Good morning everyone, and welcome to HPE Networking Investor Day. Thank you for joining us both here in person and on the webcast. I am Shannon Cross, Chief Strategy Officer at HPE. As you all know, we posted record Q3 results earlier this month. in networking, for example, we reported both record revenue and orders. Today, we will take a closer look at the business and the strategy we have in place to capture new opportunities we see for the future. Over the next few hours, you will hear from Rami Rahim, Executive Vice President, President, and General Manager of HPE Networking, about how AI is reshaping the networking market and why networking is considered critical infrastructure in the AI era. We will also talk about how the combination of HPE and Juniper Networks strengthens our ability to compete and win in this increasingly important market.
We will discuss our integration progress and the financial benefits we are already seeing. We will then invite the leaders of our networking business to join me for a panel, and finally, Rami and I will host a Q&A session. Before we begin, I would like to introduce and welcome Dave Rubin, who recently joined HPE as our new Head of Investor Relations. Many of you already know Dave from his time at Flex, and we are very happy to have him on our team. Let me cover our safe harbor statement. This event may include forward-looking statements involving risks, uncertainties, estimates, and assumptions. If the risks and uncertainties ever materialize and the estimates or assumptions prove incorrect, our results may differ, perhaps materially, from those expressed or implied by such forward-looking statements. HPE assumes no obligation to update such statements.
Please find more information regarding our forward-looking statements on our website at investors.hpe.com. This event also includes certain non-GAAP financial information. Such non-GAAP financial measures may have limitations as analytical tools. Please note that these measures should not be considered in isolation or as a substitute for analyzing HPE financial measures as reported under GAAP. Certain financial information featured in the presentation today has been normalized to include Juniper Networks results as of the beginning of HPE's fiscal year 2024. With that, let's get started. Please welcome Rami.
Thanks, Shannon.
Yep.
Welcome everyone, and thank you all for investing your time with us today. My objective for today is to demonstrate how our new combined HPE Networking segment will accelerate shareholder value for years to come. We are going to talk about a few critical things today, the AI market opportunity and why networking today is more important than ever in the new AI era, how our new combined HPE Networking portfolio and innovation are perfectly suited to capture the large AI opportunity, the significant strides we have made with the integration of Juniper and HPE, the strong financial progress made against our commitments, and finally, I am going to share a new financial guide later in my remarks.
The core message I want you to take away is that HPE Networking segment is a key driver of our long-term strategy to create shareholder value through durable revenue growth, margin expansion, and strong cash generation. We are executing ahead of plan, with the integration delivering greater than expected synergies and expanding into new addressable markets. Our HPE Networking portfolio is not just larger, it is more complete, more integrated, and better positioned to compete at scale in large markets benefiting from strong secular growth drivers. And finally, we are seeing that progress reflected in our results and in our outlook. Let us just get started. As you know, the AI market is driving major technology transitions, and it is reshaping the technology stack. It has become a strategic core element for how organizations architect and operate their IT to enable scale and competitiveness.
That is why every customer segment is treating the network as core strategic infrastructure. As you can see on this slide, the expected market growth opportunities across networking are significant. And with the combination of Juniper and Aruba, we are positioned to win. We look at our opportunities across the four product categories you see here and our two customer segments, enterprise and service provider, which includes cloud service providers, or CSPs, such as hyperscalers and Neoclouds. Data center is our fastest growing market, largely driven by CSPs. And here, we are expanding our addressable market opportunity as AI drives increasing demand for both high-performance scale-out and scale-up solutions. In routing, we are seeing the opportunity broaden as AI moves beyond training and into large-scale inferencing environment. And that is creating demand across both service provider and enterprise networks.
This is also an area where we have a long history of innovation and deep incumbency, which is a significant competitive advantage for us. Campus and branch is currently our largest product category. The combination of Juniper and Aruba further strengthens our competitive positioning from both a technology and a go-to-market standpoint. And finally, we cannot talk about the evolution of AI infrastructure without addressing the increasing convergence between networking and security, where HPE has a unique approach through the combination of silicon, software, and agentic operations. The opportunity for HPE is clear. We have the right to win in every networking product category, and we are now even more confident because of the successful integration of Juniper into HPE. How is the integration going? In short, it has been a tremendous success. We are moving faster than expected and delivering greater than expected cost synergies.
Integrating two large businesses into a single networking powerhouse, while also delivering strong order growth, is hard to do. We are doing it and delivering quarter after quarter. The success is driven by the thoughtful integration we have done and the amazing execution by the combined team. Not only have we set a clear strategy, but we onboarded all Juniper employees, combined our sales teams, and never stopped innovating. This has given us tremendous confidence and excitement for what comes next, an acceleration of profitable growth. One of the strategic opportunities in bringing HPE and Juniper together was to combine decades of innovation and differentiated IP, while accelerating product development and time to market that will result in market share gains. We are already seeing the benefits.
For example, we rapidly advanced our self-driving network capabilities, cross-pollinating the best of HPE Aruba Networking Central and Juniper Mist, supported by a new set of campus and branch wireless access points, as well as access switches. We also grew our addressable market by expanding our innovation into the AI data center scale-up market. We introduced a new data center scale-up switch, leveraging HPE's decades of experience in rack scale architecture and liquid cooling technology. I will talk more about these products later, but the key takeaway is that we were able to accelerate our innovation through the integration process, leveraging unique IP and expertise. We have accomplished all of this in just over a year, and these are only a few examples. The second major element of the integration was bringing our sales organizations together. Here again, speed mattered.
We called this Sales Day 1, and it was completed globally in about six months after we closed. We made it a deliberate decision to move early, and it is paying off, with our teams bringing Juniper into Aruba accounts and Aruba into Juniper accounts. One catalog, one compensation plan, one set of account rules, all of the sellers carrying a full combined networking portfolio. In a minute, I will talk about the channel opportunity and what comes next in our integration process. First, let us turn to results, and particularly cost synergies. As you may recall, when we closed the transaction in July of 2025, we raised our original cost synergy target from $450 million to at least $600 million in annual run rate savings by fiscal 2028. Those savings come from several areas, which include things like SG&A, go-to-market harmonization, and the elimination of R&D duplicate costs.
We are running ahead of our cost synergy plan, while also spending less on integration through fiscal discipline. Given our progress, we are increasing our fiscal 2028 annual run rate cost synergy target to $800 million. Let us talk about what comes next. We have two major integration priorities remaining, bringing our partner ecosystems together and completing our commercial systems integration. The key milestone for the first one is called Partner Day 1. Partners drive most of our networking business, and this milestone will enable all 60,000 HPE partners to sell the full networking portfolio through one unified partner program. Before the acquisition, only around 10% of HPE Aruba Networking and Juniper partners overlapped. This creates a significant cross-selling opportunity as we bring the combined HPE Networking portfolio to a much broader set of sellers and customers. Partner Day 1 is planned for November 1st.
On that date, we will converge the Juniper and Aruba programs under one unified partner program, HPE Partner Ready Vantage. The next priority is a little less visible, but equally important. It's completing our lead-to-cash processes and systems. We're building a modern single quote-to-cash foundation that will make it easier for customers and partners to do business with us while allowing us to launch new products and operate more efficiently. The first phase launches in November with integrated quoting and ordering, and we expect to unify our supply chain processes by the end of 2027, with continued improvements coming throughout 2028. While there's still work ahead, we have made tremendous progress, giving us confidence in accelerating profitable growth in fiscal 2027 and beyond.
As you've seen, the combination is already creating strong shareholder value through accelerated innovation, new expanded market opportunities, and our scaled go-to-market reach and higher cost synergies. Now let's shift to our HPE Networking strategy. At HPE Discover back in June, we introduced our vision for the self-driving network. We discussed how we're bringing networking, compute, cloud management together to simplify increasingly complex IT infrastructure. Today, I want to focus on how we are winning in the market and achieving growth by leveraging the power of the combined HPE and Juniper networking portfolios. We've organized our opportunity around four focused strategic plays. The first go-to-market play is pretty straightforward. By bringing Juniper Mist and Aruba Central together, we now have a much larger combined campus and branch cloud-native and AI-driven portfolio.
We've taken the combined networking portfolio through HPE significantly broader go-to-market engine, creating larger growth opportunities through scale and productivity improvements. The second play is increasing services attach rates. Today, services represent about 1/3 of our HPE Networking business. Services deepen customer relationships, add higher margin recurring revenue, and improve the quality of our products, driving durable earnings. Juniper has a strong history of attaching services to products, and we see an opportunity to bring that business model and the culture to Aruba across a much larger installed base. So by fiscal 2028, we expect to increase services attach rates by 5 percentage points, supporting both recurring revenue growth and margin expansion. The third play is about bringing our data center networking portfolio into HPE's broader infrastructure customer base. This means networking is no longer a stand-alone conversation.
It's part of a much broader discussion that can include compute, storage, security, and cloud management. That creates opportunities to participate in larger infrastructure deals across all customer segments. Finally, the fourth play is about expanding into new market opportunities. One example is AI infrastructure, of course, where we're leveraging HPE's AI data center momentum and innovation to expand into the scale-up networking market. Now, I'm going to talk more about the AMD Helios opportunity in just a moment, but the broader point is that the combination is creating new avenues for growth, not just expanding existing ones. We're bringing capabilities together to create solutions and address markets that neither company could have effectively pursued on its own. Importantly, we're building a large customer pipeline. So now let's dig into our specific market strategies and opportunities, starting with data center, where we're seeing the fastest growth.
