CEO Antonio Neri: HPE Is Seeing A ‘Simply Amazing’ Uptick In AI Orders
‘Obviously what we are experiencing in AI is simply amazing,’ said HPE CEO Antonio Neri. ‘It is breathtaking in some cases. I consider AI a massive inflection point, no different than Web 1.0 or mobile. The potential to disrupt every industry and advance many of the challenges we all face everyday through data insights is just astonishing.’
Hewlett Packard Enterprise is seeing a “significant uptick” in customer interest in artificial intelligence (AI) based solutions resulting in $800 million in “incremental” AI orders in the most recent quarter, said HPE CEO Antonio Neri.
Since the start of its second fiscal quarter, HPE has won multiple large contracts totalling more than $800 million from large cloud providers and enterprise customers that will develop, train and run AI models, said Neri
“Obviously what we are experiencing in AI is simply amazing,” said Neri in a conference call with analysts Tuesday after reporting results for the second fiscal quarter, ended April 30. “It is breathtaking in some cases. I consider AI a massive inflection point, no different than Web 1.0 or mobile. The potential to disrupt every industry and advance many of the challenges we all face everyday through data insights is just astonishing.”
The $800 million in “incremental” AI orders during the quarter came from both “digital native” companies pursuing generative AI large language models and cloud providers, said Neri. Most of the contracts exceed $100 million, he said. “We expect this pipeline to continue to grow and anticipate these deals will generate significant revenue in later quarters,” he said.
Among the AI wins is a deal with Crusoe, a cloud provider pioneering infrastructure that taps into wasted methane or renewable energy to power cloud computing, said Neri. Crusoe is using HPE Cray supercomputers as a generative AI foundation, said Neri.
“HPE is winning in AI because we deliver an end-to-end portfolio designed for the full spectrum of enterprise AI workloads and use cases, spanning large-scale model development, training and inferencing,” said Neri. “Customers are attracted to HPE’s market-leading supercomputing capabilities, differentiated interconnect IP, AI-specific software and services expertise.”
The new orders were above and beyond an 18 percent increase in AI and high-performance-computing-based solutions to $840 million for HPE’s second fiscal quarter.
HPE is set to announce new AI-based solutions at its HPE Discover conference in Las Vegas, which runs from June 20-22, Neri said.
HPE’s edge-to-cloud portfolio gives it a significant advantage in the AI market, with a “strong inference” at the edge with the ability to “connect and process data wherever it is created with very efficient and low carbon footprint,” leading to more sustainable solutions with lower power consumption, said Neri.
HPE also has the ability to take the data that is created and “train” it for different use cases, said Neri. “HPE has a unique portfolio, from the inference side all the way to the training side,” he said. “Our HPE ProLiant already has some very powerful cost-efficeint solutions at the inference side. The amount of computational power we can put in one of these 2U servers is simply amazing.” The ProLiant includes GPU and CPUs that open the door to the AI models, said Neri.
HPE also has “unique differentiation” in delivering AI at scale with supercomputers, said Neri. That includes the HPE Slingshot ethernet fabric that provides cost and power consumption advantages for HPE’s Aurora Cray Supercomputer, which houses 60,000 GPUs.
The HPE AI offerings will include collecting data, preparing data, automating the data pipeline and training the data, said Neri.
HPE intends to make its AI-based solutions to customers of every size, said Neri, which opens the door for partners to participate in the AI boom. Ultimately, partners could sell the AI-based solutions in an as-a-service model, he said.
The AI-based HPE solutions will be part of HPE’s edge-to-cloud platform, with a single view of data from the edge to the data center to multiple clouds, said Neri.
“It is all in concert to our unification of the experience from edge to cloud, whether it is general purpose workloads or AI workloads,” said Neri. “That is what we are driving, making it ubiquitous for partners to go after.”
Under Neri, HPE has been aggressively pursuing the AI opportunity through a number of game-changing acquisitions, including its $1.4 billion acquisition of supercomputing pioneer Cray in 2019; the purchase in 2021 of Determined AI, which makes a software stack to train AI models; and the acquisition earlier this year of Pachyderm, which makes open-source software for large scale AI applications.
HPE also just released an updated version of its Ezmeral Software data fabric that transforms it into a much more powerful platform for AI- and ML-based workloads.
Rob Schaeffer, president of CBT, a top HPE enterprise partner that has received wide acclaim for AI-based solutions like refinery of the future, said HPE has an AI advantage as a result of Neri’s technology leadership and vision. “HPE’s AI supercomputing capabilities provide it a unique advantage over the rest of the industry,” he said. “The world is still learning about AI and HPE’s leadership position in AI. That is a story that is being written. By the time it is completed, they will look at Antonio as having made some very courageous decisions along his journey as CEO that has benefitted all of HPE and its partner ecosystem.”
The HPE AI capabilities have helped provide Orange, Calif.-based CBT with a “first-mover” advantage in the AI race, said Schaeffer. He praised HPE’s GreenLake cloud service capabilities to drive data insights with both block and file data.
CBT has had production Ezmeral loaded in its data center from the early days of the product and is also moving forward with Determined AI and Pachyderm, said Schaeffer.
“We’re already working with customers on generative AI solutions,” he said. “We believe the future is very bright. With our work on IT and OT, the growth potential is very, very large.”
The AI optimism came as HPE reported better-than-expected earnings of 52 cents per share on lower-than-expected revenue of $7 billion, up four percent from the year ago quarter. The Zacks consensus estimate for the quarter was 44 cents per share on sales of $7.28 billion.
Neri said HPE saw a decline in macroeconomic conditions resulting in some cases in elongated sales cycles, particularly for compute. “Large enterprise businesses and customers in certain sectors such as financial services and manufacturing in North America are being more conservative with their spending,” he said.
HPE compute revenue was down eight percent in the quarter compared with the year ago period.
As a result of the compute decline, HPE lowered guidance on Fiscal Year 2023 sales growth to four percent to six percent in constant currency, down from five percent to seven percent.
At the same time, HPE is increasing its non-GAAP operating profit growth to six percent to seven percent, up from five percent to six percent.
Among the highlights of the quarter was a 50 percent increase in HPE’s Aruba intelligent edge business to $1.3 billion. HPE has now delivered 11 consecutive quarters of growth in the intelligent edge business. That intelligent edge business now makes up about 20 percent of HPE’s revenue.
“The order book for both intelligent edge and AI remains very, very large, and the demand improved sequentially,” said Neri.
“In the short term we are going to navigate this uneven demand in compute, but we are very pleased with the momentum we have in hybrid cloud with GreenLake, AI—which is a massive, massive opportunity for the company with our unique differentiation—and obviously the intelligent edge, which is delivering standout performance quarter after quarter after quarter,” said Neri.