Hewlett Packard Enterprise Company

Good day and welcome to the fiscal 2026 first quarter Hewlett Packard Enterprise earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Paul Glazer, Head of Investor Relations. Please go ahead, sir.

Good afternoon. I am Paul Glazer, 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, 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 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 31st, 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 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 Network's 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 AIR growth. Phase one 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 roadmap 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 increasing 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 multi-year 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 shipment. 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 security analyst meeting last October, we have streamlined our financial reporting structure into two 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 deliver strong revenue growth at the high end of our guidance, with orders growing faster than revenue. The networking segment now represents nearly 30% of 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 in demand strength across the world. In campus and branch, customers are adopting our self-driving AIOps networking strategy and solutions. Normalized orders increase by high single digits. The Wi-Fi 7 transition is ramping quickly. We saw more than 10 times increase in Wi-Fi 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. HP now has the most competitive routing portfolio spanning data center interconnect, AI on-ramp, and edge use cases. Our recently introduced MX301 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 to $1.9 billion in cumulative networks for AI orders by the end of fiscal 26. Our new combined networking R&D team continues 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 athletes 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 a new combined networking portfolio. In advance of Mobile World 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 networking run infrastructure to address the rising data traffic demands driven by AI data center interconnect and inference in scaling. We also announced new server innovations to speed 5G and AI deployments, enhance 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 networking 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 networking technology stack with the 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 AIOps 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 their 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 Aletra 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 install-based block transition and the accelerated adoption of our object-based platform. GreenLake continues to be a significant differentiator for HPE, In 2021, 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. Our unique portfolio of cloud management software, AIOps, and our platform-based services underpin our hybrid cloud offerings, drawing significant customer interest and building a strong sales pipeline. RVM 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, HPE FS delivered an exceptional quarter with record return on equity. During these high commodity cost cycles, HPE FS is a strategic advantage, enabling customers to maximize the value of their current IT infrastructure and provide access to certified pre-owned 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 networking revenue, earnings per share, and free cash flow outlook for fiscal 26. and we 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.