The pace of change in the data center is, quite frankly, extraordinary. AI has fundamentally reshaped how infrastructure is designed and deployed. The reason is simple. You can invest billions of dollars into GPUs, but if the network can't keep up with the traffic and the performance demands, those resources are not fully utilized. As a result, networking has become a much more strategic part of the AI infrastructure stack. We believe HPE Networking is exceptionally well-positioned because we have the products to address networking across all layers of the AI data center. That includes scale-out and scale-up. We expect our data center networking revenue to grow at low to high 50% CAGR from fiscal 2026 through 2029. Our strategy starts with innovation and time to market.
We have consistently been early with many of the technologies that matter most in AI infrastructure, from 800 Gb Ethernet to 1.6 Tb Ethernet, and most recently with the industry's first liquid-cooled Ethernet data center switch. That matters because it allows us to engage earlier in large AI deployments and establish a competitive position as customers build out next-generation data center and AI infrastructure. AMD Helios is a great example of what our integrated HPE strategy can deliver. We're bringing together Juniper's networking technology with HPE's compute liquid cooling, rack-scale engineering to deliver an integrated Ethernet-based scale-up solution. More importantly, it's opening an entirely new addressable market in networking, either by selling our AMD Helios networking trays as part of an HPE integrated rack solution, or independently to other solution providers.
We believe Helios represents more than a billion-dollar networking opportunity over the next two years, with networking tray orders having already exceeded $200 million. I am excited to share that just this morning, we made an announcement that HPE was awarded a $1.2 billion AMD Helios order from Vultr. It's HPE's first order for the new integrated AMD Helios system, which features our new purpose-built HPE Networking scale-up switch and software. This is a great example of the wins we can land working across the portfolio together with our partners. Let's move to routing. What's happening in routing today sort of reminds me of my early days at Juniper, when we were building ever-larger routers to keep pace with the explosive growth of the internet. Today, AI is creating another major wave of networking demand. We see that opportunity developing in two areas.
The first is the AI on-ramp, securely and efficiently connecting users' devices and branches to AI infrastructure. This plays directly to our strength of the MX platform and the Trio silicon, which were designed for high-scale, service-rich edge routing. When it comes to programmable networking silicon, Trio is truly unique in the industry in its capabilities. The second is data center interconnect, or DCI or scale-across. As AI clusters grow beyond individual data centers, customers need to connect infrastructure across buildings, campuses, and geographies with enormous bandwidth, with low latency, and with high power efficiency. That's where our PTX portfolio and our Express Silicon truly excel. The important point here is that this is not a new market we are trying to enter.
We're applying decades of routing innovation, custom silicon expertise, and deep incumbency in some of the world's largest cloud and service provider networks to a new wave of AI-driven demand. As a result, we expect our routing revenue to grow at low to high 20% CAGR from fiscal 2026 through 2029. A good example of our AI data center switching and routing strategy playing out is our recent win with Oracle. We are participating in Oracle's multi-year, gigawatt scale, AI infrastructure build-out, both in routing and switching platforms deployed across data centers globally. The significance goes well beyond a single customer. This win validates HPE's ability to compete in some of the world's most demanding AI environments and demonstrates the strength of our end-to-end networking portfolio.
So far you've heard how we're applying our strength in switching, routing, and custom silicon to some of the fastest-growing parts of the AI market. Let me now turn to our opportunity in the campus and branch. The campus and branch, as you all know, is our largest networking product category, representing approximately half of our total networking revenue. We expect our revenue to grow at a high single-digit percent CAGR through fiscal 2029. The Wi-Fi 7 refresh cycle is one important driver, but the opportunity extends well beyond wireless. As customers upgrade their wireless infrastructure, they often need to modernize other parts of the network as well, creating opportunities across switching and the broader campus architecture. We are entering this cycle from a position of strength with self-driving automation that truly sets us apart in the industry.
In just a bit, you're going to hear directly from one of our customers who has experienced the value of this technology firsthand. Importantly, the combination of HPE and Juniper further strengthens our position with a larger deployed base, a broader portfolio, and significantly greater sales and channel reach. Put simply, we are taking proven technology and putting scaled distribution behind it, and that creates opportunities to drive adoption across the installed base and reach new customers to gain share. Importantly, that leadership is independently recognized. HPE has been named a leader in Gartner's Magic Quadrant for enterprise wired and wireless LAN infrastructure for 20 consecutive years, including five straight years with the highest ranking for ability to execute and completeness of vision. The opportunity is clear. We're going to leverage the combined strengths of HPE and Juniper to capitalize on the Wi-Fi 7 refresh cycle.
Finally, another really important technology trend we're capitalizing on is the convergence of networking and security. Security vendors are increasingly adding networking capabilities to their platforms. Our strategy is to move aggressively in the other direction, bringing more security into the network, and that's playing both defense and offense. It helps us protect our networking position while expanding our addressable market and the share of customer spending. We have the assets to do just that, including a complete SASE portfolio, industry-leading SRX firewalls, network access control, and identity and policy management integrated throughout the network. While some of these capabilities are sold as a standalone security product, our primary strategy is to embed them throughout our networking portfolio, including in our campus and branch silicon, which enhances our differentiation.
As a result, we currently expect security revenue to grow at a high single-digit percent CAGR through fiscal 2029. I believe we have the industry's most complete and most differentiated networking portfolios, spanning from the campus and branch across the wide area into the data center, and with security embedded throughout. I am confident that the strength of this portfolio, along with our expanded go-to-market scale, will enable us to grow market share in the years to come. The progress we've made in our integration and the success we have achieved in building industry-leading self-driving networks would not be possible without great customers. Fortunately, we have one of those customers with me here today. I would like to welcome Sajeev Nair of ServiceNow up here to talk to me about it. Welcome. Thank you for joining us. Please, have a seat.
My pleasure. Yeah.
Okay. Sajeev, thanks for joining us. You have been a customer since 2018, I believe, starting with Mist, and then Juniper Networks, and now with HPE.
Yeah.
You've seen the vision of self-driving networking truly come to life. Maybe start by just taking us back. In 2017, earlier, what did the network look like day to day, and what was your team just dealing with?
2017, gosh, I think if I have to just simply put it in one word, it was chaotic. If I think about it now, that's how it comes across. The enterprise was not doing anything wrong. It was very typical stuff that you were going and sourcing deep tech solutions, solving a particular problem in a stack. At the back of your mind, you knew that you are creating another fragmentation in your telemetry that is already fragmented. You are signing up for another control plane that you have to manage, and then you're going to be basically trusting the humans to do the magical correlation that needs to happen to solve the problems faster.
The hidden element into this whole thing was the cost. That was so high that we did not realize that there was a better way to solve these problems. We had this thinking in the back of mind that we need to solve some of these problems, but how do we go about it?
In 2018, another tiny company walks in, tell us that they are doing something radically different in the wireless space. That was Sudheer and Bob and Sujai in front of us, and they were like, "We're going to do something different." We said, "Okay, tell us more about it." They said, "We're going to focus on two things. Number one, we're going to solve something that has been completely overlooked in the networking industry. That is end-user experience." We said, "Wow, this is exactly the magic words that we wanted to hear." The second thing they mentioned was, "We're going to overlay AI on top of the entire wireless infrastructure." We said, "Okay, that sounds ahead of times thinking, but we are on board with this thought process. Let's begin small." That was the beginning of our relationship in 2018.
That's awesome. We're talking about almost 10 years ago, well before AI was a fashionable term to be used by pretty much everybody in the industry. But we see what you're talking about so often. The consistent troubleshooting, the silos. What were some of the first results that your team saw when you started deploying the technology?
Absolutely. Some of these numbers are going to just blow your mind because it did exactly the same thing for us. We're like, okay, we're on this journey with this amazing vendor/partner that was so agile, they were ready to listen in, they were ready to implement and move as fast as we wanted.
As we deployed this stuff in a small way in 2018, 2019 was when the Juniper acquisition, Juniper acquired Mist, and we said, "Wow, this story is now going to get amazingly better because the goodness of what we saw, the AI and the end-user experience that Mist was delivering, was now going to be spread on top of the entire Juniper stack." When that was conveyed to us, we said, "Okay, this is actually opening up a completely different radical thinking in our mind of how we want to transform ServiceNow network." COVID happened, and there was the amazing time for me and my team to go and do something strategically different. We said, "Okay, what are we going to do?
We are basically going to rip and replace every single vendor stack that we had in our networking environment, and we're going to basically shift all of that into Juniper switching, Juniper routing. It worked out phenomenally well because everybody was coming back from home, using Wi-Fi networks, and they said, "Okay, this is not any different. My home and my office looks exactly the same." That was the time when we scaled it up, and we took the whole full-stack approach. Think about it. We came from a world of fragmented silos and multitude of control planes that we were managing, to now this space where we had Wi-Fi, wired, and WAN all available to us in a single pane overlaid with Marvis AI, and the story was just getting brilliant day by day. 90% reduction in our incident volume. Can you believe? 90% reduction.
