Good afternoon, everyone. Asiya Merchant here. I am part of the tech hardware, tech supply chain research here at Citi. Have a seat, everyone. It's day one of Citi's technology conference, the afternoon portion here. Very excited to have HPE. We have Marie Myers here. She is the CFO of Hewlett Packard Enterprise. We have a few other folks from HPE as well in the audience. Before we kick start, is there any safe harbor? We're good?
I think we're good.
Safe harbor's in.
Yeah.
Okay. All right, so this is a fireside. We have a bunch of questions here. I'm going to leave some time towards the end for investors. I just request that you please do raise your hand so we can bring the mic to you. Marie, you guys just reported a very, very strong quarter, and you guys are guiding for fiscal 2027. You did guide for fiscal 2027. You upped that guide now for fiscal 2027 as well. Your order backlog, your normalized orders, like you said, was up 42%. You have very strong backlog.
One of the questions that we're asking is, as you step back and you think about the current demand environment and the fact that there's so many supply constraints as well still, what gives you confidence that even as you look into fiscal 2027, that this is durable demand that you're seeing in your order book, and it's not just customers coming to HPE or coming to one of your peers and saying, "I have an order, take us"? There is durability to this demand and not just people signing to make sure they get something.
Yeah. No, first of all, thank you for having me at the conference. As you just said, we posted, frankly, one of the best quarters I've ever had in my career, so I was delighted to have to present a set of numbers like that, and we did actually a beat and a raise, and we guided up our 2027 numbers as well. In terms of the demand profile and what gives us confidence, we are in an environment where demand is just outstripping supply at levels that were probably unprecedented in the industry. As we reported, our order book on networking was actually up 36% year-on-year. We're seeing a very durable sort of super cycle going on in networking with its refresh of networking, combined with new momentum, particularly since we closed the deal with Juniper Networks around areas like data center.
On the cloud and AI space, our orders were up over 70%, almost 75%, 76% on a year-on-year basis. What we're seeing in that side of the house is just really strong demand in terms of data center modernization and refresh. I think what's really interesting is the whole conversation around the data center has moved from just the pure refresh. Folks have got pressure on power, cooling, and the economics are pushing really hard on, how do I really manage this environment? You've also got new workloads like AI coming into the data center. We did disclose in the quarter a very large enterprise customer where we saw very significant inference investments. We're starting to see these inference investments really pick up pace in the enterprise.
That's what gives us the confidence, and that's why we felt really it was the right time to go ahead and re-guide the framework, which we guided for 13%-17% on revenue, and EPS actually growing faster than revenue at 16%-20% and at least $5 billion cash flow, which was, I think, a really great number for us.
Right. Especially given that you had an Investor Day not too long ago
Exactly
where you were sharing targets which were much lower than that.
Yeah.
Right. Okay. You just talked a little bit about the constraints, right? You wouldn't have raised your revenue guidance for fiscal 2026 and fiscal 2027 if you didn't have the supply, and that's been something that Apple's talking about, supply constraints. You talk to any of your peers as well, they're talking about supply constraints. So you obviously did have some supply agreements. Tell us how you feel about, your purchase commitments went up. How confident are you of having the supply that's needed, and is that a gating factor? If you could get more supply, could your guide be even better?
Well, I'd say the guide that we actually gave was really anchored around the supply that we have confidence in getting for 2027. So that's why we felt it was opportune to come out with a revised framework because we knew we could see line of sight to the supply for the guide that we gave. Now, we did also disclose, in fact, we just filed our Form 10-Q the day after earnings. Our purchase commitment level is at an all-time high, actually over $30 billion. So purchase commitments are up both on the networking side and on the cloud and the AI side of the house. And those are multi-year, what we call long-term arrangements, LTAs. So that really gives you assurance over supply, not necessarily price, but at least gives us the confidence that we can see supply.
Now, obviously, the more supply, given the order demand, then if the strength was there in terms of continuous supply, then that would help us translate a lot more of that order book into revenue.
