customer. And so -- but we see, as enterprises pick up, especially in their IT organizations and deploying AI and prem that, that will provide a tailwind for the business.

I think, Tim, there are other opportunities that the team are driving together. For example, one of the interesting assets that Juniper brought was the software-defined networking. So Fidelma has got in the resources and the IP to fully integrate into our Morpheus stack and our private cloud stack. So that completes a very strong alternative to the current incumbency. So that's an example. Also in the next few months, we're going to integrate Juniper Mist as a launching platform with GreenLake as Rami drives the convergence as he spoke about it.

Okay. Lou, you're next.

Lou Miscioscia, Daiwa Capital Markets America. So maybe this is a good summary question. You explained networking really well, what's prohibiting growth there. But with such great assets that you have, AI private cloud, on-prem, server modernization, I guess what's holding back -- possibly having faster growth? Is it really just what you had just mentioned earlier that enterprise companies just aren't moving to AI fast enough that they're stuck in POCs and just haven't really deployed that. If that is the case, what visibility do you have? Does it start to hit late first half 2026, second half 2026 calendar year? Anything to help us understand you guys getting to faster growth would definitely be helpful.

Well, I can start. I mean, Lou, I think as I think about the segmentation of the market for AI, obviously, Neil spoke about the service provided to Simon's question in the model builders. They are fewer their customers. Think about tens, right, that drives millions of GPUs now, right? We'll see when all of that gets built. Then you have enterprises like us, right, which I hope you got that we are very aggressive in deploying AI. As you can see Marie is very enthusiastic about that in her own organization.

But there, you're talking about very smaller number of AUP call it, because ultimately, it's not in the hundreds of millions of billions, we're talking about single millions, right? And so you have to pile up all these transactions to start making a dent into the overall numbers. But the good news is that since we started with private cloud AI and the enterprise focus, we have been growing every single quarter.

And one of the things I mentioned in my remarks is that we already have a $500 million pipeline in the private cloud AI and that is something we are really focused on converting to. And that conversion happens through the POCs directly with our customers and through our channel partners because we are enabling all the channel partners with our infrastructure so that they can bring the customers to their offices, what they are doing proof of concept, when they decide to do there versus the public cloud.

And then eventually, once they are ready to go because they figured out the use case, the return on investment and all that, we actually help deploy that with advanced professional services and our support services. In addition to the fact the one area that made it triple focus is financing AI in enterprise, sometimes some new clouds, sometimes on sovereign governments, sometimes -- but that's where our focus is. And so we expect that to continue to grow very nicely in '26 as we go forward.

And maybe, Marie, you want to talk just a little bit. You've been dealing with what she's been doing in AI with Deloitte and others. What you've heard from some of the CFOs and other companies you've been engaged with?

Yes. Look, I'd say that folks, definitely having spoken with a lot of CFOs out there are in early stages of trying to understand how enterprise AI will really transform the business. But what I would say is we've seen some pretty amazing dramatic transformations that have happened, but we're probably at the early innings. So that's why you also see in our margin guide, we actually increased our long-term margin rate from 26% to 27.28% because you start to see enterprise and sovereign become more significant in those years. But it's going to take time. We're in the early innings.

Okay. David?

Great. David Vogt, UBS. Maybe for Antonio and Rami. Rami, in your prepared remarks, you talked about meeting your customers' needs with both the Aruba portfolio and the Juniper portfolio. Can you expand on sort of the go-to-market for driving those businesses discretely and then ultimately from a synergy perspective, how do we think about that in the context of your longer-term guide in terms of -- that part of the market, not on the data center side, but on the campus and branch side.

So first, there are 2 great platforms. And honestly, now that I've had an opportunity to look under the covers in the Aruba side, I'm like really impressed. So it's a bit of an embarrassment of riches right now in terms of what we have under our portfolio. Second, they both are AIOps platforms, but they both have unique strengths and capabilities. Mist is a public cloud-only AIOps platform. So as great as Mist was in AIOps capabilities, we were shut out of any opportunities that require different deployment models like private cloud or virtual private cloud networking or even on-prem.

