HPE CEO Antonio Neri sees enterprise AI, VM essentials acceleration

“Enterprises are now moving forward with AI,” said HPE CEO Antonio Neri. “Nobody wants to be left behind and they need the expertise which comes from a combination of what HPE and our partner ecosystem can deliver.”

Hewlett Packard Enterprise CEO Antonio Neri Tuesday said the hybrid cloud AI powerhouse is seeing “very strong momentum” in enterprise AI and a “very strong” sales pipeline for its highly regarded VM Essentials virtualization private cloud offering.

The sanguine outlook came as HPE reported US$1.1 billion in net new AI system orders for its second fiscal quarter ended April 30 with enterprise AI accounting for one third of those orders.

“Enterprises are now moving forward with AI,” said Neri in an interview with CRN. “Nobody wants to be left behind and they need the expertise which comes from a combination of what HPE and our partner ecosystem can deliver. We believe this is a significant opportunity. I would ask all our partners to continue to bring (HPE) Private Cloud AI into their labs so customers can test and validate AI solutions.”

HPE, for its part, is currently conducting 250 proofs of concepts with HPE Private Cloud AI with more than 40 of those in production, said Neri. “This is happening everywhere in every vertical of the market, some faster and some slower,” he said.

Pat O’Dell, managing partner at Clinton, N.J.-based CPP Associates, one of HPE’s top enterprise partners, said he is seeing significant customer interest in the HPE Private Cloud AI offering.

“Customers want to be able to move forward and explore AI in a way that doesn’t break the bank,” he said. “With HPE Private Cloud we can offer them a solution that bundles together hardware, software and services for less than the price of a high-end data scientist.”

HPE Private Cloud AI is providing reference architecture and solution sets that are proven and can easily be adopted by small and midsized businesses, said O’Dell.

About 15 percent of 100 customers at a recent CPP event were interested in potentially adopting HPE Private Cloud AI, said O’Dell. “We’re very, very excited about that,” he said.

A strong sales pipeline for HPE Private Cloud AI

C.R. Howdyshell, CEO of Advizex, a Fulcrum IT Partners company, No. 129 on the 2025 CRN Solution Provider 500, said his company is also seeing “significant activity and strong “sales funnel growth” for HPE Private Cloud AI in the enterprise market.

“It’s a great way for customers to get into the AI game without making a multimillion dollar investment,” he said. “This allows customers to get into AI with a turnkey solution. It fits right into our Everything as a Service business.”

HPE reported $1 billion in AI sales during the quarter, up from $900 million in the same quarter a year ago.

HPE AI systems revenue was up 10 percent sequentially, a big improvement since HPE had anticipated a modest sequential decline in AI systems revenue in the quarter.

The enterprise AI momentum is being driven by HPE’s mainstay ProLiant servers and Cray supercomputers along with the company’s highly regarded HPE Private Cloud AI offering, a turnkey private cloud for AI that is designed to be up and running in just three clicks.

HPE is also seeing momentum in sovereign cloud opportunities and with traditional large language model deployments, said Neri. HPE is set to close a deal this quarter that will be one of the largest Nvidia H200 Hopper GPU deployments in the world, said Neri.

HPE continues to see “very strong momentum” in AI systems with a $3.2 billion AI backlog, up US$100 million quarter over quarter, said Neri. “Our pipeline remains multiples of our backlog,” he said.

With improved “line of sight” for AI revenue conversion, HPE expects sales growth of seven to nine percent for the fiscal year.

As for the HPE’s Private Cloud Business Edition With Morpheus VM Essentials, which competes against Broadcom VMware’s Private Cloud Foundation, HPE is seeing “very, very strong” traction with its virtualization offering with 1,000 customers in the HPE sales pipeline.

Neri said Danfoss, a Denmark energy efficiency company, has committed to transition 75 percent of their IT estate to HPE VM Essentials. “We see tremendous opportunities ahead,” said Neri.

‘No greater pain’ than Broadcom VMware price increases

CPP Associates O’Dell said there is “no greater pain” for customers than what they are going to do with virtualization in the wake of steep Broadcom VMware price increases. “As VM Essentials matures and it matures everyday it could be the biggest potential upside for HPE,” he said. “When you are talking about reducing VMware costs by 70, 80 and 90 percent compared to VMware that is massive upside,” he said.

O’Dell said Neri has provided the vision and innovation that is putting more distance this year between HPE and its competitors with the deepest compute, storage, networking, hybrid cloud consumption and AI portfolio in the business.

“HPE has the best portfolio in the industry with great solutions that are just getting better as time goes on,” he said. “In my view they are putting more distance between themselves and their competitors this year than last year.”

The AI and VM Essentials acceleration came as HPE reported higher year-over-year revenue growth in every product segment including servers where revenue was up six percent from the year ago quarter to US$4.1 billion.

The server sales growth came after HPE addressed “operational challenges” that led to server margin pressure in the preceding quarter with inventory issues and a decline in server operating profit margins.

Among the changes implemented to drive server profitability during the quarter were the rollout of “new pricing analytics, increased discount scrutiny and inventory management,” said Neri. He said it will take a “couple of quarters to realize the full benefit” of the new measures.

HPE, Neri said, expects server operating profit margins to increase from the current 5.9 percent to approximately 10 percent as it exits the fourth fiscal quarter.

Another bright spot for HPE was a rebound in the Intelligent Edge networking business with a return to growth with revenue up seven percent to US$1.2 billion with 23.6 percent operating profit margin. “In networking the market continues to recover,” said Neri. “Year-over-year the business achieved its third consecutive quarter of orders growth.”

In the Hybrid Cloud business segment, HPE reported sales of US$1.5 billion, up 13 percent from the year ago quarter. HPE’s annualized revenue run rate – which measures HPE GreenLake cloud consumption – was up 47 percent to more than US$2.2 billion.

Overall, HPE reported non GAAP diluted earnings per share of 38 cents on a six percent increase in sales to US$7.6 billion. That was well above the Zacks consensus estimate of 34 cents per share on sales of US$7.47 billion.

The strong results prompted HPE to raise the low end of Fiscal Year 2025 Non GAAP diluted net earnings per share guidance by eight cents per share.

HPE shares were up nearly five percent or 82 cents per share to US$18.51 in after-hours trading.

“We delivered a solid Q2,” said Neri. “I am very pleased with the fifth consecutive quarter of year over year revenue growth. We see the actions we are taking in server already delivering the results that we want…Networking continues to do very well and we are very pleased with hybrid cloud. But as always there is more work to do. I believe we have line of sight to our new guidance and commitments. It is all about driving the execution which is sustained by an amazing portfolio with amazing innovation.”