Okay. All right. Outside of supply, is there any other factors that we should think about where HPE could track towards the high end of the guide that you guys have shared now for fiscal 2027?
Look, I'd say there's puts and takes as always. I think Antonio Neri did mention, and I do want to sort of follow up on this point, that the Helios stack, which I know we're going to talk about here later, is not included in our fiscal 2027 guide. It is early days on Helios. We're super excited about it because it has a combination of both our server, but most importantly, we have a networking tray in Helios, and it's early days in terms of customers sort of trialing, looking at the workloads, and POCing. So more to come in that space, but we're super optimistic on Helios, but none of that is included in our 2027 guide.
Okay. Just in terms of visibility, right? So your order book, are customers willing to sign orders that are maybe extending beyond what they traditionally have done? I don't know if it was a few quarters, if it was up to a year. Are you getting better visibility from your customers, and are the duration of the orders extending a little bit beyond just a couple of quarters?
Yeah, I'm just thinking about, I think it depends very much on the customer segment. What we're seeing, and it's probably a much more recent trend, is that a customer will place an order and then potentially come back shortly after that and actually increase that order quite significantly. Most of that we're seeing so far to date has been around AI workloads specifically. I wouldn't say there's substantial change in customer order profiles or patterns, but we are constantly reviewing our backlog to ensure that there is no evidence of double bookings or what I would say is sort of placing orders that potentially could be canceled at a later point in time. We feel really confident in the quality of our backlog that we don't see any evidence of those types of things going on.
Okay. Gross margins, they were very robust in-
Yeah
I mean, in the quarter, sorry, in the third quarter. You guys even talked about it, and you said that we should expect a little bit of moderation here in your fiscal 4Q. But the pricing environment is still very robust, right? None of your peers are necessarily doing any discounting. Just help us, why margins should perhaps moderate or maybe there was a bunch of factors that led to margins being so robust in fiscal three.
Yeah. I think I commented on the call that our gross margins were 40% in Q3, which actually was a record for the company, and it was a confluence of factors that really brought that gross margin out. It was, one, obviously the pricing discipline that we've shown as a company. Secondly, the mix of deals in the quarter, particularly on the AI side, we did not have a large shipment of AI. Going into Q4, I think I commented that we do expect to see an increasing mix of AI in the quarter. Then we had some benefits that came in with respect to the synergies that also helped to buffer some of the gross margins as well. Now, going forward into Q4, we do expect a more nuanced environment in terms of pricing.
We have come off several months now of very aggressive pricing curves. We expect that to sort of moderate. We do still expect pricing increases to happen into 2027, but the pace and the acceleration of those prices, we expect to slow down somewhat as we get into 2027.
Okay, great. After Juniper's acquisition, you now have campus branch, you have data center, you have routing, you have security, and you are now competing against some very large competitors, right? Especially on the networking side. Just help us understand, where are you seeing opportunities to gain share relative to Juniper Networks on their standalone or where HPE used to participate with your Aruba portfolio?
Look, I would say there are opportunities across the entire stack that you commented on. If we look at campus and branch, obviously the combined portfolio makes us a very formidable player in campus and branch today. We have been going down a very deliberate path to integrate what was known as the Mist platform that came from Juniper Networks with the CNX platform from our HPE legacy Aruba side. I think the Mist platform has exceptional AI capabilities, and we have been able to successfully integrate a lot of that actually into the CNX platform or moreover, continue to build off the Mist platform. In fact, we leveraged a lot of the data out of CNX into Mist to build even a more powerful AI engine.
I would say we are continuing to leapfrog that AI baseline that we had built in campus and branch, and I see that as an opportunity for us to really potentially win more and more business. I actually went in the labs with the team a couple of months ago, and I am a bit of an AI Geek myself, and I was completely impressed with just how far we have gone in a very short time since the integration with that platform. On the data center side, we were first time to market with a liquid cool switch, Tomahawk 6 QFX. Nobody else in the market was able to do that. Shortly after the deal closed, we took the liquid cooling technology out of our server business and actually applied it to the Juniper technology, and so we had absolute time to market.