When I looked at Aruba, they've actually made more progress in areas like security integration, agentic AI capabilities. So they really have unique strengths. The second thing that's really important to understand about these platforms is that these are not monolithic code bases. They were developed using a micro services-based architecture, and it is actually quite straightforward to take micro services from one and apply it to the other, right? And so that's the plan. We can keep these platforms and their unique deployment capabilities in place and start to cross-pollinate.

So Mist has done amazing work in AIOps space. I can take that as a microservice and apply it to Aruba. Aruba has done a great work in security integration. That can be a microservice that can go and apply to Mist. And so doing what have I done? I've accelerated the overall pace of innovation on both platforms. I've made my engineering more efficient because I don't need to develop something twice, I can develop it once and deploy it twice.

So that's the grand plan that we're working on right now. And some of our -- I think the industry is sort of a little bit tainted right now because our peers in the industry have taken years to try to figure out how to integrate portfolios, and we're showing our customers much to their amazement that we can do it in a much, much less period of time. So watch the space.

And I'll just add on the guide in terms of the long-term guide, the portfolio simplification sort of R&D project overlap that we talked about earlier is included in the $800 million of synergies as well.

Yes.

And one of the key differentiation also, why he can drive that convergence is GreenLake and all the cloud -- the common cloud platform and the common cloud services sitting underneath that Fidelma and team provides to everybody here on the stage. And so as we go through that journey, that Rami just described, cross pollinating and doing things once, that conversion happens very naturally and the user interface will become one at some point. But no customer gets left behind. They are very excited about that, and then they get more faster.

Okay. And we'll take our last question here. Mike?

Mike Ng from Goldman Sachs. I wanted to just ask one on networking and just have a quick financial follow-up. On automated WAN, I think when Juniper was a stand-alone company, that was more of a flattish growing category. Could you just bridge what's gotten better so that we're growing at that 5% CAGR now? Is it mostly DCI, direct cloud on-ramps? Are the other elements that are getting better as well? And then could you just talk a little bit about the networking margin going from low 20s next year to 25% to 28%? Is there a mix element there with DC switching contributing more? Or is it just cost saves?

So I'm happy to address the WAN question and Marie, maybe you can talk about the margins.

I will take the margin question.

On the WAN side, first, Juniper actually over the last year or so, even during this close period has seen really good tailwinds in WAN, primarily because of what you just described, data center interconnect. Cloud providers need wide area networking to connect data centers together and they need it for the on-ramp to the data center. And we have some really great solutions in that space.

The other trend that I expect will get better is routing for enterprises. Many large enterprises actually require routing at the edge or even run their own wide area networks. And we, Juniper, were always limited by just the scale we had in go-to-market. And now all of a sudden, we've got a much, much bigger enterprise sales force that can sell not just compute and storage, but we're going to teach them how to sell routing as well.

Yes. I'd just add that on the margins themselves, in the long-term guide, we expect to get to 25% to 28%, obviously, coming off the low to mid in '26. And that's exactly you answered the question very well. It's a combination of cost synergies, which will take some time and then the scaling of revenue growth and the benefit you see in terms of just the model itself in the outer years. So I think we're really pleased with those long-term targets.

Great. Well, I think we've concluded Q&A. Antonio, I think you had some closing remarks.

Well, as always, thank you for joining. I'm going to stand up because I want to address the webcast too, so you guys can stay. So thank you. Thank you. I know we are going to spend some more time here together. But I want to leave you today feeling confident that HPE is more than prepared for what is next. In fact, we are actively shaping our future. For our customers, we will continue to push the limit of innovation.

One of the areas I'm incredibly proud as a company, we never stop innovating. And if you think about the portfolio that we have today is something that we could only dream 7.5 years ago. So very proud of what we have done there. For our partners, we are opening the door to a much opportunity for collaboration, scale and our shared success. We do a lot of business with our partners, and they are coming along with us. And for our team members, which is the core of our culture, we are committed to create opportunities for career defining work with a culture that's consistently recognized both internally and externally.

And for our shareholders, which many are here, we are offering a very compelling investment opportunity, built on the profitable growth and strong returns, including, as we announced today, growing our annual dividend and increasing our share repurchase as we execute the strategy we just discussed. And I believe the future is here, and I believe HPE is leading the way. And together, we will redefine what is possible in technology to deliver that lasting value for all our shareholders. So thank you for joining us today on the webcast, and thank you for joining here in person. I know we're going to take a little bit of a break.

