Hewlett Packard Enterprise Company (NYSE:HPE) Q4 2022 Earnings Call Transcript

Tarek Robbiati: Yes. Kyle, thanks. I think you understand the trends in our Compute business really well. So, let me reiterate. We ended the year with record quarterly revenues of $3.7 billion. This is a 22% year-over-year growth at constant currency. Unit growth was 4% and AUP was an increase in the high-teens as you foreshadowed. And what’s driving the demand for our Compute solutions is richer configs. Customers of all sizes are selecting our Compute solutions to run their private clouds and to power multitude of workloads, data types and applications. And Compute remains and will continue to remain a critical component of our customer transition towards modern edge-to-cloud architectures. And you’re right in saying that with these results and the unit increase, our order book in Compute remains strong as we enter fiscal year ’23.

So, moving forward, trend-wise, what you can expect is, obviously, this level of AUP growth to come down as we’ll have to pass on to our customers the benefit of ease — pricing of commodity easing, but we feel very good about the prospects of Compute in fiscal year ’23, given the order book, the fact that our products are more and more differentiated and the need for customers to continue to opt for greater configs.

Antonio Neri: And I will say, Kyle, we just introduced the Gen11 platform. And one of the key differentiation we have — actually, we have several — number one is our hybrid design. It was designed with hybrid in mind, meaning the solution gets deployed and managed from HPE GreenLake, whatever you deploy that. Number 2 is continued enhancement on the security side, which is a point of differentiation. And one that really is coming up is sustainability. In our new offer, we actually provide customers with ability to optimize the Compute platform based on carbon footprint and consumption, and we get them also a carbon footprint report. So that allowed them to maximize the usage of the platform while they reduce that carbon footprint. So overall, we continue to see good momentum, and we are bringing new innovation into the platform itself.

Operator: The next question will come from Shannon Cross with Credit Suisse. Please go ahead.

Shannon Cross: I wanted to dig a little bit more into your as-a-service business. Just looking at the like absolute dollars. You had a stair step up to $936 million annualized run rate during the quarter. And it looks like there was a significant uptick in the percent — well, at least 200 basis uptick in the percent of revenue coming from software services. So, I’m wondering what’s behind that and what trends you’re seeing as you sign more and more of these contracts with your customers on a ratable basis? Thank you.

Antonio Neri: Yes. Thank you, Shannon. I think a couple of things. So first of all, we ended the year with a 68% year-over-year growth in our bookings. Today, we have now $8.3 billion in total contract value. As you know, those are contracts — can vary between 3 to 5 years. So, as you can imagine, that gives us a tremendous confidence that we will grow that ARR in the 35% to 45%. We actually closed 2022 with twice as many new HPE logos that we entered now into the 2022 year. And then the important fact is why the mix is shifting is because the Aruba business is all a subscription business. And Tarek made a comment about the automation suite, obviously, software-defined wide area network, and also the subscription to wireless or switching comes through the platform, but also the growth that we’ve seen in storage.