We had patchings that used to run for hours over the weekend. We fully automated it. We had incidents that took hours to troubleshoot and figure out where the problem was taking minutes now. The end-to-end visibility that we gained and the AI capabilities that Marvis delivered just was game-changing for us.
I love that story. You said you were talking about how excited you were when Mist was being acquired by Juniper. Now we're taking Marvis and applying across the entire portfolio, and we've already made amazing progress in doing so. The opportunity is immense. That's obviously the self-driving network in action that you've just described, Sajeev, with almost instant results. What changed for your team, sort of from an operational standpoint?
Yeah. The time when we met the Mist Juniper team, the strength of the company today, we were just 1/3 the size. I can tell you that it's the same team that is managing the network today because of the design partnership, the trust, the bringing the two platforms, the Marvis and ServiceNow that we have done here together. It has just transformed the way the team does the work. The team that was non-believer in some of these automation and the AI capabilities is fully leaned in on that today and focused on doing much elevated work. As I was talking about patching, I just want to add some numbers to it. We used to spend almost 2,000- 3,000 hours a year. I'm just pulling out a very small number, I think. Now we spend less than 60 hours a year patching network.
When engineers are sleeping, the network is patching itself. There is an example, one of the examples of self-driving network that we are leaning on, and the enterprise is trusting.
That's awesome. Thank you so much for sharing that with us. You've been on this journey with us now for a while, like we said, almost 10 years. How has the partnership and the technology evolved over that time, and where do you see the momentum right now in that partnership?
I think I would say that we are just getting started because every time we meet, there is something exciting, and there is something always new going on. As, Rami, you touched upon, in the age of AI, when the data is sitting everywhere and the AI is distributed, whether it is in your iPhones, whether it is in your laptops, it is no more the enterprise edge. It is actually going to the consumer edge. The role of networking is just more important than ever before.
Yeah.
The nanosecond, the microsecond, sub-second latencies that network needs to support for the best-in-class inferencing that needs to happen.
I think network has a huge role, and that is exactly how we see it in ServiceNow, that we want to continue to build with you. We love the design partnership. We have brought the two platforms together. We present these stories, and we show these real demos of these two companies and the two platforms coming together, and it has blown customers' mind, combined customers' mind of how we are able to achieve greater things. Because network is, I want to say that when people ask me, "What do you do?" I say, "I run a utility grade service." What does that mean? It means that when you flip the switch, the light has to come on. When I turn the tap, the water has to flow. That is exactly like networking.
Nobody needs to walk into the office thinking about whether my Wi-Fi is going to work or not. It is supposed to work. It is going to work. If it is not working, it is supposed to inform you proactively that, "I have a problem. I am working on fixing myself." Please show up on the other side of the campus and you will have a fantastic Zoom call that you can take from there.
I love it. The network has become, as I said, critical infrastructure for the AI era. The big question we get is around trust, Sajeev. Handing the network operations over to an AI agent is never an easy thing to do from a human trust standpoint. How did you overcome that obstacle and start to get comfortable with taking your hands off the proverbial steering wheel, if you will?
Yeah, absolutely. As I said, my team was non-believers, and there was this hesitation that, we found ourselves in crosshairs with all sorts of issues, because anything that goes wrong in the company, the first blame was on network. If a Zoom call is choppy, it is network.
Of course.
If the application is slow, it is network. They said, "Okay, is this thing going to make it absolutely worse and it is going to go out of control?" So we had the hesitation, but being an AI company that we are today and being an AI-first approach that we take, we said, "You know what? We are going to lead with this, and we are going to trust on this AI that we have in our hands." But it has to be essentially a graduated autonomy that we need to lean on. We need to slowly peel the onion, and we need to keep making the progression. It was imperative that we are going to keep marching forward and not look back.
Today the platform, which is AI-driven platform, from ServiceNow perspective, from the Marvis perspective, I think we are definitely looking at something that is going to change the way we operate. Personally, we have a bold goal within ServiceNow, and that is 100% autonomous network by 2028. The only way we know that is going to happen is that if we keep our mind and our hearts open, and we keep working and designing with Juniper HPE team, I think we can make that happen. I am super excited. Rami, all your updates that you just shared, it was absolutely net new to me. It has just blown my mind, and it only tells me that we are partnering with the right company, and I cannot be more excited about what we have coming up in the future.
Oh, wow. I could not thank you enough for the really inspirational words. We love ServiceNow. We love our partnership. You have made us a better technology provider in the time and through the advice and the engagement that we have had over the years, and I cannot wait to take it to new heights together. Thank you so much for joining us. Thank you. Appreciate it. Thank you. Okay. Love that. I have talked about the opportunity, the integration progress, and our innovation.
Let us now discuss how all of this is resulting in financial strength. A year ago, investors were asking whether we could integrate Juniper without disrupting the business. Today, we are demonstrating that the combination is already creating significant value. But this is about looking forward. The market opportunity is expanding, demand is strong, our execution is ahead of plan, and visibility into future growth has significantly improved.
We continue to see a strong pipeline across the entire portfolio, from campus and branch, driven by enterprise modernization, to data center networking and routing, driven by the massive AI investments. Based on continued strength and demand, we now expect our fiscal 2026 Networks for AI cumulative orders to exceed $3 billion. This is up from our prior estimate of $2.5 billion to $3 billion communicated by Antonio and Marie at Q3 earnings. As we continue to look forward, our focus is on accelerating revenue growth. The demand is certainly there, and this is reflected in our orders, which in Q3 grew 3.5x faster than revenue. We have been working through supply chain availability to meet this growing demand, and in the last quarter alone, we doubled our networking supply purchase commitments, which we are confident will help ease constraints as we move into fiscal 2027.
Based on strong portfolio demand, the incremental Helios opportunity, and improved order conversion, we now expect fiscal 2027 HPE Networking revenue growth in the range of high teens to low 20%. This is up from the prior FY 2027 guidance of 14%-17% communicated at Q3 earnings. We do expect a more back-end-loaded year than normal, given the timing of Helios shipments and the anticipated contribution from the Oracle agreement. Revenue growth is, of course, only part of the value creation story. We expect our growth, increased integration cost synergies, and operating leverage to drive margin expansion. As mentioned on our Q3 earnings call, we expect our fiscal 2027 HPE Networking operating margin to expand to mid to high 20%. This is up from our FY 2026 expectation for low 20% operating margin.
We are focused on executing through the current market environment, but we remain equally focused on generating durable, profitable growth, which means looking beyond FY 2027. Looking ahead, we see continued broad networking demand driven by the AI secular trends I described earlier today. With that, we are projecting a high teens revenue CAGR through fiscal 2029, with operating margins in the mid to high 20% range. We expect to gain market share in data center, in routing, and in campus and branch relative to the multi-year CAGRs we have provided earlier. I have covered the significant and growing networking market opportunity. I have outlined why our strategy, portfolio, and innovation gives us the clear right to win, and I have shared how we are translating these advantages into growth and value creation. We are going to transition to a panel now.
Let us welcome Shannon back to the stage to moderate that discussion. Shannon, come on up.
Thank you, Rami. You have heard Rami discuss the networking opportunity, our integration progress, and the financial framework that supports our outlook. What I would like to do next is make it even more tangible. The innovation happening across networking today spans everything from AI data center fabrics and routing infrastructure to security and autonomous operations. Please join me in welcoming the leaders responsible for those areas.
Thank you, Shannon.
Yep. Good to see you. Hello.
Hey.
Hello.
Morning, Shannon.
Got this. Thank you all for joining us. One of the themes you have heard throughout the morning is that AI is changing what customers expect from their networks and expanding the role networking plays across the broader infrastructure stack. You are each leading a different part of the business affected by these trends. Can you please briefly introduce yourself, explain the business you lead, and where you have seen the greatest benefit from bringing HPE and Juniper together? We will start with Praveen.
I am Praveen Jain, SVP/ GM for the Data Center Networking business. I have been part of five startups in my 30 years career, and the startup rigor and the HPE scale is bringing such big opportunity in front of us that I am super excited. One such example is the Helios Tray or the networking tray, which is on the right side of the room. In the morning, people made comments, it looks like a piece of art, such a complicated technology. Honestly, some of this was not possible without HPE and Juniper coming together. Please find me during the break time. I would explain to you how 1,700 wires are into it, how the liquid cooling technology is playing into it. It is my heart, which has been put into this product. Thank you.
AE?
My name is AE Natarajan. I am SVP/ GM of the Routing Infrastructure Solutions business here at HPE. I am most excited about this AI opportunity over here. Praveen talked about the right. You look at the left, the most complex, most compact routers excite me and the opportunity that it actually gives us, in terms of what we have there. Last but not the least, getting HPE and Juniper together gives us the ability to scale up and address this market with compute, storage, and networking together, giving us a total solution across the portfolio and making us one of the biggest companies in the world.
David?
Hi, I'm David Hughes. I lead our security business. I joined HPE in 2020 when they acquired Silver Peak. I was the founder and CEO of Silver Peak. In terms of what's really exciting about Juniper and HPE coming together, I think from a security perspective, first of all, Juniper had a really strong portfolio with SRX, with advanced threat protection, with Threat Labs. We're bringing that together, and what is really exciting is being able to build an autonomous, full stack, end-to-end self-driving secure system. Embedding that security technology into everything that we do, that's as important, if not more important, than just the portfolio that I manage.
