Antonio Neri: 53% of the orders in Q4, 25% of the revenue mix. And so that’s good for us because, obviously, it drives higher density and obviously, we can attach more options to the same platform. And customers like the sustainability piece of that and the hybrid by design nature of that, which is actually well optimized. And Gen 11, by the way, was conceived to accept any type of processing unit, whether it’s a CPU, but it’s an APU, including ARM-based solutions or GPU-based solutions. Whether it’s in tail on the X86. So that gives us tremendous amount of flexibility. But ultimately, it’s not just about the server. It’s the software that comes with it. And this is where we spend a lot of time building the partnerships and relationships with NVIDIA. So now you can deploy a tuning or inferencing with the NVIDIA stack and our software as well, all part of HPE GreenLake.
Jeff Kvaal: Thank you very much, Simon. Gary?
Operator: The next question is from Tim Long with Barclays. Please go ahead.
Tim Long: Thank you. Can you just touch on the storage business a little bit. It’s been kind of challenged like some of the other businesses on macro. Could you talk a little bit about the outlook for recovery there? And also, if you could just touch on the third-party business there that’s kind of impacted gross margin profitability, how does that look to be trending as we look out over the next year or two? Thank you.
Jeremy Cox: Sure. I can take that particularly towards the latter part of that. I think Antonio already hit on some of the demand dynamics, again, where we’ve seen three quarters of flat to increasing demand, and so some positive trends from that perspective. I think from an operating margin perspective, certainly, we saw a reduction in Q4. That was driven off a combination of several things, including a higher third-party mix that you mentioned. As well as the fact that we see — we saw some incremental OpEx in this segment and that OpEx as a comparison to the revenue performance in the quarter also put pressure onto that operating margin. However, we do expect a pretty quick recovery there. We — as we look into Q1, in particular, revenue is not expected to accelerate meaningfully, but we think the mix will improve as far as towards our IP product.
And the — we should see some OpEx moderation and favorability as we go into the quarter coming out of Q4 and some of the investments that we made there. And so I expect to see that get back into a low double-digit kind of area. And then as we work through the quarter, and that IP mix starts to improve more on demand acceleration, then we should start seeing us working back towards our mid-teen target that we identified at SAM for this segment.
Antonio Neri: I will say also, if you look at our HP Electra product, it’s the fastest ramp we ever had in the history of the company. This quarter, this past quarter grew another 50%. But also there is some short-term impact because a portion of that revenue gets deferred because the subscription is softer on the platform. And so that was an intentional strategy because ultimately, the infrastructure is one piece of it, but the operating system and the cloud services that comes with it are actually a subscription to HPE GreenLake. So while we’re growing 50%, we are not materializing the full revenue because a portion of that gets deferred at least to over three years. And that’s good because ultimately it comes to a significant higher margins for us.
But our strategy is to dramatically improve the mix to IT. And you will see more announcement this week in the storage portfolio, all geared to the AI opportunity. We file an object and that will accelerate some of the momentum we have in the storage portfolio.
Operator: The next question is from Sidney Ho with Deutsche Bank. Please go ahead.
Sidney Ho: I want to ask about ARR, and it was flat quarter-over-quarter, but still up very strongly, 39% year-over-year. Can you walk us through the dynamics why it didn’t change in the quarter? You just talked about GreenLake being very strong multiple times. Are there some negatives maybe some cancellations offsetting the growth? Or is that more a pause of the two very, very strong quarters? And lastly, was there much contribution from AI servers in the AR number at this point?
Jeremy Cox: I’ll take that. So just on the last point, no, there wasn’t any meaningful AI impact, but we do expect that to be an accelerator, particularly in FY ’24 as we go to Q2 and towards the second half. That will be a big part of our ARR story, and we expect that to be an accelerator for us in FY ’24. On the quarter-over-quarter, this business, similar to what I mentioned on the supercomputing area does have some time between order to revenue recognition. In this case, when ARR begins to be reported. And so I think the sequential story was more about. Early in the year, we had seen more as the backlog had been burning down and some of those deals that have been waiting in the pipeline turning into — and converting that helped drive and accelerate the ARR through the first 3 quarters.
We saw a little bit less of that in Q4. But I don’t think that it all as an indication of a slowdown in this space. In fact, between the 35% and 45% kind of CAGR or annual growth, I expect us in FY ’24 to see the higher end of that range.
Jeff Kvaal: Sidney, there’s some rounding in there that we can talk through. But thank you. Gary, this should be our last question, I think.
Operator: And our final question will be from Meta Marshall with Morgan Stanley. Please go ahead.
Unidentified Analyst: Hi, this is Mary on for Meta Marshall. I just had a question on demand trends. Can you speak to linearity within the quarter and whether pockets of weakness you saw during the quarter changed as the quarter went on?
