Good afternoon, and welcome to the Fiscal 2025 Fourth Quarter Hewlett Packard Enterprise Earnings Conference Call. All participants will be in a listen-only mode. 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 webpage. Elements of the financial information referenced on 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 amount ultimately reported in HPE's annual report on Form 10-Ks 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. Hewlett Packard Enterprise 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 2025 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 2026 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 2026 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. Our strategy underpins our long-term financial framework. By fiscal year 2028, we are committed…

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 progress 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 2025. 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…

Thank you. We will now begin the question and answer session. The first question will come from Amit Daryanani with Evercore. Please go ahead.

Good afternoon. Thanks for taking my question. I guess if I look at the fiscal 2026 EPS free cash flow guide, you folks are kind of raising both those numbers while revenue guide as well as the unchanged. Assume this is just networking mix that's helping you a bit over here. But, you know, 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, how do you think this memory cycle ends up being different versus what we saw back in '17, '18? That'd be really helpful. Thank you.

Well, good afternoon, Amit. This is Antonio. I will start, and then Marie will provide further details. Look, we are very confident in the new guide that we provided, which obviously raises the EPS and the free cash flow. 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, you know, the driver of this is all the execution that we've 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 like 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, good afternoon. Maybe I'll just add just to clarify on the guide itself so you are correct. We did raise the guide the midpoint by 5¢, 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 at the prudent guide. If we can do better, we will, and, you know, 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 actually trickling through into '26 as well. So overall, they're the two drivers of the increases in the guides, Amit.

Very good. Thank you, Amit. Operator, next question please.

The next question will come from Samik Chatterjee with JPMorgan. Please go ahead.

Hi. Thanks for taking my question. I guess, Antonio, just following up on 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. Thank you.

Yeah. 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 continued momentum in our Alletra 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 that it 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. Very good. Thank you, Samik.

All right, operator. Next question, please.

Next question will come from Tim Long with Barclays. Please go ahead.

Wanted to ask on 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 two companies combined on the GreenLake side? Thank you.

Yeah. Thanks, Tim. Look. All the ARR we are from Juniper is in the software subscription services. Because remember, our ARR is a combination of call it, the SaaS, which is a 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 with all the software subscription that they 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 ARR. But look, we now have a baseline that represents 80% of ARR is software and services. And that's very, very high. As we continue to grow the networking business, which now we are at the core, our larger networking-centric company with a tremendous amount of innovation, if you look at innovation this week, has been significantly higher than any other event we have had in the last few years. Rami came strong and articulated 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 AI ops in addition to the fact that now we support dual hardware on both platforms. We also announced the new Juniper QFX fabric, which is the 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. Obviously, now we have a $3.2 billion ARR and from there we expect to continue to grow at the bigger base, obviously. And that's where we are excited about what comes next with GreenLake. And all the AI ops intelligence we build around it.

Thank you, Tim. Next question please.

Next question will come from Eric Woodring with Morgan Stanley. Please go ahead.

Hey, guys. Thank you so much for taking my question. Antonio, I'm going to go back to kind of where Amit and Samik were touching on the commodity stuff. You know, truly want to understand your thoughts on the pass-through of demand elasticity because you know, we can look at server DRAM contract pricing up 50% in April alone. DRAM is obviously a considerable part of the server bill of materials. You know, 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 can be considerable? And two, how do you expect demand to respond? Thank you much.

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 of that will follow as we go forward. As for demand elasticity, look. There are benefits to upgrade because we have shown customers that you can take a generation 10, which is maybe four years old, down to one, seven generation 10 servers down to one. That helps reduce your energy cost by 65%, get better performance on a per-core basis, more density. At the same time, you can pay off that investment in less than two years. The depreciation of that return is very, very fast. As we said in my remarks, we are going to monitor the cost and the demand. I think you will see a rebalancing over time between units and revenue. Remember, more than two-thirds of our AUP is structural. I believe there are unit growth that we'll continue to see but maybe a little bit more muted than maybe expected six months ago. But the balance, the revenue will grow as implied in our revenue guidance because of these AUP mix shifts. I think you're spot on in your thesis.

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

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

Thank you, Eric. Next question please.

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

Yes, thank you. I wanted to clarify some of the comments around seasonality. In your slides, you talk about the $9 billion to $9.4 billion in 1Q. 1Q is a decline consistent with historical seasonality. But I think where 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 will 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. Thank you.

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 just bear in mind that from a Q1 perspective, spot on. We did have some AI deals that moved out of Q4 into Q1. 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. I think in the prepared remarks, I did mention that we have a split between revenue 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, gives you the context on Q1. And then I'm gonna 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.

Yeah. 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. Number one, obviously, is the whole procurement process is much longer. 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 their back half set of technologies, particularly with NVIDIA, Beta, and Ruby. So you have a combination of factors there. In regard to the push out 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. Then there was one particular deal that they weren't ready with the data center. And so we deploy a number of pods and those other pods 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 two segments because the focus there is because of our ability to play and win with the right margin profiles and the right working capital.

Thank you, Wamsi. Next question please.

Next question will come from Aaron Rakers with Wells Fargo. Please go ahead.

Yes, thanks for taking the question. I wanted to ask about the networking business. It looks like on a pro forma basis using Juniper's results, 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. Is quarter and in that range for the full year. I'm curious as why necessarily you see a deceleration in that? Is that conservatism? And can you talk a little bit about Juniper's positioning in some of these AI fabric build-outs, what your discussion has been with customers thus far? I think Juniper has had a position in some larger build-outs in the past. Thank you.

Yeah. 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. You know, look, really pleased with the results I'd say, for Q4, both in terms of both revenue and operating margin for the business. I think you're seeing the transformative power of those two networking companies coming together and just, you know, what we can drive here. What I would say is you think about, you know, the rest of the year, we have kept revenue, you know, 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 the integration of both of the sales forces. So, you know, it's early days, and at this point, you know, 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. You know, 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 Bitmo cloud and AI. But I'd say overall, you know, 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 is 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 up outside 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 searches 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 2026. Obviously, some of that will cut into 2027 because you have the backlog conversion that has to take place. The one area that I am actually more excited about in many ways is the routing business. The MX platform is the standard for on-cloud on-ramp cloud. It's 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. That business has a very large backlog that will convert later in the year. Marie referenced 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. 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 digits, call it the five-plus percent which is almost double of what we give you the security analyst meeting at the midpoint. Which was between 2-5%. 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 all the goal for us is all about execution.

Thank you, Aaron. Right, operator, last question please.

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

Great. Thank you for squeezing me in here. Marie, if I can just ask about the sale of the assets that you have and how that is reflected in your OI and E. I believe the OI and 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? Thank you.

Yeah. Look, Asiya, at this point, I assume you're talking about H3C. Look. Everything's factored into the OI and E numbers that I gave in my remarks. We'd actually planned 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. Thank you.

Yeah. 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 new heights 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, growth opportunities, in both cloud and AI. But we will maintain that strong discipline, focus on growth, and operating margins ultimately drive profitable growth and free cash flow. And I believe our strategy is working and the Juniper integration is working. 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.

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