Last but not least, Sujai.
My name is Sujai Hajela. I'm the EVP and General Manager for the Campus and Branch business. I came to HPE as a part of an acquisition of Juniper, and I actually came to Juniper as a part of an acquisition of a company I'd co-founded and was CEO of, which was Mist. Excitement, it's very simple. It's the self-driving network. What is even more exciting, Shannon, is the coverage and the scale, as Rami had mentioned, that HPE enables us, which allows us to take self-driving networks everywhere.
Great. Praveen and AE, I'm going to start closest to me here. Before we get started, can you walk us through a couple of terms we've heard a lot about lately in networking? Praveen, can you please briefly describe scale up and scale out?
Okay, good. When you connect GPUs inside a rack, like my networking tray goes inside the rack, when you connect these GPUs inside the rack together, it is called scale-up networking. While if you take multiple of these racks or even standalone servers and you want to connect them together, that is called a scale-out networking.
AE, can you talk about scale across?
Absolutely. Scaling now has the third dimension. It is not just within a rack and within a data center. Now, GPUs are required to be distributed across data centers. When you need to connect them across data centers, that is what we call as scale across. In other terms, data center interconnect, any of those terms that you would use interchangeably for scale across.
Great. That is what we are calling networks for AI. I am going to stay with AE and Praveen here. What differentiates HPE Networking? Why are customers choosing us, and how does the Oracle opportunity demonstrate that? We will start with AE.
Yeah. So very interestingly, I talked about AI transforming the needs of what the network needs to do with AI. Which means it is not just scale, it is not just bandwidth, it is not just throughput, it is latency, any of those metrics. But it also means how well you actually have a portfolio with the right tools, the right routers, switches, capabilities to actually build this network out. And it starts with three fundamental principles that we use to deliver anything and everything we build, starting from our silicon to our systems to our software. The first part of it is sustainability, which essentially means we drive the most power-efficient network devices that you can get across the portfolio, whether it be with our own silicon or with merchant silicon.
We drive that, and we also make sure that these network devices have or use the least amount of space, which means they are the most compact devices that you can get in the market. And these two are very important because AI is hungry. It eats up all the power and space, so you need network equipment that really needs to fit in this environment. The ability for us to do that is important. The second part of it, which is a slam dunk, which is performance. The ability for AI to actually grow the traffic, require more bandwidth, do all of that stuff, which means we have to deliver 100 Gb, 200 Gb, 400 Gb, 800 Gb, 1.6 Tb and beyond, and be the first to actually do that.
Our strategy to build it with our own silicon and to also deliver this makes it completely possible to build a complete portfolio with the performance that we have. Last but not the least is our ability to actually take AI and put it into our devices. You heard Sajeev talk about automation and self-driving. When you build these complex networks, it needs to work by itself as much as you can. And embedding that makes us bring a huge value to our customers in terms of sustainability, performance, and automation.
Praveen?
Yeah. So I will start with the breadth of our portfolio. Like we talked about, we have products for scale out, we have products for scale across, even on-ramp to the cloud through our MX platform, how users and application connect to the cloud. So we have the full breadth of the product which customers need. But also, I want to focus on relentless execution. And this comes in many forms. As I said, it is about a startup mentality. We are a startup within this big company. If you look at it, first, we delivered a Tomahawk 5-based switch ahead of every OEM. We repeated that with Tomahawk 6 base switch, 100% liquid cooled, first vendor to deliver. And to deliver that, it was not just take an ASIC and put it on the board and you deliver.
There were so many components around it, whether it is cold plates, whether it is liquid cooling technology, whether it was anything else. It was such a complicated piece, and there is a reason why others were not able to deliver, Shannon. We were able to deliver. We leveraged the HPE expertise. We went around and talked to every single component vendors and said, "We need to make it happen." We made it happen.
Now when customer needs you, let us say there is a problem. Problems do happen. Customer needs you. We are there at any point, any time of the day, because for me, it is the customer experience, which Sajeev calls it as customer experience. That is what matters. I believe when I am in their shoes and my network is not working, I will be yelling. Honestly, that is what I want to do. That is the reason I am there.
That was point number two. Also, if you look at it, again, going back to my startup mentality, if you are not innovating, let us say I am executing, but I am not innovating. This AI is the fastest changing environment. If I am not innovating, I am not doing my job. If you look at the customer like Oracle, we are innovating, co-innovating with them in getting the deeper network visibility. Let us say something fails. Network tells you what exactly happened, where exactly you do not go need to look and fix. That is my core innovation track. Last but not the least, company like HPE, the HPE Financial Services. I had no access to that as part of Juniper. Amazing results with combination of all these core factors.
Shannon, I just wanted to say good morning. That is relentless execution.
Yes, we are very happy to have them all with us.
Yeah.
I am curious, AE, I do think this is one of the underappreciated parts of what HPE Networking has, and it is the combination of what Aruba had in terms of silicon development and then clearly what Juniper had invested in over many years. From a customer perspective, what does it mean that we have our own silicon?
It is a lot. Rami touched upon it. It says, in the AI era, you are basically taking customers and bringing them into the AI world. You are also taking GPUs, which cannot operate by themselves without a network, whether it is scale up, scale out, or scale across, and you need to connect them together. The best way to do that is to have the right tools, and our silicon gives us the capabilities to have these right tools and the right devices for it. The best way to illustrate this also is by an example. We talk about building networking gear where we increase our throughput, we increase our performance. I was working with one of the largest hyperscalers. They spent a lot more money with GPUs, and they put these GPUs in front of them and connected them together.
They were finding with various different network devices, these GPUs were waiting for data, waiting for the network. What does this mean? This means you need to stop these GPUs from waiting for data and give them the data at the right time and the right way that we can manage. With our own silicon, we have the benefit of programmability. We work very closely with them to program it in such a way that when they use our networking devices, the traffic management, whether it is east-west traffic into GPUs or the north-south traffic across data center interconnects and anywhere else that you would take, becomes the most efficient. It is easily measurable by the GPU duty cycles that you get. That is the power of our own silicon delivered in our networking products.
That is great. For both Praveen and AE, I am curious, what are you seeing in the pipeline today, and how is AI changing demand across data center networking and routing? Are these orders AI-driven? Is the interest AI-driven, or is it more a traditional data center refresh? We will start with Praveen.
Yeah. We are seeing pipeline in both traditional data centers as well as in AI data centers. Let me start with traditional data centers. First of all, we have a highly differentiated management platform for managing your networks. It used to be called Apstra, now it is called DC Director. But think about this way, where it is not just managing discrete elements, it is trying to create a graph of who is connected to what. It means if anything fails or anything potentially is impacted by a change in the network, it will tell you because it knows that graph. On top of that, the technology which Sujai brought to the table with AIOps, by the way, tens of years ago, even before this current wave of AI showed up, I said, "Leverage that technology for us." We leveraged that technology, brought it to data center.
Let me give you an example. Let us say optics fail all the time in the data center. Let us say that, Shannon, you have two options. One option is an optics is failing or failed, and you need to rush some engineers because application is impacted. Option number one, which is our competitors are doing. Option number two, using my AIOps or this AIOps technology, I will tell you that two weeks from now, your optics is degraded. Two weeks from now, it is to a level where it will start impacting your performance. Which option would you choose?
I would hope I would choose number two.
Then you should choose HPE products. All right, that is about traditional data centers. Similarly, in AI data centers across the board, it's about execution and staying ahead of the market. Helios, why I'm so excited, this is our open Ethernet ecosystem where we are able to create a scale-up switch ahead of everybody else. Somebody might say, I can create one, this, and that. In this switch, we have our own AIOps. If you have 1,700 wires going into the switch, do you think something could fail potentially or degrade? Even if you did the best technology in the market or something might need attention, I'm bringing that AIOps into the same tray. That's my differentiation on top of the complicated piece I generated.
Pipelines from traditional data centers to the new areas we are investing in, like in scale-up, we are just seeing growth in all the markets.
That's great, and everyone definitely should go and see the switch you have back there, or the trays, because not only is he very excited about it's a really cool piece of technology. AE?
I'm really excited about two different things that AI is bringing to us. One is GPU clusters to cluster connectivity, which essentially what we call as data center interconnect when you go across data centers. Out there, we talked about our PTX12000, which is the most compact router. Think about it. This gives you in 12 slots what a competition would give you in 16 slots or even 18 slots, which doesn't even exist, 30% more radix and power and capabilities and throughput that you would need. With all of the value that I talked about, with the traffic load balancing, with all of that stuff, that is really exciting. Interconnecting AI clusters across the globe, whether it is hyperscalers, Neoclouds, all of those things is exciting, and that's a huge, big opportunity.
The second biggest opportunity right now is when AI is connecting customers into the AI clusters for AI consumption. When you do this, no better than our Trio-based MX Series portfolio, which gives you the security of it, which you use anyway, and it gives you multi-tenancy, it has in-line security built in, and capabilities to program it effectively to make that the de facto on-ramp. It is used by every hyperscaler in the world to get their customers into the AI clusters.
