“Customers are prioritizing buying technology today and not postponing technology purchases into the future because they know the supply environment is going to be very, very constrained,” said Neri in an interview with CRN.
HPE President and CEO Antonio Neri said he expects “demand will continue to be super strong” into the future with customers refusing to postpone technology decisions in a supply constrained technology market.
“Customers are prioritizing buying technology today and not postponing technology purchases into the future because they know the supply environment is going to be very, very constrained,” said Neri in an interview with CRN.
Neri said the “supplier environment”—which has sparked memory price increases and rapidly changing price quotes on PCs, servers, storage and even networking products—has not changed.
“Capacity is locked [in] for [Fiscal Year] 2026,” said Neri. “Secondly, 2027 is going to continue to be severely constrained, but as you know we have long-term agreements with our suppliers.”
Neri said he expects costs of memory and other components to continue to be “very elevated” into the end of 2027.
“I think that supply availability will improve in 2028 because that’s when these new factories will come online,” he said. “But that’s all relative to the performance of the ramps and yields [of memory and other components], and then you need to look at what’s going to happen with demand itself. If the demand continues to be accelerated, that may delay that relief.”
Neri’s comments came after the AI networking and infrastructure powerhouse reported “record orders backlog” in the second fiscal quarter ended April 30 with orders more than doubling year over year.
“We have a unique portfolio at the intersection of networking, cloud and AI, which is perfectly timed for the disruption we see today,” said Neri.
The backlog and the “long-term supply agreements” HPE has to deliver for customers gave the company the “confidence” to raise guidance for the current fiscal year and provide a 2027 Fiscal Year forecast, said Neri.
HPE raised its Fiscal Year 2026 consolidated revenue outlook to high teens on a normalized basis.
HPE also raised its Fiscal Year 2026 non-GAAP diluted net earnings per share by a full dollar to be in the range of $3.35 to $3.45.
The 2026 guidance effectively puts HPE two years ahead of what it had planned to deliver in Fiscal Year 2028.
The better-than-expected results sent HPE shares soaring 16 percent, or $7.55, to $54.49 in midday trading on June 2. HPE shares closed up 9 percent on June 1 to $47.
HPE’s $13.4 billion acquisition of Juniper Networks is paying off faster than anticipated, with the company forecasting “cumulative Networks for AI orders—which includes data center switching and routing—to at least $2 billion by the end of Fiscal Year 2026.
“I think customers were looking for an alternative to incumbency,” said Neri. “I think our self-driving network in the enterprise is resonating very well in both the campus and branch and data center switching and enterprise. Our [networking] scalability and performance and features in the large cloud is resonating. The team has executed extremely well.”
How do you feel about the record quarterly results, especially the HPE Networking results that include the Juniper acquisition?
I feel good about everything in the context of our strategy and the focus that we have brought to the company over a number of quarters.
The results of today [are] not the outcome of just one quarter. We delivered exceptional results with record-breaking results across all metrics. Those results were driven by the fact that we have a strategy that’s paying off from disciplined execution and unbelievable strong demand.
To give a context on that demand, orders doubled year over year. When you break out that demand by the segments, networking with cloud service providers and the routing business grew nearly 30 percent. Our enterprise data center switching with synergies with the rest of the portfolio grew 20 percent. Our campus and branch grew orders in the upper 20 percent, and security grew in the mid-teens. Our [networking] revenue grew 10 percent [on a normalized basis].
We have a very, very large backlog, the momentum is strong, and that’s because the supply is constrained. Even in the AI space for networking in what we call Networks for AI, we have very strong momentum. That’s why we are raising the bookings to at least $2 billion for [Fiscal Year] 2026.
You go to cloud and AI with traditional servers, which obviously go mostly through the channel, we had triple-digit growth in order bookings.
Storage was our sixth consecutive quarter of triple-digit growth in orders. In our private cloud portfolio, which is virtualization and AI, we have had five consecutive quarters of growth.
In AI at scale where we are still very disciplined and focused, we booked $1.8 billion in new orders mostly focused on enterprise and sovereign and AI inferencing.
Because of our momentum in Q2 with the backlog and the line of sight with demand, we are doing two things: We are raising our [Fiscal Year] 2026 guide. That guide is actually delivering what we were supposed to deliver in [Fiscal Year] 2028.
So we are pulling forward by two years our long-term commitments into 2026. EPS [earnings per share] is now up a full dollar compared to the previous guide—$3.40 compared to $2.40—and free cash flow is going to be at least $3.5 billion, which is up from the previous guide of $2.2 billion.
We are really delivering the long-term plan of [Fiscal Year] 2028 into 2026. The second thing we are doing is paying down the debt [on the Juniper acquisition] a year earlier. If you recall, we said we were going to return to two times EBITDA leverage by 2027. Now we’re going to do it by April 2026. That’s because we have very strong free cash flow—again at least $3.5 billion.
We completed the sale of H3C. We have now sold 100 percent of the H3C [HPE’s China networking joint venture] stake, and the combination of the two allows us to pay down the debt.
You bring it all together and we are very confident when we think about 2026 and 2027. So we are guiding [Fiscal Year] 2027 as well with revenue growth between 8 [percent] and 12 percent, operating margin rate between 12 [percent] and 16 percent, and non-GAAP diluted earnings per share of 12 [percent] to 16 percent growth in Fiscal Year 2026.