We beat many of the names that you mentioned. I'd say that puts us in a prime position to win some of those large deals. We just closed and announced a deal with Oracle at our earnings call. Clearly that, I think, gives us a really good sort of toehold into the data center and a good proof point that we can become, I think, a very formidable player in the data center over time. That deal in itself leveraged the strength of the entire portfolio you mentioned. It's a combination of routing, switching, and then services. Our services portfolio is actually probably one of the hidden jewels. It has a very high margin rate, very, very sticky. Then we also leveraged our financing business actually to pull that deal.
Okay. Good segue into the next question. How should investors think about the Oracle deal? The Oracle deal has routing. You have Express silicon in there. I think you mentioned software. You have AIOps. It's a multi-year, it's a gigawatt scale agreement. When you think about the revenue ramp and how should we think about the timing of the revenue ramp over the next couple of years? Could this be a proof point for additional, I don't know, neoclouds or sovereign clouds to come to HPE? Are you thinking about additional hyperscalers here as well coming to HPE for these kinds of deployments?
Yeah, no, I think I'll start on your second point, which is absolutely yes.
Okay.
I think that's a great proof point for us that we can absolutely compete against the best of the best of this space and actually win a big deal like this. As you said, it is one of the largest AI infrastructure build-outs, so we're delighted to be chosen by Oracle to be a key partner, to have that level of confidence in our ability. What I love is it tests the whole portfolio. So I think it is absolutely a great example of opportunities that I hope we can continue to win. I would say there is strong interest in our portfolio for the reasons that we just discussed earlier. In terms of the deal ramping and how to think about it, we just announced it, so it's fresh off the press.
We see 2027 very much as the early stages of just getting started with that deal, and that deal is multi-year in nature. We do have a Networking Investor Day coming up September 30th, and we will provide some more details and insights about how we think around the timing of that deal. As we get up into our Q4 revenue guidance at the end of our Q4 earnings call, we will give you some more specificity about the guides.
Okay. All right. When we talk about the networking, I know margins and growth, both the top-line growth rate as well as margins have been key focus for investors. Walk us through when you think about margin expansion in this segment, is it just revenue that is growing, let us say, mid-teens year? Are you talking about better order conversion that is underpinning that? You are talking about Juniper Networks synergies that is underpinning your margin guidance. What should investors be looking for as you are looking at the margin expansion story within networking?
Yeah. First of all, I would say we are really pleased with the performance of the business. We did actually close 10% revenue year-on-year in Q3, and we posted operating margins of 22%. When we first bought Juniper Networks, the deal itself was only predicated on cost synergies. We guided investors in the street to actually $600 million worth of synergies by the end of 2028. I would say in terms of signposts, one of them is absolutely, are you on track to meet that? The answer to that is absolutely. In fact, we are performing better than we expected in terms of delivering cost synergies. You can see that in the operating profit that we guided for the remainder of 2026. Actually, we guided up into 2027 for mid to high 20s in terms of operating margin.
If you think about it, what is different between 2026 and 2027 is the fact that we will have a full year of those Juniper Networks synergies in 2027. That is absolutely helping to drive some of the improvement in the rate that we expect in 2027. Secondly, let me just comment about revenue. Obviously, very strong order performance. I think I mentioned 36% year-on-year. We are seeing better conversion in Q4, and then even better conversion into 2027. We guided for 12% in Q4, and then up to a range of 14%-17% getting into 2027. We are expecting revenue to continue to grow at a better pace. As I mentioned earlier, we have secured purchase commitments both for our networking business and for our cloud and AI business.
We do expect to see that improvement in order conversion take place, picking up in Q4, and then more so into 2027. We haven't spoken a lot about revenue synergies. I know Rami Rahim did at Securities Analyst Meeting speak specifically to cost synergies and where we saw those coming from. As we get into the Networking Investor Day, there'll be more to say in this space. I'll just put another plug in for September 30th, where I expect Rami Rahim will cover a little bit more of the success we've had here. But I would look at the data center deal and say that's a good example.
