Q4 2021 Hewlett Packard Enterprise Co Earnings Call

Bedroom in the webcast player for this earnings call.

With that let me turn it over to you Antonio.

Well, thanks, Jeff and good afternoon, everyone. Thank you for joining our call today and for those of you who attended our virtual security analyst meeting last month. Thank you. We appreciate the opportunity to discuss how our edge to cloud strategy position us to capture an expanded market opportunity and upsell ratio holder value creation.

Speaker 1: Well, thanks, Jeff, and good afternoon, everyone. Thank you for joining our call today. And for those of you who attended our virtual security analysts meeting last month, thank you. We appreciate the opportunity to discuss how our edge-to-cloud strategy positioned us to capture an expanded market opportunity and accelerate shareholder value creation.

Speaker 1: HPE ended fiscal year 2021 with strong momentum.

HP ended fiscal year 2021 withdrawn momentum customer.

Speaker 1: Customers are responding to our edge to cloud value proposition as evidenced by the record amount for our solution.

Customers are responding to our edge to cloud value proposition as evidenced by the record demand for our solutions.

Speaker 1: Demand accelerated in the second half of the year, driving fiscal year 2021 orders growth of 16% year-over-year.

Demand accelerated in the second half of the year driving in fiscal year 2021 orders growth of 16% year over year.

Speaker 1: Revenue of $27.8 billion in fiscal year 21 grew in line with our long-term outlook of 1% year-over-year.

Revenue of 27 $8 billion in fiscal year 'twenty. One grew in line with our long term outlook up 1% year over year.

Speaker 1: In fiscal year 2021, we executed very well, which enabled us to exceed our commitments across all financial metrics, even with a substantial order backlog.

In fiscal year, 2021, we executed pretty well, which enable us to.

Exceed our commitments across all financial metrics, even with a substantial order backlog.

Speaker 1: Our as-a-service annualized revenue run rate, or AIR, of $796 million was up 36% year-over-year.

Our auto service annualized revenue run rate or <unk> of $796 million was up 36% year over here.

Speaker 1: We significantly improved our gross and operating margins, which increased our fiscal year 2021 non-gap operating profit by 25% year-over-year.

We significantly improve our gross and operating margins, which increased our fiscal year 2021, non-GAAP operating profit by 25% year over year.

Speaker 1: We delivered fiscal year 21 non-GAAP diluted net earnings per share of $1.96, up 27% year-over-year. And we generated fiscal year 2021 free cash flow of $1.6 billion, up $1 billion year-over-year, which translates to growth of 177%.

We delivered fiscal year 'twenty, one non-GAAP diluted net earnings per share of $1 96 up 27% year over year.

And we generate the fiscal year 2021 free cash flow of <unk> billion.

$616 billion.

Up $1 billion year over year, which translates to growth of 177%.

Speaker 1: This was a very strong performance, and it was particularly impressive against the backdrop of industry-wide supply constraints, which continue to challenge our ability to convert orders to revenue as quickly as we would like.

This was a very strong performance and it was particularly impressive against the backdrop of industry wide supply constraints, which continue to challenge our ability to convert orders to revenue as quickly as we would like.

Speaker 1: We have a world-class global operations team that continues to work closely with a long-standing diverse network of suppliers.

We have a world class global operations team that continues to work closely with our long standing diverse network of suppliers. We continue to take proactive inventory measures to better position us to deliver against these robust customer demand.

Speaker 1: We continue to take proactive inventory measures to better position us to deliver against this robust customer demand.

Our results in Q4 strengthen and the momentum we have as we enter fiscal year 'twenty two.

Speaker 1: Our resulting Q4 strengthens the momentum we have as we enter fiscal year 22.

Speaker 1: Increased demand in the quarter dropped orders growth of 28% year-over-year with particular strength in our as-a-service orders, which grew an impressive 114% year-over-year, including a large network as-a-service win.

Increased demand in the quarter drove orders growth of 28% year over year with particular strength in our other service orders, which grew an impressive 114% year over year.

Including a large network as a service win.

Speaker 1: We also saw record levels of orders in key growth areas, including intelligent edge, high-performance computing, and artificial intelligence businesses.

We also saw record levels of orders in key growth areas, including intelligent edge high performance computing and artificial intelligence businesses.

Speaker 1: We delivered $7.4 billion in total Q4 revenue, which was up 7% sequentially and above normal sequential seasonality.

We delivered $7 $4 billion in total Q4 revenue, which was up 7% sequentially and above normal sequential seasonality we.

Speaker 1: We expanded our gross and operating margins, increasing our Q4 non-GAAP diluted net earnings per share by 27% year-over-year.

We expanded our gross and operating margins, increasing our Q4 non-GAAP diluted net earnings per share by 27% year over year.