Yes, I think we're -- okay. So thank you, everyone.

Welcome to the fireside chat with HPE. My name is Chris Darron of the Global Technology Investment Banking team. And I'm joined by Marie Myers, CFO of HPE. Marie, thanks for joining us.

Thank you very much and good morning.

So I have some questions. which will help guide the discussion. We'll talk about business positioning, recent close of Juniper. Congratulations. I know you guys reported financial results yesterday. Congratulations. We'll cover that a bit. Product and platform and capital allocation. So we'll talk about that, anxious to dive in. So maybe first on the quarter. All right, you have a statement.

I have a statement. I've got to go through. So let me just start by saying good morning, everybody. Quick caveat here. My remarks may contain forward-looking statements, so please refer to our SEC filings, including our most recent Form 10-Q for a discussion of risk factors that may relate to our business. Thank you.

Great. So you reported earnings yesterday. Congratulations on the success. Could you talk a little bit about the demand environment? How would you characterize it? Maybe how would you characterize it relative to, say, 6 months ago? How do you feel? .

Yes. No. Well, first of all, pleased that earnings are over, and we wrapped up a solid quarter yesterday. In fact, we had record revenue in excess of $9 billion, incorporating 1 month of Juniper's results and both with and without Juniper, we had very strong revenue performance. We also saw sequential improvement in our operating profit across most of our major business segments. So in all, I think a solid quarter and a good way to start the integration of Juniper. In terms of demand, to answer your question, is a fairly consistent quarter in terms of what we've seen. There were no noticeable pull-ins or demand differences geographically. And I would say that was relatively consistent, Chris, across all the businesses. I know we continue to be in an evolving macro. The tariff environment continues to play out. However, I would say it was fairly consistent quarter in line with expectations and what we typically see. So no noticeable call-outs across any of our businesses.

Got it. Thank you. So obviously, big change in the business with Juniper now closed. Congratulations. I've followed the kind of the transformation story that Antonio has been executing on over the past few years and for the edge to cloud story. Now with networking doubled in size effectively and is nearly 50% of the business on an operating profit basis. It certainly feels like it's a difference in an inflection point and augmentation in the business platform overall. Obviously, the strategy is still the same. How do you feel about the positioning of the platform to deliver to customers across that edge to cloud story and across that infrastructure story? .

Yes. I think you underscored it when you said transformative. I mean, frankly, the deal is a transformative moment for the company. I think a couple of points I'll pick up on, which is, first of all, going forward, more than 50% of the operating profit is actually going to come from the networking segment and it pivots the company along the lines of what you mentioned in terms of the edge to cloud strategy, we're seeing very much an environment where networking becomes a critical segment of the company's business. And in fact, we've integrated both our Intelligent Edge business and Juniper networks into 1 segment that we now call networking going forward. So hopefully, that will be relatively easy for everybody to track and understand. .

I think from a customer perspective, I'm fortunate enough to be the exec sponsor on some of our largest accounts. And I think customers are very excited because they have the opportunity now to sort of work with 1 person across the portfolio. And as we move into our AI, and I know we're going to talk about this later, we see the opportunity to have sort of network-led conversations depending on the segment you're operating in and really compete effectively across the portfolio. And I'd just add, Chris, there's really nobody else out there who has this portfolio of assets. So I'll go back and start where we kind of wrap up where we started, which is -- this is a transformative moment for HPE. And frankly, it's one of the reasons I joined the company. I think this is going to be a very different journey from here on.

Yes, absolutely, I would agree. Maybe -- and you touched on it a bit in terms of the breadth of the platform and positioning. Could you talk a little bit about competition and how you're positioned relative to peers who might operate in more specific of those verticals?