Mm-hmm. Okay. Talk about AMD Helios. I know it's a big opportunity. You guys are looking at scale up now as well. It's not incorporated in your guide initially. I know you talked about early days, but just what should investors be looking for? Are there any qualifications? What is it that's going to help investors understand the size of this opportunity? What could HPE share be in scale up? Could it be equivalent to what you have in scale out when we think-
I'd say I'm personally super excited about Helios because it gives us an opportunity to really get out there and participate in a segment of the market that we potentially haven't been as competitive in. What's great about Helios, it incorporates a networking tray, and then obviously we work with AMD on the server architecture. But frankly, by having the networking tray in the stack, it obviously gives us a much better margin profile on these types of deals. What I would say is, where are we in terms of looking at these opportunities? Right now, we are in POC stage with a number of different customers, and I'd say we've got some strong interest. Customers are obviously testing those workloads because they have to evaluate performance. It's a new stack.
Many of them have been accustomed to working on their existing architecture, their existing stacks, so they have to gain confidence that they can see these workloads really performing at the levels that they want. I expect that once we get through that stage, we'll start to see those proofs of concepts convert into orders and then obviously into POs. Once we see that happen, then we'll obviously bring that to you in terms of the guide. But this is very much more into 2027 and beyond. It's still early days, is what I would say. But so far, we've definitely got some strong interest from a number of different players around the world.
Okay. I know Rami's going to talk a lot more about it on networking.
Yeah.
Margins, and we talk about synergies. I know you were a big factor in driving some, you're talking about those synergies even earlier on. Just what's gone better than expected? As you talk about, whether it's channel, whether it's go to market, whether it's product stuff. What has gone better and is low-hanging fruits done? Where are you guys now kicking it up, so you get to better synergy?
Yeah. Like I said, I think really pleased with the performance of synergies. What went faster was probably just the core integration. In terms of just mapping a lot of the overlap between the two organizations went really, really quickly. What I would say that very successful was the sales and go-to-market integration. That's usually one of the tougher sides of large deals like this. I've been involved in a number of transactions in the past, and you can sometimes get it wrong in the sales space. But the mapping that we did of our accounts and the actual sales day one that went live a couple of quarters ago was virtually very seamless, and we didn't see confusion in terms of customer account mapping, region mapping.
The one that probably had us the most focus going into the deal was the U.S., because that's where we knew we had potentially much more overlapping accounts. But so far, that's gone extremely well, probably exceeded expectations in terms of the pace and the sequencing. Then I'd say on the product side as well too, you could have expected to be more ambiguity around roadmap consolidation, et cetera. But for the most part, customers, I think, have been very happy with the way in which Rami Rahim and the team have navigated the roadmaps as well. Pleasantly surprised. I always believe in deals like this. It does come down to people and culture. The two companies, if you sit in the room with the team from HPE or the team from Juniper Networks, it's really difficult to detect which company people came from.
The cultures are very similar and have a very strong ability to blend very quickly. I think that that was one of the probably underestimated parts of the deal, that the two teams would assimilate so quickly, whether that was technically or even out in the field in sales. I had a chance, like I said, to sit down with the Mist team. Some of the AI team from the HPE side is working hand-in-hand, side by side, and you wouldn't have had a clue who would work for which company. Having worked on Compaq and Digital and all these other deals in the past, I must admit I've had quite a few different experiences. This one actually surprised me, and I think it's been a huge advantage for us getting to this stage of the transaction.
Okay, looking ahead, where's more of the focus going to be in year two integration?
Year two is heavy going on IT systems integration. First year, we probably kept a lot of the dual systems side by side. As we get into next year, into 2027, we're going to do a hardcore system integration. Big deal for me in finance because we'll map a lot of the financial architecture. My team will be under a fair bit of pressure going into 2027. That'll be the year where we get a lot of the system integration done.
