Hewlett Packard Enterprise Co Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Amit Daryanani - Evercore ISI - Analyst : Thanks a lot and congrats on a nice spring. Yes, my question is on the AI system side that you possibly had some really good revenue performance, you think business pretty much double sequentially up. Hoping you could spend some time talking about how should we think about margins on the AI side versus maybe segment averages because your margins appear to be holding up a lot better versus what we have done at Dell, Super Micro, for example. So love to just understand how do we think about AI systems margins versus corporate averages? And if you just touch on what do you think differentiates your AI solutions versus companies like Super Micro download is super helpful. Thank you.

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yes, thanks for taking the question. I guess sticking on the AI topic, if I could. First ask, when you referenced the AI enterprise customers starting to show up and I think the comment on the conference call, it's now north of 15% of your AI orders. Can you give a little bit more context of that? What has that been over the last couple of quarters? I'm just trying to think about the trajectory of that? And Antonio, on the liquid cooling side, as we and investors think about Blackwell product cycle from in NVIDIA. I'm curious, can you be a little bit more specific of exactly where from a technology perspective you differentiate at liquid cooling or is there something unique that HPE does within the 300 patents that you would want to highlight for us as a sustainably differentiated? Thank you.

Question: Mary Lenox - Morgan Stanley - Analyst : Hi. This is Mary on for Meta. I just had a question for you on Intelligent Edge, where are you in the Intelligent Edge inventory digestion? And when do you expect to emerge from it?

Question: Toni Sacconaghi - AB Bernstein - Analyst : Yes, good afternoon and thank you for taking my question. I just wanted to follow up on the guidance. You talked about enthusiasm for the second half. But you beat revenues this quarter relative to your expectations by $400 million and by guiding up an additional percent and you're actually only guiding up the full year by $300 million. So I'm wondering, are you just being conservative given the commentary around enthusiasm and forces at work in the second half or how do we reconcile that discrepancy? And then also just on the AI servers for the second half. I think you talked about 6 to 12 week lead time so if you have $3 billion of backlog and lead times are 6 to 12 weeks, why can't you deliver $3 billion in AI systems like next quarter, certainly in the second half? Thank you.

Question: Joe Cardoso - J.P. Morgan - Analyst : Hey, thanks for the question. And this is Joe Cardoso on for Samik. So maybe just following up on the AI questions. And you're seeing a sequential decline in a AI backlog this quarter, admittedly off of a very robust revenue quarter. And maybe you can just discuss the pipeline you're seeing and if sitting here like what are some of the puts and takes that investors should be considering when seeing the sequential decline in backlog despite what appears to be a strong underlying demand environment overall? Thanks.

Question: Victor Chiu - Raymond James - Analyst : Yes, hi. This is Victor Chiu, for Simon. Regarding the AI systems revenues pretty sharp inflection this quarter. Can you just tell us how much of the increase was driven by allocation improvement versus your ability to ship orders and kind of just help us understand the dynamic there a little bit?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Hi, thanks for taking my questions. It's Ruplu Bhattacharya, for Wamsi today. Can you talk about how much of the GreenLake revenue and ARR growth came from AI? And then Antonio do think that having GreenLake is helping you sell AI systems and how they wanted to clarify Antonio, you talked about sovereign AI can you talk about what inning you're in and are there specific requirements or sovereign AI, where you think HPE is very well positioned to satisfy?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Yes, I just wanted to ask about the sovereign AI? And so are there specific requirements that you can satisfy?

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Good afternoon, guys. Really appreciate you taking the question. Just a quick clarification and a quick question. Antonio, did you say that last 12 months AI growth was driven by service providers and was at mobile, you said. And then the question is that what's a good way to think about clouds, your GenAI cloud scale opportunity, hyperscalers and Tier 2 going forward? Thanks a lot.

Question: Lou Miscioscia - Daiwa Capital Markets America Inc. - Analyst : Hey, thanks for getting me in. So my question is really about a GPU or accelerated diversification. Obviously, AMD and Intel and others are starting to come out. So as you think about calendar 2024, what do you think that your system will be for this? And what do you think demand will be? And then maybe continue that into 2025?