This conference call focused on HPE's financial performance in the third quarter of fiscal year 2025, emphasizing discussions on non-GAAP financial information and the introduction of the integration of intelligent edge and networking businesses. Participants were also reminded about the risks and uncertainties associated with forward-looking statements in the financial report.

In the third quarter, HPE achieved revenue of $9.1 billion, an increase of 18% year-on-year, mainly benefiting from strong performance in the AI, networking, and hybrid cloud areas. The company completed the acquisition of Juniper Networks, and the newly integrated networking department contributed nearly 50% of non-GAAP operating profit. Orders in the AI field almost doubled, with significant growth opportunities, and AI undelivered orders reached $3.7 billion. The company optimized its cost structure and improved operational efficiency through the Catalyst program, with free cash flow reaching $790 million in the third quarter.

Introduced Q3 performance highlights, including progress in network business integration, recovery in enterprise market, growth in WiFi 7 demand post Juniper acquisition, revenue improvement, and innovation and market recognition in network business. Looking ahead, the focus will be on discussing network strategies, emphasizing AI-driven network solutions, and reiterating the goal of $600 million in cost synergies over the next three years.

Server revenue reached $4.9 billion, reaching a historic high, with a year-on-year growth of 16% and a sequential growth of 21%, mainly benefiting from the strong conversion of AI orders and stable demand for traditional servers. AI system revenue reached $1.6 billion, also hitting a new high, with continuous growth in enterprise AI orders, with a compound annual growth rate of over 100%. The company continues to innovate, launching HPE servers equipped with the latest NVIDIA accelerators, as well as the Gen12 server series, with the adoption rate of Gen12 servers expected to accelerate by 2026.

In the third quarter, HP released a new generation of high-performance computing solutions, significantly increasing memory capacity and system interconnect bandwidth, while achieving stable growth in hybrid cloud performance. The company saw double growth in revenue and profit, with a 75% year-on-year increase in ARR (annual recurring revenue), with software business performance being particularly outstanding. HP continues to expand its presence in the fields of AI, cloud, and networking, launching innovative technologies such as Green Lake Intelligence to attract new customers to join Green Lake Cloud. With the completion of the Juniper acquisition, HP is committed to leading the market in the new era of network, AI, and cloud convergence, planning to accelerate growth through modern, secure, cloud-native, and AI-driven network products.

The report highlights the company's outstanding performance in the third quarter, including a year-on-year revenue growth of 18% to $9.1 billion, a 40% increase in ARR, and higher gross margin and cost efficiency improvements achieved through the acquisition of Juniper. The non-GAAP operating profit margin benefited from cost management and synergy effects, reaching 8.5%, and it is forecasted that at least $600 million in costs will be saved over the next three years.

In the third quarter, network business revenue increased by 54% year-on-year, server business revenue increased by 16% year-on-year, and hybrid cloud business revenue increased by 11% year-on-year. In terms of network business, Juniper's integration made a significant contribution, server business benefited from large orders for AI systems, and hybrid cloud business was driven by the HPE Alera MP platform. All business segments showed strong market performance and revenue growth.

HPE announced the Catalyst program, aiming to accelerate growth and enhance efficiency, with plans to reduce 5% of employees and save $350 million by 2027. The Q3 financial performance was strong, achieving $1.3 billion in operating cash flow and $790 million in free cash flow, with inventory levels returning to normal. Despite the impact of Juniper's integration on cash conversion cycle, improvement is expected in Q4. HPE pledged to reduce debt, maintain investment-grade credit rating, and target to reduce net leverage ratio to below 2x by the end of 2027.

The company adjusts its outlook for the 2025 fiscal year, expecting revenue growth of 14%-16%, with contributions from Juniper. The non-GAAP operating profit margin is expected to increase to above 9%, reaching 11% in Q4. Free cash flow is estimated to reach $700 million, with a significant increase in Q4, primarily benefiting from improved net profits and accounts receivable. Network business revenue is expected to increase significantly, while server business may see a decline, but with improved gross profit margin.

The dialogue discussed the current situation and future predictions of server gross profit margin, pointing out that by addressing pricing and discount issues, the gross profit margin has been restored to historical levels of 10% to 12%. The gross profit margin of AI servers is affected by product structure and market transitions, and the overall gross profit margin of servers is expected to remain around 10% in the fourth quarter.

The conversation mentioned that the company has a strong internal framework to guide the evaluation and prioritization of AI-related projects, ensuring effective allocation of resources and successful project implementation.

Discussed the market performance after the merger of HP and Juniper, including strong growth in various segments, as well as the outlook for future AI opportunities, with a particular emphasis on the potential benefits and profitability of networking and servers in the field of AI.

The dialogue focuses on the company's strategic layout in the field of AI, emphasizing the ability to cover all vertical markets, geographical areas, and use cases through product integration. It mentions close collaboration with partners and integrated advantages in areas such as network, servers, and storage, aiming to provide customized solutions for different customer groups. It particularly highlights progress made in AI network construction, sovereign cloud, enterprise AI factories, etc., showcasing the company's comprehensive layout in AI technology and services.

Discussed the decline in profit margin of the network department after merging with Juniper, explored the path to restoring profit margins to historical levels and surpassing them in the future, as well as the short-term and long-term impact of integrating and closing Juniper on cash flow.

The conversation revolved around profit and cash flow forecasts for the network department, providing detailed explanations for the decline in profit margin for marginal businesses, as well as guidance on Q4 and full-year cash flow. Mention was made of the impact of Juniper's acquisition, as well as the emphasis on future free cash flow, with plans to provide more information at a security analyst conference.

Discussed the future growth targets of the internet business, emphasizing the need to exceed the market's average growth rate. Mentioned the integration of the Aruba and Mist product lines, believing that both can coexist in the market while enhancing data security and SD-WAN integration to build the best internet business.

Discussed how AI and cloud technologies create new opportunities in the integration of enterprise networks, emphasizing the opportunities for AI applications at the service provider, sovereign space, and enterprise levels. At the same time, the issue of rising product costs was mentioned, particularly the platform transition costs in intelligent edge business. Overall, the conversation highlighted the important role of AI and cloud technologies in driving the transformation of enterprise networks, as well as the challenges they may face in the future.

The conversation revolves around HPE's customer feedback and market growth opportunities, mentioning market dynamics in the server, storage, and networking sectors. Customers are currently undergoing infrastructure refreshment, with HPE gaining market recognition for its high-performance, energy-efficient Gen 12 servers and innovative storage solutions, while also showing growth potential in the transition to AI-driven virtualization layers.

The conversation discussed Juniper Networks' business progress in the field of AI, especially in becoming a standard strategy in large deployments, as well as details of their collaboration with Nvidia. Juniper had accumulated good orders before the deal, and will further elaborate on its architecture and strategy through a security analyst conference in the future, showcasing its leading position in AI network solutions and its contribution to HP's future development.