How are things changing? You cannot turn on a TV today or open a newspaper. No, we do not open newspapers anymore, but look at your phone without seeing something about agentic AI. How are things changing from a traffic perspective with agentic AI? What are you seeing in terms of customer buying and customer behavior and buying patterns? How will this influence the next generation of silicon?
Absolutely. This is interesting and important. Everybody looks at AI and says, "Hey, AI is making more demands into the network." Let us take a step back and look at three important things. In your house, you always had an upload speed of X and a download speed of 10x. Now, with AI, your uploads and downloads are going to be synchronous, which means you need the same amount of traffic because you are sending rich content, images, content upwards for AI as well as for downwards, which means your network has to transform and address that. The second part of it is AI does not allow you to cache. You could take a movie, you could cache it, and you could stream it. It is a lot easier and simpler to handle the networking challenge that way. But you cannot cache because within 10 milliseconds it gets obsolete.
Last but not the least, we have a new plethora of users that Sujai and I were talking about, the digital user. Right? Many of you traveled, you might have jet lag, you might fall asleep. You didn't have your coffee, but digital users don't fall asleep. They are always on, which means they drive the network 7/ 24 every second, every millisecond of the way, which is important. This transforms the network, and we really need to build the network to address this.
How do we think about AI inferencing? Because so much is changing within the network, within the world over a very short period of time. I do think ultimately we're going to look back. Juniper has been such a phenomenal acquisition for us because we bought it right at the time that this was all inflecting. How do you think about AI inferencing and what it means for your business, AE? Because we're all going to be inferencing closer to the edge. Connectivity is becoming even that much more important. How does that play into your plans?
Absolutely. Inferencing is catching on. It is actually more mainstream now, which means you need to consume AI. You've trained these models, you get these models out to the edge, and you want to actually leverage them to increase your productivity with agentic AI and everything else coming in. As you drive it closer to the customer or the digital user who's using AI, you need the ability to have multi-tenancy, which means when you get that traffic, you need to be able to take multiple of these traffics and bring them back in. You also need to have built-in security so one traffic doesn't leak into the other, which is also important. I'm going to touch upon something very unique with our Trio. Rami said this, the most programmable networking chip, s ometimes he says it's the CPU of networking, where you can program it to anything.
I was actually dealing with a customer, and they wanted to actually, and this is true, where they want to actually have packets go up to LEOs, low orbit satellites. When they switch from one satellite to another, guess what? You need to be able to balance this really well. Our Trio is programmable. You can actually write code into the Trio with the data plane in what we call as a capsule, and make this the most efficient way of handling traffic that goes through low latency but high bandwidth links like satellite links.
Praveen, we will come back to you on this one. HPE has such a large enterprise customer base. Rami talked about the opportunities to cross-sell. I shouldn't say we because we are now part of one, but HPE brings a wider geographic reach and very deep enterprise customer relationships. Can you talk a bit about how you are seeing the opportunity to cross-sell with your products across the entire HPE platform?
Yeah. Actually, I want to start with this. It is a complete surprise to me how fast we started embracing each other, the Juniper part and HPE part. Just give you an example, GreenLake and OpsRamp and Morpheus. All our products, Juniper products, are already integrated. That is a cross-sell opportunity number one in front of me. Anywhere you sell OpsRamp or GreenLake or Morpheus, you are there. Then look at the deals like Oak Ridge National Lab, which was a full stack opportunity, including networking, compute, storage, wouldn't have happened without HPE being present. In other words, that is my cross-sell or the full stack opportunity. Then I own now, as part of this acquisition, the data center part of Aruba business, and those customers, as they need the high-end switching gear, I am cross-selling the higher-end data center switches into that.
Before that, obviously, before the acquisition, we were cross-selling into Mist environment. Security plays a tremendous important role. As Rami mentioned, it is built-in security. When I am selling a solution, I am cross-selling with security. The opportunity is tremendous. We need to just keep going with fire from all angles.
Great. I am now going to move down a bit in the panel. Sujai, before we jump into self-driving networks, can you just give the audience an idea of what is included in our campus and branch portfolio at HPE?
HPE's campus and branch includes our Wi-Fi and our campus wired Ethernet switching portfolio. Key is to note that it's got a strong tie-in with security, which David's going to be covering in more depth soon.
Great. David, why don't you give us an idea of security at HPE? We are a bit differentiated from what some would say are the pure play security providers.
Yeah. In terms of what we measure in our security business, we include SD-WAN, SASE, SSE, next-gen firewall, and network access control. What I really want to emphasize is my team's job is not just delivering financial outcomes relative to that part of the portfolio, but to make sure that we have an architecture that extends security edge to edge from the Wi-Fi access point all the way through into the data center, and making security a core part of our self-driving vision.
Great. Now I'm going to talk a bit about the self-driving network. I hope everybody saw the commercials that were up there as we were eating breakfast. Beyond that, if anybody watches football, and I'm a huge football fan, especially college football, our marketing team has done a phenomenal job working with the Mercedes team and our F1 sponsorship to come up with some great networking commercials. Please watch for those. For now, with the audience, what does self-driving network mean for our customers, and what differentiates HPE's approach?
Self-driving starts with a very simple philosophy. Up is not the same as good, which means, Shannon, a network being up does not mean that you are having a great experience on Teams or Zoom or whatever you are using. That is the philosophy which we are manifesting with the vision of a self-driving network. It is unique in its ability to deliver on that philosophy. Number one, we are the only ones in the industry that measure every user, yes, every user, every minute across the global universe, which is connected to the HPE cloud, and try to understand end user experience. Number two, Marvis, our loving AI engine, actually works on troubleshooting or isolating a problem when that happens. Daryl, who runs our services and support, who is in the audience here, his organization, Customer Success, actually uses Marvis, this AI engine, to also help with customer support.
Again, the only ones in the networking industry to do that. Third, guess what? I can identify, Shannon, you are having a problem in our Teams call. I know how to fix it because the support team has digitized a solution, and all I need to do now is make it happen autonomously. Welcome to the agentic aspect of self-driving networks. The differentiation leads to clear benefits. One of the fastest deployment times. A customer that rolled the self-driving network across thousands of locations were able to drive their deployment times from years to months. Actually, one customer in manufacturing, Jennifer, you remember this, one customer in manufacturing went and changed out the network during lunch hours. Welcome to self-driving networks. Number two, Sajeev spoke about this, ridiculous reduction in user-generated trouble tickets. You will hear 90% most of the time. Last but not the least, driving real business outcomes.
The fastest checkout at a retail store, number of transactions, number of packages shipped, amazing patient experience in a healthcare organization. Welcome to the self-driving networks.
Great. One of the things we hear from investors fairly often is what is going to happen with Aruba Central and Mist, and how does this all come together? Can you talk about how you are going to make one plus one equal three?
Or maybe five. But self-driving vision is common to HPE Aruba Networking Central and Juniper Mist. Every customer, regardless of which platform they are on, benefit from this vision. We have actually realized products within a year, a dual-platform access points. Praveen, you're aware of this cross-pollination of AI models coming from Mist to Aruba. All done within a year of an acquisition. You can check with other vendors in the industry. It's been a decade, and they are still at it. The most important part, the self-driving vision is assuring our customers on the longevity of the portfolio. Frankly, our financial results back that up. Record orders for Campus and Branch, and Mist and Aruba both are doing exceptionally well.
Great. Self-driving is obviously truly unique to HPE, and it's giving us key business benefits. But what are you hearing from customers about trust in the self-driving network? Because clearly, they've got to trust it if they're going to hand over all the keys to the kingdom to Marvis and Mist.
Customers actually trust the self-driving network because Marvis, the AI engine, actually works. That's key. Just to give you a simple stat, in the last 90 days, we ran a check on our clouds, Shannon. Marvis executed thousands of trusted self-driving actions where the network IT or the administrator did not have fingers on the keyboard. That is critical. Where does this trust come from? It comes from a unique trusted AI harness, which has these memory of episodes, which Daryl's team from customer support has inserted into the harness so we know how to solve a problem. Define scope, clear guardrails, and we always provide the customer evidence and the recommendation, and then all we do is run the network on that trusted AI harness. Actually, it was interesting, Shannon.
We recently had our self-driving summit with over 40 large enterprise customers and prospects across verticals, and one pattern came out clear. Customers are looking at this network transformation not just to replace hardware, but to fundamentally bring this ability to drive the network on its own. You would ask, what is this transformation? We heard about digital transformation a few years back. Actually, this is the transformation which is of a new kind, which is what AE referred to, the digital workforce, the agents. The shift is driven now by a new kind of user. It's not about user, it's not about IoT. It's about the agents that never sleep. Self-driving is the way to keep pace using the same trusted models which we built for humans and IoT to now take care of the digital workforce.
Great. I think one part of trust is security. Obviously, it is very important. How should investors think about our security strategy, David? What makes our approach different?
Well, first of all, you heard Rami say the network has never been more critical to business outcomes, and nowhere is that more true than with the security related to the network. Everybody understands threats are escalating, particularly driven by AI, and defense is critical. You need to use, as a cybersecurity team, every tool that you have in the toolbox. One of the most important tools is the network. Using the network as a sensor to detect problems and using the network as an enforcement point to stop problems spreading. For example, you take a healthcare organization as a customer example. In a healthcare organization, there is a lot of east-west traffic with medical devices talking to sensors, a lot of traffic going backwards and forwards, many devices that operate with old software. It is easy for one of those devices to be compromised.