No, I think first and foremost, there is nobody that has this collection of assets. So if you're looking at, for example, the data center space where we compete for some of our business, we can now have a network-led conversation with those customers, whereas in the past, that really wasn't -- we weren't able to really compete in that segment. And so now with the collection of both Juniper and Intelligent Edge, it gives us a much broader customer segmentation that we can participate in. And then clearly, the network is such an important part of the stack. We've seen in terms of just AI itself, the network is crucial to enable performance even at the GPU level. And with Juniper here really starting to make traction in the data center space in AI. I think it's just one good example where we will be able to differentiate ourselves, to your point, against some of our more traditional customers that we've competed head and head with.

And so I've heard you describe the end customer segmentation for AI infrastructure as model builders, cloud service providers sovereigns and then finally the enterprise. Could you talk about how -- a little bit about how the needs of those individual customers are distinct and how you, as HPE are positioned to deliver across all of those needs? .

Sure, absolutely. And maybe I'll just summarize, first to say we had really strong performance for our AI business in the quarter we just closed. We actually shipped $1.6 billion of revenue for AI and closed the quarter with a really strong backlog of $3.7 billion. And what I'm particularly excited about is that actually out of that $3.7 billion, more than 50% was in the enterprise and sovereign space that you just raised. And what we see is that enterprise and sovereign also has a different sort of profit pool, and it's also, I think, an area that we have the right to win as a company. We've been very well-known in the enterprise segment. And clearly, we see this is an opportunity for us as companies start to adopt and mature AI itself, it's an area that we can really extend very naturally into compete.

I would just say from a segmentation perspective, we have a deliberate pricing framework. We use that framework to really help guide us through decisions to bid across all of the segments that you mentioned, everything from model builders, CSPs, sovereign and enterprise. And that framework really takes into account the margins and working capital. I would say from a model build perspective, we tend to be very selective. Those deals tend to be lumpy, large competitive and, I would say, more dilutive in terms of the deal itself. As we look across CSPs and then into sovereign, we're seeing sovereign transactions, as I mentioned, become increasingly becoming a much broader part of our portfolio. We do have a very strong legacy and history in this space because of our heritage around super compute.

So it's a natural place for us to play, a natural place for us to win. And we see more and more soverign transactions working their way into our backlog that I mentioned earlier. And then finally, on the enterprise side, enterprise is an area that I feel that we absolutely have a place to play and win. And it's an area that we see more and more customers are gravitating to. We have AI factory. We also have what we call our private cloud PC AI and both of these are just great examples of where we see HPE really performing and winning an etirprise. And once again, we look forward to the next quarter, we see AI revenue coming down slightly, but we see the mix of that revenue really moving much more towards sovereign and enterprise.

And I know you've incorporated AI into your day-to-day. To some extent, I know you've talked about it. How is that going? Are you going to be able to work from the beach at some point? .

That would be awfully nice, Chris. I'm Australian, and I grew up on the beach, so you've sort of pegged me right there. I would say that, look, we've been working hard on my own finance team on a product that we called Zora AI. We're actually incorporating it on our own PCAI infrastructure and architecture, and it's specifically focused on CFOs and finance organizations. Excited we're about to go live here and it will be available to our finance team. We've started first with our operational sort of KPIs. It's an area, I think, that most companies typically tackle. It's typically also very, let's just say, human centric, a lot of work that the teams usually get ready for a Monday morning ops call, and we're basically going to take the AI platform. And enable AI to really drive all the data collection, synthesis, so that we'll be able to take all that workload off the organization.

So super excited about that. I frankly see enormous opportunity just in finance alone for AI to take a lot of the sort of day-to-day groundwork out of finance. So lots of transformation here. I'm personally really committed to it, and I'm personally committed to actually using our own infrastructure so that we can go out and sell that to customers. And we're partnering with Deloitte here to help drive that. So I've got a lot of CFOs I'm talking to myself as customers.

Yes, as a road map, very good. Maybe -- so we talked about networking a bit. The other big winner within your portfolio is Electro MP, the storage platform. Could you talk a little bit about what you see as the future for that and some of the drivers?

Yes, absolutely. I'd say, look, we are -- first of all, start out in saying that we are in the midst of a transition in storage, both in terms of the product itself, the Electro MP platform. and in terms of the model itself, we're moving to much more of a ratable revenue model, which I think is the right thing for us. We have a phenomenal leader, Vidal Marissa, who's been the sort of architect of that model and the product line and has been driving that transition. And we're seeing really strong adoption and it's showing up in terms of just the share performance. We've done super well most recently on our share and in terms of just growth. I think we've seen triple-digit growth that we reported in our earnings announcement yesterday.

