HPE President & CEO Antonio Fabio Neri Talks Tariffs and Earnings
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Bloomberg Audio Studios. Podcasts, radio, news. HPE says tariffs will have a smaller than expected impact on sales this year. AI revenue also beat Amnesty estimates, but the company continues to face headwinds, and that includes an activist investor. HPE CEO Antonio Neri joins us now.

I find what you said about tariffs and how that's reflected in the numbers so interesting because the hyperscalers, for example, told us that one reason capital expenditures were raised in that period is the reflection of the higher cost of doing business because of tariffs. For you, it's like almost the opposite story.

Yeah. Good morning, Ed. Thanks for having me. Look, we raise our guidance for a number of factors. Number one, because of all the work we have done throughout a very diversified supply chain, we find ways to mitigate the tariffs. Obviously, the USMCA plays a role in that.

But at the same time, we know we are performing better in many of our businesses, and we have had a number of targeted actions to continue to mitigate any impact from the tariff. And that's us today as we know it.

But the reality is that the original impact we communicated at the earnings call in Q1 now is significantly lesser. And therefore, together with the cost actions, together with the better performance of the business and the lesser impact on tariff, we raised the bottom range of our guide by $0.08.

Antonio, is it possible for you to quantify for us the sort of sales channel impact that you provide for NVIDIA? So we talk endlessly about all of the projects, domestic and overseas, and NVIDIA's involved in, the great build-out. But as you know so well, and I spend hours tearing servers apart, nothing happens without HPE and others assembling the designs. I just want a number on it. That's the thing.

Yeah, well, hard to put a number, Ed, because many of these build-outs are happening as we speak, and it takes a little bit of time to go from an agreement with a customer working with us in NVIDIA to building and deploying it, and then eventually putting it in production. But I can tell you,

Look, we have a deep, long-standing relationship with NVIDIA. We are covered in all segments of the market, whether it's these big, large build-outs in the service provider space, whether it's sovereign or enterprise. And one of the things I'm really proud is that the work we put together with NVIDIA last year when we announced the NVIDIA Computing by HPE and our private cloud AI is growing very rapidly. In fact, one-third...

of the net new orders we booked in Q2 were from Enterprise.

But at the same time, we are completing one of the largest deployments on the GB200 as we speak, and that's a very large deployment. And then we said that our backlog grew quarter over quarter. Now it's $3.2 billion. On a cumulative basis, for the last two years, we've booked over $9 billion, and we have multiples of the backlog in our pipeline.

That one billion that you attributed to AI in particular is good, but it's not as much as Dell, for example. I hate to put it so on the nose in that way, Antonio, but how much is perhaps Elliot on your board or others around you sort of saying, look, capitalize on AI even more?

Yeah. No, that has nothing to do. Look, the previous quarter we booked ourselves a very large order, which is the one we are deploying today. And that was not, Dell didn't do that. So this is a lump in business. And you will see us also talking about some of the large orders we may get in the current quarter or subsequent quarter. So, you know, this goes back and forth. But ultimately, you have to play with discipline.

And our goal is to grow in the AI and the rest of the business with a capital structure that works because the reality is that there is revenue growth, then there is profit accretion, and then there's working capital. And that working capital is something you have to watch very, very closely because the timing

from winning a deal to the time of revenue recognition in these large deals can be long and therefore you impact cash flow from operations. So we're trying to balance all of that while we deliver on our commitments both on the revenue growth and on the EPS growth.

Well, you delivered in terms of 6% revenue growth on the quarter. We appreciate it. Antonio Neri, HPE CEO for joining us.

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