What you want to be able to do is detect that compromise rapidly, and then you want to be able to isolate that device immediately. What is really different about HPE is unlike a cloud-driven security company, which is really optimized for traffic going north-south to provide a good experience for users using applications, we have the ability to do things in the cloud, but we can bring everything on-prem, not just to the firewall, the next-gen firewall, where traffic exits the organization, but to extend that security all the way down to the access point and the switch port where those devices connect. So we can detect these problems immediately, and we can act immediately. Just think about it. The network is a sensor. Every single threat coming in, every piece of data that is being exfiltrated out, is going across that network. That lateral movement is going east-west.
You need to be in the path of all of it. We are with the network, and what is really different about HPE is we are not just focused on the cloud or the extreme firewall, we are building that capability into the network.
Great. AI is changing. We have talked about AI this entire morning so far, as we should be. AI is changing both the nature of security threats and the tools available to defend against them. How does AI fit into our security strategy?
Yeah. I think everyone understands AI is a double-edged sword. On the one hand, we can use AI to find vulnerabilities early, get them remediated, deliver better software. On the other side, adversaries are able to use AI to find vulnerabilities to be able to move at machine speed to scale their operations by spawning agents. What is absolutely needed is autonomous protection. Effectively, a network that senses and acts dynamically. In terms of AI, I put it into two categories, AI for security and security for AI. When we think about AI for security, we are using, for example, AI to detect anomalous behaviors. We are using agentic technology and agentic mesh to tie together AIOps for the security portfolio with Mist and Marvis, so that we have full stack self-driving that delivers fantastic user experiences to helping the networking team.
At the same time, it is providing a really useful tool to the cybersecurity organization with autonomous protection. Switching to security for AI, we are extending zero trust from human identities to non-human identities. So securing those IoT devices, securing distributed workloads, maybe running inference, and of course, securing and sandboxing agentic AI or what you call digital users. We need to be able to provide zero trust that covers both human and non-human identities. A second example of what we are doing with security for AI is defending traditional and AI data centers. The SRX Series next-gen firewall is deployed in nine out of 10 of the top cloud providers. We are also implementing features in the SRX Series to enforce AI governance and provide guardrails. AI is driving a whole lot of what we are doing in security.
Shannon, what David is referring to, and to the folks here, this became really real for us recently, Shannon. We were talking about this customer. They had an unfortunate incident, and you would be amazed. They had no trust on what malicious thing was left in the network somewhere. Guess what they did? They ripped out each and every element of the network. That was the only choice. Then the CIO and CISO asked us, "We are not going to just build the same incumbent network again." When they heard what David and I are doing together on network as a security sensor, that was a key reason for them to say, "This is the secure self-driving network we need to go with."
Well, great. Thank you so much. We are super excited with what Juniper's team has brought, Rami's team has brought to the table for us, both in terms of the products, the services, the capabilities, the ability to leverage what you have across the entire HPE portfolio. I think it has just been a phenomenal combination. Our opportunity is very broad, whether we are talking about AI infrastructure, routing, security, campus and branch or autonomous operations, and we are seeing the same underlying trend. Networking is becoming increasingly strategic to how our customers build and operate their businesses. Thank you to our panelists for sharing their perspectives, and now we are going to take a 20-minute break, and we will reconvene after that for Q&A.
Thank you, Shannon.
Thank you.
Thank you.
[Break]
Welcome back, everyone. This morning, we covered the market opportunity, integration progress, technology differentiation, and financial performance. We would like to open the floor now for your questions. We have Rami here with me on stage, and if you are in the room, please wait for a microphone, state your name and firm before asking your question. To give everyone a chance to participate, please limit yourself to one question, and we will come back around as time permits. Before we begin, I would like to remind everyone that this is a networking-focused event. The forward guidance we have provided relates specifically to networking, and we will not be providing any updated forecast for HPE as a whole. Please keep those questions for our fourth quarter earnings call when we will provide a fulsome guide for FY 2027. Today, please focus on networking. With that, let us open it up.
It is very hard for me to see, so I am just going to sort of rely on [Jess] and Joe.
Hey, thank you. Joe Cardoso from JPMorgan. Thanks, Shannon. Thanks, Rami, for doing this today. Maybe the question I have, and it is a two-parter, so sorry, Shannon. If I look at the data center outlook you provided today, it implies you are roughly adding $5 billion in revenue through the forecast period. First, can you help frame the contribution between the opportunities there, enterprise, scale out, scale up, and whether there is any concentration that you guys are thinking around the opportunities or if it is more broad based? Then as we think about data center mix, moving from something closer to 10%-15% of revenue for networking to something closer to 1/3, how should we think about the gross margin implications from that? Thank you.
Okay. I am happy to address that. The data center opportunity is the fastest-growing opportunity for us. We have outlined that just earlier today. The confidence level that we have in our ability to capture share in the data center comes down to a couple of things. First is the strength of our technology across every layer, scale up, scale out, scale across. A second is the ability to leverage the HPE path to market to unlock new opportunities, and we are already doing that. Helios is just an example of that. It would be very difficult for Juniper to do that on a standalone basis. Having access to the partnerships that HPE has, the technology across liquid cooling, full rack architectures, gave us that capability.
In terms of where we see the bulk of the growth, I think as Praveen mentioned earlier, we are going to see both strength in enterprise and in cloud providers. Certainly, I think it is easy to assume that cloud providers are going to be where the bulk of that growth is going to come from, and that is where the massive investments that are happening are. In cloud, there is always going to be some level of concentration. I mean, for example, we talked about the Oracle deal. That is a big win, but I do not think it is going to be a unique win. I believe there are going to be other deals as well that we can pursue as part of the strength of our portfolio and our go-to market. Should I address gross margins?
Yes.
Okay. So gross margins, part two of the question. I think we have historically, maybe this is maybe during the Juniper days, said that data center switching is on average lower gross margin, and that certainly would apply to things like scale out, but also scale up where the capacity is significant. Having said that, if you look at the business on its entirety from a contribution margin standpoint, where you factor in the cost of R&D, the cost of sales, I think is operating margin neutral for us and certainly would be reflected in our outlook for next year and beyond.
Great. Next question, please. Erik?
Sure. I'll stand up? Sure. Awesome. Hey, guys. Erik Woodring from Morgan Stanley. Just a quick clarification question, Rami. So thank you again for everything today. Just on the kind of fiscal 2027, fiscal 2028 outlook, can you just help us understand, you reported earnings 28 days ago, so just where the increased confidence in that guide comes from? Is it just Helios? Is it incremental supply visibility that you have? Would just love to get a little incremental color on kind of how you arrived on the outlook today relative to a month ago. Thank you.
Well, relative to the last earnings call, I think the one new factor is Helios, right?
Yes.
That is now reflected in the opportunity for both next year and beyond. As I mentioned, the thing that is so exciting about Helios is that it is net new opportunity. We are taking standards-based Ethernet to a new layer of the data center stack for the first time. So it is unlocking a massive TAM. If you think about the capacity requirements within the data center, scale out is orders of magnitude greater than scale across, and scale up is orders of magnitude greater than scale out. The capacity requirements are stunning in this area, so it unlocks a significant new TAM for us.
Great. Asiya? I do not know where.
Asiya from Citi. Just on that topic, Rami, can you just think about or help us think about what are you envisioning for the market share in these Helios racks? I think you identified the TAM over the next couple of years, and clearly you have one large other ODM that is a competitor. So how do you envision your market share just in that Helios opportunity? Thank you.
It is a huge opportunity. We did not assume significant market share gains in our $1 billion or more than $1 billion outlook for the next couple of years, primarily because it is still early. That being said, I think as we go through the year and we start to see more pipeline, more visibility into wins, et cetera, that will give us even more confidence. At that point, maybe we can talk about market share. It is still very early to talk about market share at this point in time. I am just excited at the sheer magnitude of that opportunity. You rightfully mentioned today there are a couple of players. There is one networking player, and that is us. There are going to be customers that are okay with a more of a CM model for procuring the trays and the racks.
For us, I think we're pursuing customers. I believe there are a lot of customers that need a company that can do the kinds of things that Praveen talked about earlier, with not just the development of the really complex hardware, but the software integration that gives you the AIOps, the troubleshooting capabilities, the ease of management that I think only a networking company can do, and that's exactly what we're doing.
Great. Simon?
Thank you very much. Simon Leopold with Raymond James. I want to see your insight on how the DCI market is evolving in that I reflect back three, five years ago, Juniper was basically part of a duopoly, and today there are probably four players. What are you doing to innovate, differentiate, and how do you see that particular use case playing out? Thanks.
Yeah. Thanks for the question, Simon. I meant what I said on stage. It's fun now participating in this market opportunity because it truly does remind me of my early days when I was a chip developer at Juniper, and we were building more and more capable ASICs, performance-based ASICs to keep up with the demand. We went through a long period where there was some doubt about the need for custom ASICs, the capacity requirements that are necessary in next-generation routers, and we are now well beyond that, and we can't build them fast enough. Yes, it is true that there are more competitors today than I say there were probably back in the early days of the internet, but the opportunity has exploded.