Speaker 1: And we generate a Q4 free cash flow of $94 million in line with the outflow we provide at the end of Q3.

And we generated Q4 free cash flow of $94 million in line with the outflow we provided at the end of Q3.

Speaker 1: I thought I would take you through our quarterly results in detail, but I would like to spend a little more time putting a full fiscal year in context for you.

Patrick will take you through our quarterly results in detail, but I would like to spend a little more time, putting a full a full fiscal year in context for you.

Speaker 1: Our fiscal year 2021 results prove the relevance of our strategy to customers and the traction of our transformation to become the edge-to-cloud company.

Our fiscal year 2021 results prove the relevance of our strategy to customers and the traction of our transformation to become the edge to cloud company.

Speaker 1: As we discussed at our Security Analyst Meeting last month, HPE is at the center of several compelling megatrends.

As we discussed at our security Analyst meeting last month Hps at the center of several compelling Mega trends.

Speaker 1: the explosion of data at the edge, the mandate for a cloud experience everywhere, and the need to extract value from data to generate insight.

Promotional data out of the edge the Monday for a cloud experience everywhere and they need to extract value from data to generate insights.

Speaker 1: HPE's differentiated H2 class strategy uniquely positioned us to capitalize on these trends and capture growing profitable markets.

Hp's differentiate the edge to cloud strategy uniquely position us to capitalize on these trends and capture a growing profitable markets.

Speaker 1: Our solutions and services help customers overcome the challenges of multi-generation IT and enable them to access, control, and maximize the value of all their workloads and data everywhere.

Our solutions and services help customers overcome the challenges of multi generation and enable them to access control and maximize the value of all their workloads and data everywhere.

Speaker 1: We are executing with focus and speed to deliver against our vision and strategy. We are making strategic investments and taking deliberate steps to continue to shift our business model.

We are executing with focus on speeds delivered against our vision and strategy, we are making strategic investments and taken deliberate steps to continue to shift our business.

Speaker 1: And as I have said previously, this transformation is my number one priority, and I'm proud of the progress we have made in fiscal year 21.

And as I have said previously this transformation is my number one priority and I'm proud of the progress we have made in fiscal year 'twenty one.

Speaker 1: Our Intelligent Edge Business Group Fiscal Year 21 revenue 13% year-over-year, with orders exceeding, for the first time, $4 billion.

Our intelligent edge business grew fiscal year, 'twenty, one revenue, 13% year over year with orders exceeding for the first time $4 billion.

Speaker 1: Customer demand was up strong double digits year over year as more customers look for ways to create new digital experiences at the edge and capitalize on the data generated there.

Customer demand was up strong double digits year over year as more customers look for ways to create new digital experiences at the edge and capitalize on the data generated there.

Speaker 1: But the industry-wide component shortages kept us from converting our full order momentum to revenue Q4. And we entered fiscal year 2022 with record levels of backlog.

But the industry wide component shortages kept us for converting our full order momentum to revenue in Q4, and we enter fiscal year 2022 were record levels of backlog.

Speaker 1: Our market leadership at the edge remained very strong. HPE was positioned as one of the leaders in the magic quadrants Gartner provides for wireless access network edge infrastructure, which is notable because HPE is only one of the two companies to be positioned in the leader quadrant four years in a row.

Our market leadership of the edge remain very strong HP was position as the leader in one of the leaders in their magic quadrant Gartner provides for wireless access network edge infrastructure, which is notable because HPE is only one of the two companies to be positioned in the leader quadrant for two years in a row.

Speaker 1: We continue to drive strong innovation in this business. In Q4, we introduced the industry-first distributed services switch, which brings software-defined services and security right to where the data is created and processed.

We continue to drive strong innovation in this business in Q4, we introduced the industry first distributed services switch, which bring software defined services and security right, where the data is created in process.

Speaker 1: Developed in partnership with Pensando, this solution eliminates legacy appliances and host software needed to build the hybrid cloud demand.

Developed in partnership with Penn Sandal this solution eliminates legacy appliances and host software needed to build the hybrid cloud demand.

Speaker 1: demanded by modern applications and IT organizations.

And demanded by modern applications and it organizations.

Speaker 1: In Q4, we closed the largest network-as-a-service deal in HP history to help a large U.S. retailer enhance its customer and employee experience throughout its stores.

In Q4, we closed the largest network as a service deal in <unk> history to help large U S retailer enhancing customer and employee experience throughout the stores.

Speaker 1: In addition, the Major League Soccer franchise FC Cincinnati standardized on Aruba at the TQL Stadium to deliver next generation digital cashless, contactless fun and event experience.

In addition, the major league soccer franchise FC Cincinnati standardize on Aruba at the <unk> Stadium to deliver next generation digital cashless contactless fund and event experiences.