So right product, right time, I think the key is just understanding as we move to that ratable revenue, we'll have a lot more on the balance sheet that we'll recognize over time and plus the profit profile of that product will play out. So I think a lot to look forward to, but it is a lumpier transition is what I would add.

Now on the integration of Juniper, there's obviously a big synergy, cost synergy potential, $600 million. And that breaks down across G&A cost of goods sold and gross margin. And then there's obviously the ability to deploy AI on your business, which you're already doing. Could you talk about those 3 categories of where you see the synergies coming from? And maybe what the biggest levers are and timing of those?

Sure. So, I think Antonio and Rami, we had a call shortly after we closed the transaction where we updated our outlook around synergies. And this is purely cost synergies. So we haven't sort of spoke of revenue synergies yet. But from a cost perspective, we raised our outlook from at least $450 million to at least $600 million. And at the time, Antonio mentioned that we expect to see that sort of recognized over the course of the next 3 years, $200 million in year 1, cumulatively going to $200 million, et cetera, et cetera, over the course of 3 years. exiting around about $600 million. Now clearly, those opportunities are very obvious in, as you mentioned, in the G&A space. G&A is a natural area where you have overlap and duplication, everything from finance HR, real estate, et cetera. These are, I think, the very obvious areas that you look to the 2 businesses to sort of integrate.

What I would add a couple of caveats before I dive deeper here is that, first of all, this is the largest transaction that has been done by this company since the split. And those 10 years coming up here, I can hardly believe it. I was actually on the original split team that's set up the other company that I used to work at, the PC and print companies. So it's a large deal, and it's a complex transaction. So it is going to take time. And albeit, we did have a little bit more time, so to speak, to get ready for this, but it is going to be a tough journey for those of us who have been fortunate enough to have set through large cost transformations, this is not one for the shy, let's put it that way. So a lot of work to be done in terms of driving those cost synergies and aligning those cost synergies.

What I would say is, apart from the numbers on the human sort of side of things, culturally, there is a lot of similarity between the 2 companies. So I think that's going to bode well for us as we go through this transformation. Now in terms of just other opportunities for cost synergies, the obvious one is supply chain. Obviously, we have the breadth and scale that Juniper didn't have. And so that's going to be, I think, super important as you put both of these networking businesses together. You have scale opportunities in terms of supply chain, purchasing, et cetera. And then I think these are going to definitely be the areas that we will focus on as we go into the early stages of the integration. And then as you look across the platforms, more to come here as we get closer to the Security Analyst Meeting, I don't want to steal the thunder here of in terms of how Rami and Antonio are going to talk about the platform integration and the product line integration. So we'll leave that for our Security Analyst Meeting on October where we'll provide you more updates around how we think about the portfolio, the product platform, et cetera, from a synergistic perspective.

And then the other piece that I think is super important is just revenue synergies. We haven't commented on that. Once again, I'll leave that as well for -- so you will make sure you stay tuned and come to Security Analyst Meeting in October. But overall, I think a lot of certainly, it's the right point in terms of the networking industry market to come together like this. We're coming together at a point where the industry is starting to recover. So I think that should hopefully provide a nice tailwind. And that I'll close out and say this is not a transaction for the faint hearted. There's going to be a lot of work here to take the cost out.

Well, I think you're well prepared for that, though.

Thanks for the vote of confidence there, Chris, I appreciate it.

Maybe switching a little bit to capital strategy. How are you thinking about capital allocation and balance sheet priorities over the next 12 to 24 months?

Well, I think it's been -- I would say it's pretty obvious right now. We've just closed this super large transaction. Our leverage ratio has gone above 3. So I would say that we're intensely focused on 1 key variable, which is free cash flow. The intention right now is to be focused on the balance sheet, frankly, paying down that debt and meeting the objective that we -- I think Antonio communicated at the onset of the transaction, which is to get down to a leverage of 2x sort of by the end of '27. So that's, I would say, front and foremost.