The need for routing solutions, where we have the opportunity to innovate across the entire stack, from silicon to the systems to the software, is absolutely there. Our customers are asking us for power efficiency, for performance, for scale, for programmability, and also for silicon diversity. We offer that, and I think that's what's helping us capture more than our fair share over the next few years.
Wamsi? Sorry, it's very bright.
Thanks. Wamsi Mohan, Bank of America. Thanks for doing this. Rami, maybe when you think about the opportunity that you alluded to in terms of synergies, you've still kept your networking margin outlook, where it was consistent, but you also have taken the growth rate significantly higher. Why isn't that necessarily translating into higher margin? Are you investing in particular areas that will play out for higher growth in the future? How should we think about that? Thank you.
I'll start, and then Rami can continue. When you think about the $800 million that we talked about in terms of our synergy target, remember, we started at $450 million when we announced the deal. Then when the deal closed, we took it to at least $600 million, and now $800 million. We're very happy with the trajectory that we're doing there. I think, keep in mind, we're giving you a range from an operating margin standpoint of mid-20s to high 20s. I think as we look at the business, obviously scale does matter and the growth's going to be there, but we're also investing heavily in the business to be able to drive that growth, and we also think that we'll see a linear progression over the next several years in terms of operating margin. I don't know if you--
Yeah. I am happy to add. We were able to achieve these kinds of synergies without in any way impairing our ability to compete and grow. That to me is the most important thing because the markets are significant, they are growing, and we want to make sure that we can be competitive from both the technology and a go-to-market standpoint. We are going from low 20s to the mid to high 20s over the next few years without in any way slowing the innovation train. The innovation train, as you have seen in my discussion this morning with some of the demos in the back, is really, really strong right now.
Thank you.
The last thing I would just say is that we have been able to do these synergies at a lower cost than was originally anticipated. As you know, Marie and Antonio are extremely focused on free cash flow, and I am really proud of how the team has come together to drive that.
Thank you. Lou Miscioscia, Daiwa Capital Markets. Maybe not focusing that much on the supply chain, but if you look at the growth ranges that you have given, what do you think would be the inhibitors to get you to the high end of the range in comparison? All the numbers all do look very attractive, so congratulations on that.
Thank you for the question. This year, 2026, it won't come as a surprise to you because I think we talked about it in the last earnings call, that our growth is supply limited. Next year, I anticipate that it'll still be supply limited, just less supply limited. Quite frankly, we, including I, underestimated just how explosive the market growth is and also how good our execution is going to be in capturing that as we went through this complex integration process. But we are in the process of rectifying that, and we're investing in it. We've doubled our purchase commitments with our suppliers just quarter-over-quarter. We've more than quadrupled it on a year-over-year basis.
The amount of attention and energy within the organization right now, not just within supply chain, across the executive circles, Antonio himself is getting involved to get us the supply that we need, is absolutely there. Which is why I'm so confident that we can deliver on this outlook for next year. Hopefully, as we get into 2028 and beyond, things get a little bit less constrained, but we will see when we get there.
Question back there.
Thanks, guys. Ananda Baruah, Loop Capital. Thanks for taking the question, and thanks for doing this today. This is really fantastic. Appreciate it. With the broadened portfolio and with the amplification of scale-out, scale-up, scale-across, what's a useful way to think about the company's opportunity at Neoclouds now going forward, particularly given that it seems like for a large portion of the Neocloud customer base, the AI server margin could be shifting upwards as well? You guys have a really interesting bundle. Would love to get your thoughts. Thanks.
Okay. It is a great question because if you break out the cloud opportunity in hyperscale and Neoclouds, and let us put sovereign clouds in the Neoclouds category, the hyperscalers will make, and will continue to make, decisions on different technology components separately. They are going to make independent decisions on compute, on their networking, on storage, et cetera. We just have to go in there and compete for every layer of that stack based on the merits, the strengths of our technology, and our ability to co-innovate and really work with our hyperscale customers at a very technical level, which we know how to do. As you get into the Neocloud, which is the crux of your question, there, typically they are very technical, so you do have to engage with them in a very technical way.
Obviously the merits of our networking matters a lot. Here, the opportunity to go in there with full rack solutions increases because many Neoclouds value the simplicity of buying a complete system and buying from a single technology provider. Our win with Vultr that we announced this morning would be an example of that. It is the full portfolio that we are bringing to bear to win this, which again speaks to the revenue synergy opportunity that exists between Juniper and HPE. It would have been much more difficult to compete for the broader Neocloud and sovereign cloud opportunity as a standalone company as Juniper.
Great. [Woojin]?
Thanks for taking the question. Shannon and Rami, thanks for the event. You guys have a broad portfolio, but if I look at the portfolio as a whole and routing in particular, relative to your routing competitors, they have a very pronounced optical business and an optical strategy. I am just curious what Juniper's or HPE's optical strategy is and how should we think about the CPO opportunity for HPE, especially given that you are pursuing the scale-up market.
Okay, it's a great question. Optics are already a very important part of our ability to compete and to win in the market. You talked about routing initially, and in routing for certain use cases, let's say when we participate in wide area use cases, optics is typically a separate layer of the network, and there are dedicated optical companies that go and pursue it, and our ability to win is not in any way affected by the optical opportunity. As you get into DCI, which is a simpler use case, there is an increasingly large market for plugables, plugable coherent optics. Here, we have great partners. We, in fact, have engaged with our partners at a very technical level to build named, branded HPE coherent optics to capture that opportunity, and that has worked extremely well with us, and I expect it to continue to work extremely well with us.
As you talk about CPO, co-packaged optics, I think that is not an immediate opportunity. I think that's going to come about in a different layer of the data center stack. I think honestly, initially in scale-up, in the next maybe two to three years. We will talk more about that strategy and how we pursue that holistically as we get there. For now, our ability to, let's say, participate in the scale-up market, in fact, the first Ethernet-based networking company to participate in the scale-up market is perfectly good and fine without having the CPO as part of our portfolio.
I think that's George.
Hi. Thanks. George Notter from Wolfe Research. I guess I wanted to ask about sort of the new expectations you guys have for the networking business. How much of that is embedded in or comes from pricing versus unit growth? Is there a thought there? Then a second question I wanted just to ask was on scale-across. Obviously, your position there, I think with the PTX, I know there are others in the marketplace that have had a lot of success there. I think Arista, for example, has talked quite a bit about scale-across opportunities. How do you see your positioning in that market, and how do you think about where you fit versus others? Thanks.
Okay, great. The problem when you ask two questions is I forget easily. What was the first one?
See, I was just doing the same thing in my head.
Pricing. Thank you.
Yes.
The answer to that one is very simple.
Yeah.
It is very much a unit-based growth driver versus a pricing base. We have, of course, increased our pricing to deal with the increasing components that we are having to manage. For the most part, the vast majority of the growth comes from units. The second one around scale-across and our competitiveness in scale-across, I will just go back to what I said. I think, yes, it is a competitive market. HPE Networking, prior to that Juniper, was by no means unfamiliar with competing in competitive markets. I mean, we were up against 800-pound gorillas in practically every market opportunity that we went into pursued.
I do truly believe the thing that sets us apart and scale across is our ability to build every layer of the stack, starting with the silicon. That is, by the way, why today we have the densest 800 Gb Ethernet routing solution on the market. In this market, density truly does matter.
Maybe that is a good opportunity for you to talk a little bit about the Oracle deal and why you think we won the Oracle deal.
I would be happy to, Shannon. We are not new partners to Oracle. In fact, we have been working with them on routing solutions for quite a long time. But I think with Oracle, the thing that they have seen from us is, first and foremost, an ability to keep up with their extremely rapid requirements. And that means from a technology standpoint, hardware, software, and also new features and capabilities that they need in order to make their data centers work and to operate. I think it was a result of those years of working closely with them, co-innovating with them, demonstrating to them that they truly matter to us as a very strategic partner. We were just given a much larger opportunity.
Couple that with the strength of HPE across services and support, HPE Financial Services, et cetera, it was a perfect combination to go and to secure what is a really huge opportunity for us. Well, I should not say opportunity. Win for us.
Great. David?
It is David Vogt at UBS. Maybe Rami, can you speak to the opportunity to leverage your campus relationships across the enterprise data center? Is there an opportunity to leverage your historical multi-channel solution? I will give you a second question at the same time. When you think about your silicon portfolio, how do you feel it stacks up against the merchant silicon provider that is the lion's share of the market today, and how are customers viewing your silicon portfolio vis-a-vis what is out there in the marketplace and what is allowing you to take share from that perspective? Thanks.
Let me start with the second question first. The customer feedback on our silicon portfolio is amazing. First, Trio is truly unique. It is the x86 instruction set for the internet. The level of programmability, the logical scale, user scale that it offers is second to none, which is why I think we do exceptionally well in the AI on-ramp use case. Think here hyperscale, direct connect routers that allows them to connect enterprises directly to their clouds, whether they be AI clouds or traditional clouds. For the PTX, I just mentioned densest 800 Gb Ethernet density, and that's what matters for our customers, power efficiency, performance, and density of interfaces. That being said, you're right. Because of the explosive growth of this opportunity, more and more entrants are coming in, and more people are investing in silicon. That just means we've got to do the same.