Now we’re going to deliver at least $4.5 billion in free cash flow, which will allow us to return approximately 75 percent of at least $4.5 billion to shareholders in dividends and share buybacks in 2027, while we continue to invest in the business.
Last but not least, we have the integration of Juniper. Our Catalyst program is going extremely well. We are ahead of our plan and milestones.
How did the channel perform in the quarter?
To give you context on the channel and the broader partner ecosystem, we grew 64 percent year over year. That shows the momentum we have with the channel. The channel accounted for 67 percent of the business, which is a 7-point increase year over year.
Our cloud and AI business [through partners] grew 39 percent year over year and 16 percent quarter over quarter.
Juniper on a normalized basis saw year-over-growth [through partners] of 14 percent, which represents 89 percent of our overall networking sales.
We see tremendous traction with partners as well in the virtualization space.
So all in all a terrific quarter, terrific results, durable results. That gave us the confidence to not only raise [Fiscal Year] 2026 but also provide 2027 guidance.
Is the global supply chain getting better or worse, and how is it impacting customer decisions?
First of all, the supplier environment has not changed. Capacity is locked [in] for [Fiscal Year] 2026. Secondly, 2027 is going to continue to be severely constrained, but as you know, we have long-term agreements with our suppliers.
In both cases in [Fiscal Year] 2026 and [Fiscal Year] 2027, that has been factored into our guidance. That’s why we provided the 2026 guidance and the 2027 guidance.
Costs continue to be very elevated. At some point there will be some normalization but not declines. So we’re going to be in a very elevated cost environment all the way to the end of 2027.
Customers are prioritizing buying technology today and not postponing technology purchases into the future because they know the supply environment is going to be very, very constrained.
Do you think this supply chain crisis will go into 2028?
I think demand will continue to be super strong. We have a unique portfolio at the intersection of networking, cloud and AI, which is perfectly timed for the disruption we see today.
I think that supply availability will improve in 2028 because that’s when these new factories will come online. But that’s all relative to the performance of the ramps and yields [of memory and other components], and then you need to look at what’s going to happen with demand itself. If the demand continues to be accelerated, that may delay that relief.
I think the general consensus is that 2028 should be better. If the supply becomes better, then costs should come down. But it is hard to tell at this point in time. It is too early. We are 18 months early to get a final answer on that.
Dell talks about a supply chain advantage as it is four times bigger than HPE’s. How is the HPE supply chain performing when you look at the results?
I would say that based on the scale of our portfolio we are getting our fair share. But it is fair to recognize when you have a PC business, you have higher allocation of supply. But it is capacity, not supply. They can decide where to spend that capacity. They can spend it on PCs, server or storage.
Technically, you buy capacity. You don’t buy specific products. Then you go quarter after quarter saying, ‘Give me some of this and give me some of that.’ It’s like when you go to the supermarket and say, ‘Give me a half-pound of this and two pounds of that.’ You buy capacity.
Compared to our scale and what we are doing, we definitely are getting our fair share. When it comes to networking, we are now probably the largest OEM when it comes down to vendors like Broadcom. So that is an advantage over time.
It depends on the portfolio and what you do. I would remind you that we just announced we are two years ahead [of our long-term financial plan] moving from 2028 to 2026. That is based on the guidance we are providing today. That supply is factored into that guidance.
You said you now expect cumulative Networks for AI orders to reach $2 billion by the end of Fiscal Year 2026. What is driving that?
When we talk about Networks for AI, we are talking about both routing and data center switching for the AI buildout. We see momentum in both.
Remember, we address three key dimensions there: scale up, scale out and scale across. In the scale up, obviously Nvidia is more of a closed environment. As we think about [Fiscal Year] 2027 in particular with AMD coming to market with its Helios stack, the scale-up switch inside that architecture is Juniper.
Scale out is obviously our Juniper QFX [switches] where we compete with the likes of Cisco and Arista and any white box that a customer may use, particularly the hyperscalers. There we have a time-to-market [advantage] with Broadcom. We have the first 1.6-terabit-per-second switch [based on Broadcom Tomahawk] with agentic AI built into it.
Then scale across is going extremely well with our Juniper PTX fabric for data center interconnect, which is our own silicon.
We feel pretty good about networking. The momentum is very strong. That’s why we raised our guide for [cumulative Networks for AI] to reach at least $2 billion in new bookings.
It seems like the appetite for a network alternative has never been greater. Do you see that?
I think customers were looking for an alternative to incumbency. I think our self-driving network in the enterprise is resonating very well in both the campus and branch and data center switching and enterprise.
Our scalability and performance and features in the large cloud is resonating. The team has executed extremely well. When you think about an integration of this magnitude, doing it so fast, with integration of sales forces, clear messaging to the channel, rationalization of the footprint, announcement of road maps, new product introductions, it has been fantastic. In my view, this is a great example of how to do a large acquisition at scale quickly and so efficiently. It is going to be a very big source of shareholder value creation, which is starting and is already visible in the numbers.
It is also a very big source of customer relevancy because ultimately everything needs to be connected. Therefore, networking becomes the core foundation for everything we do. For the partners, it means profitable growth.