If you step back and look at our capital allocation framework, really nothing has changed. I mean, we're focused on maintaining that investment-grade credit rating, focused on, as I mentioned, paying down the debt. And then obviously, any excess cash, returning that back to shareholders either in the form of dividends or share repurchasing. So at this point, no change to the framework. Obviously, as we get to a point we're excited about the cash generation opportunity that this deal presents and then we'll provide a more broader update at our Security Analyst Meeting around how we see that evolving over the course of the next 3 years. But as I mentioned in the call yesterday, we continue to buy back shares.

We didn't buy them back this last quarter because we're in the midst of a material nonpublic information that we have subsequently disclosed and that we'll continue to sort of buy shares to help to manage dilution. But I did clarify yesterday, obviously, we do have a more dilutive moment as we've taken on Juniper. And so we just had to clarify for the analysts yesterday that our share count has changed as well. So for those of you who are listening that are out there updating models, just make sure that you've got the new share count in the model, many of you didn't have it. So we were at 1.44 on shares as well. So I just want to sort of add that caveat out there.

Maybe switching back a little bit to revenue and pipeline. Could you talk about pipeline and what's in it, confidence to get to the end of the year?

Yes. No, I think overall, we've seen, just start out with our networking segment, strong order growth. I think particularly on the Juniper side, coming into the transaction only 1 month so far as we speak, but we see double-digit growth in orders. And I think that very much just aligns with the comment we made earlier about where we're at in terms of the recovery on networking. So I think overall, pleased with the performance from an orders perspective as we look at networking. Maybe I'll flip and say a comment about AI as well. We said the pipeline was multiples of our backlog. I think it's also just time and place in terms of where we see the maturity on AI as well and pleased with what we see from a pipeline perspective across the other segments of our business as well. .

And maybe a bit on kind of geopolitics, it's a complicated time. But as you think about one of the categories of the AI opportunity being sovereigns, how are you sort of navigating the complex environment globally with your expertise with serving end customers and the users on the sovereign side?

Yes. I think as I said yesterday, it's definitely an evolving macro and the geopolitical situation continues to evolve as well. We do have sovereign transactions, some of which I think we disclosed are in the Middle East. So we have to work through the government processes, just like everybody else. And we just intend to be very transparent about where we're at in those processes and going through the appropriate government controls. At this point, I think we all understand that things will continue to change. And I think the key is just being agile here and having the ability to manage through the environment that we're in. And I think once again, we'll just be very transparent around what this means for us in terms of our pipeline and also our orders. .

Got it. So we've covered a lot. I do want to open it up a bit to the audience. I do have some more questions which we can get to. But maybe I'll just call on a few questions if there's anything. In the front.

[indiscernible] talking about cost synergies that would be challenging. And could you elaborate what you buy that? Are you speaking more from a human aspect or actually identifying those cost synergies, which I assume you've already done. Can you just elaborate what you mean by that, please?

Yes. No, at this point, we have obviously had time to be able to put together our plans, which is why we raised our synergy target from $450 million to $600 million. I was referring more to the human aspect in terms of we've got to announce some significant workforce reduction programs, which are difficult and challenging from a human perspective.

Okay. That's why I figured it -- and just 1 other follow-up question. Can you speak -- it sounds like you want to save some of this for your Analyst Day in October. But can you speak about the opportunity to accelerate the growth of Mist and its leadership position in that market. with the leverage that you have with the bigger sales force, bigger footprint along those lines?

Sure. I mean, I think 1 obvious benefit for the integration between Juniper and HPE is the, I'd say, just not only the geographic but the customer footprint. We operate today, HPE in a broader suite of countries. Juniper has operated in a much more narrow suite of countries. So I think that clearly, the sales footprint and go to market is going to be an asset for the platform, as you correctly said, like we have already a reach into very strong enterprise accounts that we'll be able to sort of leverage that through through to the entire portfolio, frankly. But in terms of the Mist platform, more specifically, we'll give -- Rami will be giving an update when we do our Security Analyst Meeting in October. So I'll defer to to that meeting to really provide a lot more details as to our outlook. But I think an obvious synergy benefit that we -- I think we mentioned right at the beginning of the transaction was the fact that we saw the global reach of HPE's footprint and go-to-market definitely being able to extend into the Juniper platform. .