I'm very happy to report that because of this combination with HPE, the level of investment that we are now seeing in silicon has only increased while delivering these financial results and the outlook that we provided. That, I think, is going to help us in keeping up and maintaining our leadership position relative to others that do their own custom or to merchant. The first question, which is around the wireless opportunity and the ability to sort of cross-sell between data center and wireless, 100%. I spend a lot of my time right now, along with my team that you saw up on the stage earlier, thinking around what can we do to leverage the broader sales team that HPE now has to expand our reach. Some of that comes from the global server and storage sales team.
They talk to customers that are buying servers all day long. Guess what? Every server has at least two Ethernet ports. We want those Ethernet ports to plug into an HPE Networking switch and then ultimately into an HPE Networking router and into a security appliance. That's the first opportunity, but it's certainly not the only one. Even within networking, we now have amazing technology. Sujai talked about the power of the self-driving network, but we have a far bigger go-to-market team that's selling data center networks, that's selling campus and branch networks. We have trained all of our sellers to sell the broad portfolio. We have metrics. We're measuring the performance, and we're starting to see good early signs, but that's a huge opportunity going forward.
Mm-hmm. Lou?
Thank you. Lou Miscioscia, Daiwa Capital Markets. A lot of things have been surprising us. Obviously, data center has been incredible and strong, but obviously now servers are kicking in, took a while, storage too. Obviously, you gave good guidance for campus and branch, but could you go deeper into that? I mean, why does that not surprise us in a year or two from now with much more material growth in single digits?
Yep. The market as a whole is growing in the mid-single digits. I think we said 6%.
Six.
We are going to take share. We are going to take share because of the strength of our portfolio, our technology, the true uniqueness of our self-driving capabilities. When you hear self-driving or automation, AIOps, agentic AIOps from others, you really have to look under the covers to see how much is actually there. We are fighting a lot of noise in the system and a lot of people that are honestly copying our message. The way we are fighting it is simple. We are going to leverage our broader sales team, and we are going to ask as many customers as possible to just give us a shot.
Because when they give us a shot, and a shot looks like a proof of concept, they put the self-driving network that is either part of Mist or HPE Aruba Networking Central against anybody else in the industry, we win the vast majority of the time. If we can continue to do that as we have been doing, and we start to reap those revenue synergies, the sky is the limit. But for now, I think high single digits is a good place to be.
Anyone? Okay.
Thanks. Simon Leopold, Raymond James. You've given us some numbers around the AI opportunity, and I guess one of the things I'm trying to get a better sense of is the attach of compute to networking. I know this is the networking day, but I'm trying to get a little bit better context of how we should think about the mix or the ratio of compute attached to networking and the opportunities to land bundled deals that way. Thank you.
I think from a perspective of Helios, obviously that's where we're seeing a big opportunity, and with what we announced today in terms of Vultr, obviously a $1.2 billion deal. A portion of that is obviously networking. It's a full scale, though. It's a full rack. What the company as a whole is thinking is we're going to have a balanced approach. Clearly, there's opportunity in racks. There's also a great opportunity to be a merchant vendor of trays. So we will focus on that.
But the one thing to keep in mind is we continue to balance the working capital requirements of doing a full rack because if you've got Antonio, you've got Marie, everybody's fully committed to at least $5 billion of free cash flow next year. So we're going to continue to balance that. But obviously, this initial announcement that we made is a full rack, but we've also had some tray sales as well.
Yeah. Just to add to that, and I think, Shannon, you rightfully talked about the Helios opportunity. That's where I think you can expect higher than normal attach rates because it's an integrated system. However, we did say there is going to be different paths to market, including selling the Helios switch tray through other Helios rack scale providers. That's perfectly acceptable. I think we are going to sell quite a few trays that way.
Going to the other part, like the non-Helios opportunity, whether it be in the enterprise, Neoclouds, et cetera, attach rates are still low, but we want them to be higher. A big part of our revenue synergies is to make them higher. Praveen talked about Oak Ridge as an example of an end-to-end win. There are definitely more opportunities like that out there to pursue. There are a number of things that need to happen. You've got to get the sales team well-versed in selling the full portfolio.
That's now well underway. You want to create more hooks at the software layer between the different elements, between networking and switching and routing. That's well underway. So I expect attach rates will only increase going forward, and that's going to only help the networking business.
Wamsi?
Yeah, thanks for taking the follow-up. Wamsi Mohan, Bank of America. Rami, in your comments earlier, you mentioned that some of the incremental growth that you are pointing to this year is going to be more back half loaded. Can you give us any sense of the linearity of how this year might be different from other years, given that you made that comment? Thank you.
The answer is no, not at this point in time. Just think more back end loaded just because of the timing of the opportunities. It takes time to go from what is a relatively new system that is just about to enter into the market to a ramp with all of these cloud providers. Interest is high, but it is going to be more back end loaded.
Mm-hmm. Yep. Then Victor.
Thank you. Victor Santiago with Evercore ISI. Rami, you touched on this earlier, but I wanted to ask about the Mist and HPE Aruba Networking Central platforms. Can you help us think about longer term, what the end goal is here? Do you see ultimately or do you ultimately expect Mist and HPE Aruba Networking Central to converge into a single management platform, or do you see a value in keeping the two platforms and continuing to add interoperability like you did earlier this year at HPE Discover? Thank you.
Yeah. It is a great question, and the short answer is no, they never converge into one platform, and they do not need to. Let me explain a little bit more. The applications, the AIOps, the hardware, the access points, the switching, after only a year of integration, have already started to converge. Marvis is the AI engine for both. We have introduced our first access points that work with both platforms.
We have now added the CX switching portfolio to both Mist and it was already there on Aruba. In essence, what we are doing is we have these two platforms. Each is optimized for different deployment models. Mist is purely cloud, and Aruba has more deployment options, including on-prem, which is important to many customers. But the experience to the end user is going to be the same, and it only becomes more and more the same in time.
The experience to the operator, like you heard from Sajeev earlier today, is going to become more and more unified, and there will be less and less duplicative investment that is required on our part to deliver on that unified experience. That is the strategy, and I have to tell you, somebody was just asking me earlier, "What has surprised you?" I knew that it would be somewhat complicated to converge these businesses together, but the speed at which we articulated the strategy and the speed at which we are providing proof points of technology convergence has even surprised me. My team has done an absolutely awesome job of this convergence, and our customers have taken notice. Honestly, our competitors have taken notice as well.
Great. Erik?
Sure. There we go. Rami, you highlighted that the unified partner program launches effectively in a little over a month from now. I am just curious if you had to pick your favorite children almost, what products or solutions or even opportunities do you think you could have the most success in that cross-sell opportunity? From our perspective, going from 10% to what would be considered a success in 12- 24 months, what do you want that kind of cross-sell overlap to be versus the 10% that you outlined already? Thank you.
Okay. First, no, I am not going to pick my favorite children. I do not have any. That being said, if you are talking about the channel, there I believe it starts with campus and branch because much of the Aruba business which went through the channel was a campus and branch business. The opportunity to unlock new partners to sell our campus and branch portfolio across Aruba and Mist is absolutely there, and that is work that is well underway. We want to make it absolutely frictionless for all 60,000 partners that I talked about earlier to sell that broader portfolio. Then enterprise data center. We want to grow from what is an AIOps amazing self-driving experience in the campus and branch into the data center. We can absolutely do it. We have already seen elements of that.
Today, again, we have not even done this yet. It is going to happen in the next few weeks, so the opportunity is still an unlocked opportunity. But when it does happen, and we reduce the friction for our partners and our sellers, by the way, to sell the broad portfolio, I expect that the win rate, the cross-sell is only going to grow and contribute to our revenue-sharing opportunity. I am not going to give you a number because it is still very low right now, and it is only going to go up, and we can probably share more in future events.
Okay. Well, I think we have come to the end of our Q&A session.
Thank you so much.
Rami's gonna make some comments here, and I will be back to give you a few logistics at the end.
Sounds good. Thank you, Shannon. Let me close this out for all of you. I do not think that there has ever been a more important time in HPE Networking. The network has never been more critical to how businesses operate and has never been more critical to how AI gets built, deployed, and consumed. In this environment, I think innovation matters, speed matters, software matters, silicon matters, infrastructure matters, and increasingly, scale matters, and it matters more than ever. But having any one of these things is simply not enough. Winning requires all of them, and that's what excites me about what we are building here at HPE.
We have decades of networking innovation and some of the best engineering talent in the industry. We have purpose-built silicon, leading hardware, and AI native software. We have the speed and agility to move with a market that is changing incredibly fast, and now we have HPE's full scale, not just networking, but across networking services, supply chain, compute, storage, financing, partners, customers, as a strategic advantage. The network has never mattered more, and I believe HPE has never been better positioned to win. Thank you all very much for joining us.
Thank you for your questions and for joining us this morning. We appreciate your continued interest in learning more about HPE and the growth trajectory of our networking business. For those of you who are here in person, we encourage you to visit the technology showcase area, and Praveen really wants you to do that, and see firsthand the innovation we've been discussing today. Two logistical notes before we close. We do have a bus for those of you heading straight to SFO, and it will be leaving around 11:45 A.M. And lunch is available in the back of the room. Thanks for being here, everyone, and this concludes our program.