Great. Switching a little bit to cloud and AI. Orders were up quite meaningfully. I think you said 70%+, 75%. Clearly, there's a lot of demand. I know enterprises are updating, modernizing. There's agentic AI, there's inferencing, but there's also pricing that was probably a large element of that. How should investors think about this unit demand versus pricing as you're thinking about into fiscal 2027?
Well, I'd say, look, in terms of the relationship with pricing and units, clearly pricing has played very importantly into the overall top line and bottom-line results. Units are also incredibly important. We're in an environment where today demand continues to outstrip supply, and we don't see that changing into 2027, which is what really underscored the confidence in the 2027 guide. What I would say in terms of just the quarter itself, I know we got some questions about, well, how do you see unit volumes growing between Q3 and Q4? We announced that very large deal, the $3.5 billion inference deal, which is clearly inference traditional compute as an indicator of the order strength and the volume strength that we see out there. So I do expect there's a little bit of a timing mix issue in terms of Q3 and Q4.
We do expect to see unit volumes continue to accelerate even as we get into Q4 and beyond. Clearly, as I've mentioned earlier, some of those pricing curves that we've seen throughout 2026 will start to moderate in 2027. But we still expect to see an elevated pricing environment in 2027.
Okay. Then talking about that deal, just because it was a pretty sizable deal. What differentiated? What went your way? What led them to say, "We'll give this large deal to HPE?" Just given the size of this deal, how should we think about both from a margin perspective and working capital to support as these revenues ramp for this deal?
Yeah. So maybe I'll just clear up the working capital first. So this deal is traditional CPU, so it fits inside our normal working capital paradigm, which for me as a CFO, I really like this model because we get tremendous leverage because it has negative cash conversion cycles. So, absolutely no impact in terms of degrading working capital. In fact, incredibly positive in terms of cash flow generation, margins, right in our framework in terms of how we think about the business. What I would say about this deal, in particular, why we won this deal, really twofold. First reason is they wanted a trusted partner, somebody that could manage a large-scale deployment like this at a very relatively compressed timeframe that they could trust and that had the know-how, that could handle the architecture requirements and also provide the service and support.
We're like a one-stop shop for them because we brought all of those elements of the deal to bear. Secondly, the other piece, obviously, in an environment like this is you've got access to supply. We were able to secure all the components required in that deal in the time that the customer wanted. In these environments, you've got to be able to do it all.
The customer wants to have product delivered in time and also have the know-how and the support, knowing that you're going to be there to handle some of the complexities of potentially doing an install on this size and scale.
Yeah. One of the topics that we've been focusing on is just this whole enterprise AI adoption, right? Not just on the cloud, but on-prem. How are you thinking about the TAM that's available to HPE as a result, the TAM growth that this is seeing? How are you thinking about HPE's share within that expanding TAM?
Well, I would say that as a company, we're incredibly well-positioned for that expansive TAM that we believe is going to continue to grow. The reason for that, we've always been a company that participated in the hybrid space, and it is very much our DNA and legacy in terms of inference and on-prem. In fact, we did comment on the earnings call. Antonio Neri and myself made a deliberate decision to actually build our own AI factory internally on-prem, because we felt that given the rising token cost environment, we knew that we could avert significant amount of token cost for actually making this conscious, deliberate investment. This investment, we believe we're doing it on our own architecture called PCAI, which is HPE Private Cloud AI architecture.
We have seen enough use cases now to see that we could save up to 60% on token costs versus, say, the cloud. There's very compelling use case environments, not just based on the cases themselves, but also on the economics. We see this whole space really becoming very relevant for us and is an area that we feel like we're very well-positioned to compete in.
Okay. These AI deals, storage, right? It's a smaller portion of your cloud in AI, and you do have a HPE GreenLake offering there as well. Just how much storage is being attached now to these AI workloads? Based on your own experience, what you're experiencing in-house as well, but as you're looking at this cloud and AI, to what extent are you seeing storage attach to these workloads?
I would say that storage is definitely one of the parts of our business that continues to accelerate and should be a very strong beneficiary of this AI build-out. We have seen 10% revenue growth on a year-on-year basis, and actually, we saw even faster order growth. Orders grew over 20%, so that gives me confidence that we're starting to see what you mentioned in terms of storage becoming a more important part of AI build-outs. I'd say it's still early days.