Any other questions from the room? I have...

I know you've got some.

I wanted to, sure. So maybe just on traditional, we talked a lot about AI. On the traditional server side, how do you expect performance in that business to do? Do you expect any sort of cannibalization from the AI -- as the enterprise starts adopting AI more and more in AI servers?

Yes, look, I started by saying we just launched our new Gen 12 server. And clearly, that has helped to drive some of the performance that we saw in the business in the quarter. It tends to have a higher AUP because of the configuration and mix. What I'd say is, look, there is just a -- what we're seeing customers have sort of sweated their older assets like the Gen8s, Gen10s for a longer period of time. So there is an opportunity out there putting aside AI to actually just sort of drive the refresh of a lot of the older generations of servers. Today, customers are under pressure because of data center space. and frankly, just data center economics in terms of managing a more efficient data center heating, accepted cooling. So I do think that there is just unique opportunity right now to actually just refresh a lot of the older infrastructure, not so much from a cannibalization perspective but just even from a data center sort of modernization opportunity. So we're seeing that as a driver in the portfolio.

Today, most of our portfolio, I would say, is still Gen 11. It does take time for customers to move from generation to generation. But I think just what we saw just through the COVID period is that folks typically sweated their assets a little longer and that there is really a great opportunity to continue to drive just data center modernization with the new architecture.

And you might have covered some of this in your earnings yesterday, but how are you seeing the tariff environment impacting customer demand? And how is it impacting your business? What are you doing to mitigate?

I'd say, overall, the tariff environment for us has been somewhat stable. We have guided to about $0.04 in the year in terms of tariff impact. was in the first half and sort of $0.02 was in the back half. Nothing has really changed for us. I mean, I think in terms of just the impact financially, it's maintained the same level of impact. In terms of customer demand, we haven't seen any particular noticeable impact so far to speak of. We do have a benefit potentially of a globally well-positioned supply chain. We have a fairly international footprint across our business. And certainly, that's given us perhaps a fairly agile basis to work from. But at this time, I'd say we haven't seen any specific demand impacts to speak of in terms of tariffs at this point. I would add it continues to be an evolving macro. I mean we do have to stay I think for all of us, we have to be very agile today and keep a close eye as to how we manage our supply chain footprints. .

Agreed. What I mean, what do you think the public market investors are necessarily missing or conversely, what do you think they appreciate most about the HPE story? Can you talk about that?

Yes. No, I think it's clear that the closing of the Juniper transaction was a critical milestone for us and really changes both the shape of the portfolio and frankly, opens up a suite of opportunities for us that perhaps we haven't been able to unlock in the past. And so I think, first and foremost, the Juniper transaction changes the shape of the business, it becomes more than 50% of our operating profit and gives us the opportunity to really I think, bring a lot of credibility to our cloud to edge AI story. And I don't want to steal the sort of thunder from Sam, but this will be sort of the backbone of how we'll talk through our SAM opportunity. I'd say that on our server business, we continue to see the transition, as I mentioned, to Gen 12 as a real critical sort of driver of data center modernization and refresh. And then from an AI perspective, we see that opportunity, particularly in enterprise and sovereign as our order book changes to have more than 50% of those 2 segments in our business.

Storage, pleased with the progress around the transition to our Lectra MPE platform and really look to that as a free driver, Greenleake, obviously helping to drive the performance of our AAR. We didn't talk too much about that, Chris, but we hit $3.1 billion in AAR in this last quarter with almost $600 million coming from Juniper. Even the shape of that is very much trending towards almost up to 80% of that is software and services. So very pleased with the performance and the change of the profile that's going on inside the company. And then finally, as we look to the future, I think consistent solid performance from our HPFS business, we don't get to talk about that business very often but it continues to be a mainstay in the company and performed very well as well. So overall, I think we have a lot to look forward to here as we close out our fiscal year. And we're going to have a lot to say at our Security Analyst Meeting coming up here very shortly.

Good. Good. Well, this has been excellent. Thank you for your time and thank you for joining us. .

Thank you very much.

Thank you all for coming.

Thank you very much, everybody.