HPE President & CEO Antonio Neri Talks Company Growth with AI Usage

**SPEAKER_1** (0:02)
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**Paul Sweeney** (0:07)
Antonio Neri joins us here, CEO of HPE. Antonio, thanks so much for joining us here. Talk to us about what are the key issues for you guys going forward. This AI story is a story that's playing out across the tech stack.

**Antonio Neri** (0:23)
Well, good morning, Paul. Thanks for having me. Yes, of course, today, the narrative is all around the AI and the ability to use AI to change the world.
And so for us, as technology companies, how we accelerate the deployment of AI in the enterprise. And today, we talked about the evolution of just large language models, intro agentic models, which allows to increase productivity across the entire enterprise, across processes and functions. And so we have made a series of announcements here, which brings together the infrastructure, the software and the cloud experience into one integrated, unified, operating model, including governance and compliance, so that build the trust within the enterprise to go forward.

**Scarlet Fu** (1:12)
And how does this change your growth trajectory going forward? I know that one year out might look very different from five years out versus ten years out. Just walk us through how you see this changing, what you had anticipated to what you now think you can achieve.

**Antonio Neri** (1:29)
Yeah, Scarlet, so if you go back and read our earnings in Q2, we grew the company as a whole 40 percent year over year on revenues, and we expand the margins because of the content that we bring into our revenue now has a bigger mix of networking, software, and cloud services.
And in that context, we believe networking is going to be the thesis of our company. If you think about developing these frontier models, whether proprietary or open source models, you need a lot of GPU power, but that GPU needs to be very productive. You don't want to keep it idle. And the bottleneck of that is networking. And so we have now with the acquisition of Juniper, an amazing portfolio in the three key elements, scale up, scale out, and scale across, which position has to be core element of that infrastructure build out. So this is why we believe the company is gonna grow double digits going forward and will continue to expand the operating margins. And that will translate in free cash flow. So we already guide it, which is unlikely and in many cases for six quarters ahead. So think about it because of the confidence we have in our growth trajectory.

**Paul Sweeney** (2:40)
Antonio, where do you think this technology, this AI technology story is? I mean, a lot of folks are saying we're still in a very, very early innings, but you just think about the amount of CapEx that is being spent by a variety of players within the sub stack. It's just extraordinary. Where do you think we are in that compendium there of AI investment?

**Antonio Neri** (3:04)
I concur with that. We're still early. And Paul, what you have to understand is three customer segments, you have to look into it. Number one is the model builders and the hyperscale is the Neo Cloud. We're building large amount of compute capacity. We believe by the end of the decade, we're going to build 250 gigawatt of power that will host these GPUs. And that's the CapEx you're talking about.
But then ultimately, what is the mix of that capacity? It's going to be shifting from training models to influencing models. And that's where we're going to see the large adoption of AI into the enterprise to drive that productivity. But if you put it in context of industrial revolutions in the past, this actually is very small compared to that spend that was done in every inflection point, including the turn of the past century. So yes, I understand the concern about the amount of CapEx, but when you put it in context of changing the way we work, the change in our society was still small relative to that.

**Scarlet Fu** (4:09)
You know, just looking at how you might be deploying cash, I know that you tapped the debt market in March to refinance some upcoming maturities.
You've got strong liquidity with cash and equivalents of more than $5 billion at the end of the second quarter. What might prompt you to go to the debt market again to raise more money?

**Antonio Neri** (4:31)
Well, we do that very regularly because, remember, inside HPE, we have an operating company. Obviously, we are paying down the debt and refinancing where we need to.
And that's the operating balance sheet you're referring to. So our balance sheet is super, super strong. And then we have the financing company, which has $13 billion under asset management. Think about the financing we do for customers. And we do it also as a part of the asset lifecycle management services. And basically we have debt securitized against those assets, but the return on equity on that is super high, super, super high. So we use those vehicles when it's necessary, but what we announced just at the beginning of this month in our earnings is that we're going to pay down that debt much faster.