Yeah.
As companies, you're really talking about large enterprises that are starting to move in this direction. Companies are starting to consider storage a part of these deals, but it's an opportunity, I think, well into 2027 and beyond. For us, storage growth has been something we've been very, very focused on over the past few quarters. We did actually build out a whole new platform that I think really provides relevancy for us today in the market. It's the HPE Alletra Storage MP X10000 platform, and we've seen now, I think, seven quarters of consecutive growth in that platform. We know we've got the right platform at the right time in the market today to really help serve customers.
Okay. When we come back to the cloud and AI, there's a little bit of mix element there, especially on the AI side of things, that tends to depress margins, larger deals.
Correct
GPU stuff. You guys have also had a lot of experience with your past acquisitions, Cray Inc., et cetera, with liquid cooling. We had one of your peers talk a lot about reliability and services attached that is growing the margin of these AI systems. How are you guys thinking about the margins for your AI business?
Well, we've been very intentional.
Right
I think, around where we wanted to play in the AI space, and we've said quite deliberately that first of all, we had a pricing framework that we wanted to use to help guide our decisions around these deals. We've stuck very closely to our pricing framework, which frankly, at the end of the day, has been really about building margin. Secondly, what we felt as a company, that we were much better positioned to play in both the enterprise and the sovereign space. The reason for that is exactly what you just said, is that given our heritage as a company, we had so much experience around liquid cooling technology and services, that this is an area where we have, frankly, better margin attached. We've actually seen that play out.
And the liquid cooling expertise, I might add, was one of the early beneficiaries of the Juniper deal, where I mentioned a moment ago that we were first to market with a liquid cool switch, which was Juniper QFX5250. We were able to leverage that liquid cooling heritage and apply it to a switch, which was something that none of the competitors were able to do. So yes, absolutely, enterprise and sovereign, they are about 60% of the book of business that we do today, and we do see that as a natural sweet spot for us as a company. What I would add is, given the discussion we just had about Helios, as we start to see Helios become more mature, we do think it is an opportunity, though, to revisit some elements of the market that we perhaps didn't play in.
Because now with the network tray in the mix, once again, we have a very strong margin profile to play with. So I think Helios will help us to open up some of that market that potentially was not as accessible to us in the past because of the margin profile and working capital.
Mm. Okay. Talking of working capital, I think that $5 billion in free cash flow is a pretty strong number. Yes. But inventory has also come up quite a bit. So just walk us through, as you are thinking about this high free cash flow conversion now, despite the higher inventory, what is driving that confidence that you can convert those orders very quickly into revenues, collect on those revenues, despite the higher inventory and working capital needs?
Yeah. So maybe I will comment on the free cash flow drivers, and then I will talk a little bit about what is going on in inventory. So on free cash flow for 2027, first of all, really, really excited about the fact we are able to give numbers of at least $5 billion is what I would say for 2027. Underscoring that is really two things. One, we have had restructuring for our synergy programs in our numbers for the last couple of years, and we will see that start to taper off as we get into 2027. So we have got less restructuring. Secondly, just the tremendous earnings growth. I think I mentioned in the guide that we are guiding EPS to 16%-20% on a year-on-year basis, and you are seeing that drop straight through to free cash flow conversion.
That's really what's underscoring the tremendous performance in cash flow, which Antonio and myself are very, very focused on. In terms of the inventory comments that you made, right now we're seeing elevated inventory levels, I think across the whole industry. Obviously, with higher commodity prices, you're going to see all the tides are sort of raising at the same time. That's what you're seeing in terms of passing through predominantly some of the impact of the numbers on inventory. I'd also comment that we've actually got some AI deals that will ship in Q4, so some of that is just moving through inventory. It's more a timing issue.
I would expect inventory levels will continue to remain more elevated than what we've seen prior to this whole commodity super cycle, and partly that's due to the valuation of the inventory, which has just rose up due to the prices of memory, et cetera.
Okay. The Oracle deal also had warrants associated with it. The details were in your queue. You do also have, on the offset side, you do have a lot of share buybacks that you're going to now accelerate given the free cash flow generation. Just on the warrant side, what sparked warrants? Why do warrants, and maybe you can give us a rationale. Should we be expecting more warrants as you get perhaps more deals coming your way?
Yeah, look, I'd say we're starting to see warrants become more common in these types of transactions, and I think that was really nothing more to read into it apart from that. Secondly, I'd say what we did do is we attached the warrants to actually sort of the stage gating in terms of the initiatives of the project. So they only sort of go into vesting based on the volumes associated with the infrastructure investment. So it's not all at once. It'll be stage gated over the multi years that we talked about. Then in terms of cash flow and our capital allocation framework, we actually pulled up our share repurchasing into Q4. So we commented in the earnings call that given the fact that our leverage is now actually at 1.8x, we're way ahead in terms of our timing.
We said we would get under 2x by 2027. We actually got there this quarter, so a year and a quarter ahead of timing. We actually announced that we will start to use the principles of our capital allocation strategy, which was to buy back at least 75%, return at least 75% of our cash flow back to shareholders by share repo and also dividends. We are going to start that up in Q4. What was really good is now we are able to really pull up the tenets of that capital allocation framework much earlier due to our leverage ratio.
Mm-hmm. Let me see if there is any questions from the audience here. There is a lot of changes that are happening on the technology side. Customers are dealing with reference architectures, changes in those reference architectures. You have a lot of chip providers as well, with multiple. When you look at these inventories, you look at your order book, you are buying inventory to support that order book, how do you prevent, or maybe there is some terms in these agreements, so you do not deal with maybe some obsolescence risk here with the inventory that you have purchased?
Well, I would say we have been incredibly judicious about assessing the inventory that we buy and ensuring that the reserves are appropriate. I think we have a very strong process around our excess and obsolescence risk management. At this point in time, I do not see any particular issues given the current environment with excess and obsolescence.
Okay. Then there is, I know you are just digesting, still working through the Juniper acquisition, but Marie, as you are sitting here, lots of free cash flow here. I know a lot of it is going to be returned to the shareholders, but as you think about your portfolio, you have the neocloud opportunity, pretty significant. I know you guys are strategic about where you want to invest. There are sovereign clouds, of course. How are you thinking about all these various opportunities that are out there, and to invest in, and relative to using the excess free cash flow to return to shareholders?
Well, I think we've been very diligent in our framework. I'm excited that, frankly, that we have the opportunity in Q4 to accelerate bringing up our framework to buy back at least, to return back to shareholders at least 75% of our free cash flow. What I would say is that we are still, like where you started the question, we're still in the early days of the Juniper acquisition. We have plenty to do, I might add. So I think we're very pleased with where we're at and the performance of the transaction so far to date. But plenty of opportunity to continue to accelerate the business, as you correctly said, both in the networking space and in the cloud and AI space.
Happy with the portfolio in terms of where it's at, and we'll be very focused on closing out this deal in every way we can and really bringing forward the power of the two companies that we've put together.
Great. The last few seconds here, Marie. What do you think is underappreciated about HPE's story?
Look, I think the 2027 story is incredibly strong. The free cash flow that we're posting is record levels for the company. Certainly, the numbers of at least $5 billion, I believe, are incredibly important. What you're seeing also is just the leverage in the model. As we continue to grow, we posted revenue of 13%-17% in terms of growth, but we posted EPS growth of 16%-20%. So you're seeing earnings power actually outperform revenue. So you're starting to see just the benefits of the work that we laid and the seeds that we laid with a lot of the synergies and cost programs. So leverage in the model, operating at scale, winning in key places like data center and inference, that really should set us up very nicely for 2027 and beyond. And posting cash flow numbers that are, I think, very noticeable.
Yep.
Thank you.
Thank you.
Thank you.
Thank you, everyone.