Speaker 1: The franchise deployed an end-to-end Aruba Edge Services platform network and its new 26,000-seat stadium to power this game day and special event experience.

The franchise deployed an end to end Aruba edge services platform network and its new 26000 seat stadium to power These games.

They and special event experiences.

Speaker 1: Orders of HPE's high-performance computing and AI offerings were also up strong double digits year over year.

Orders of Hpe's high performance computing and AI offerings were also up strong double digits year over year.

Speaker 1: This record level of demand has generated an order book of awarded contracts now at $2.7 billion, excluding the important $2 billion win with the U.S. National Security Agency.

This record level of demand has generated on an order book of awarded contracts now at $2 $7 billion. Excluding the important 2 billion dollar win with a U S National Security Agency.

Speaker 1: HPE expanded our number one market position in HPC with 37% market share as of calendar Q2 data, which is more than 14 points above the closest competitor.

<unk> expanded our number one market position HBC with 37% of market share as of calendar Q2 data, which is more than 14 points of both the closest competitor and.

Speaker 1: And according to the list of the top 500 supercomputers released just two weeks ago, 33 of the top 100 most powerful supercomputers in the world were built by HPE. This is more than any company.

And according to the list of the top 500 supercomputers that released just two weeks ago.

33 of the top 100, most powerful supercomputers in the world were built by HPE.

This is more than any company.

Speaker 1: At the end of Q4, the National Energy Research Scientific Computing Center, NERSC, at Berkeley's lab accepted the first phase of the promoter supercomputer.

At the end of Q4, the National Energy Research Scientific Computing Center nurse at Berkeley's lap accepted the first phase of the per motive supercomputer.

Speaker 1: Powered by the HP Cray EX system, Permuta introduced a new generation of supercomputing capabilities to more than 8,000 scientists performing research for the US Department of Energy Office of Science.

Powered by the HP create E X system for a move to introduce a new generation of supercomputing capabilities to more than 8000 scientists performing research for the U S Department of energy office of Science.

Speaker 1: HP is uniquely positioned to bring the AI deep learning and data analytics capabilities of our most advanced supercomputers to mainstream enterprises through the

HP is uniquely positioned to bring the AI deep learning and data analytics capabilities of our most advanced supercomputer to mainstream enterprises through.

Through the <unk> platform.

Speaker 1: In Q4, we announced that ENI, a global energy company, selected HP GreenLake to upgrade its existing HP supercomputer.

In Q4, we announced that Eni, a global energy company selected HPE to upgrade existing HB supercomputer through.

Speaker 1: Through HPE GreenLake, E&I can accelerate discovery of new energy sources with more accurate modeling and simulations, as well as become more sustainable by monitoring utilization and energy consumption within an out-of-service solution.

Through HPE Green Lake Eni, Cansler, and discover discovery of new energy sources with more accurate modeling and simulations as well as become more sustainable by monitoring utilization and energy consumption within an as a service solution.

Speaker 1: We continue to strengthen our compute and storage businesses where we saw strong orders and profitability in fiscal year 2021.

We continued to strengthen our compute and storage businesses, where we saw strong order some profitability in fiscal year 2021.

Speaker 1: In compute, orders increase more than 10% in fiscal year 21, and we deliver operating margins of 10.8% up 260 basis points year over year.

<unk> orders increased more than 10% in fiscal year, 'twenty, one and we deliver operating margins of 10, 8% up 200.

60 basis points year over year.

Speaker 1: We are making bold moves to transform our storage business into a cloud-native data services business, which resulted in a high single-digit order growth and gross margin expansion of 130 basis points year over year.

We're making bold moves to transform our storage business into a cloud native data services business, which resulted in a high single digit order growth and gross margin expansion up 130 basis points year over year.

Speaker 1: And we continue to see high services attach rate helping enable HP Pointnext orders to increase mid-single digits in Fiscal Year 21.

And we continue to see high services attach rate, helping enable HP <unk> orders to increase mid single digits in fiscal year 'twenty one.

Speaker 1: This contributed to the overall performance of HB.NEXT, which ended fiscal year 21 with a book-to-bill ratio of 1.15 of revenues, highlighting the potential for future revenue growth in fiscal year 22 and beyond.

This contributed to the overall performance of HP next which ended fiscal year 'twenty, one with a book to Bill ratio of 115 of revenues highlighting the potential for future revenue growth in fiscal year 'twenty two and beyond.

Speaker 1: In fiscal year 2021, we generate a strong momentum in our transformation to an as a service company. Our company as a service orders increased 61% year over year, with HP GreenLake orders increasing 46% year over year.

In fiscal year 2021, we generate the strong momentum in our transformation to a service company or <unk>.

As a service orders increased 61% year over year, which.

The HB Green Lake orders, increasing 46% year over year.

Speaker 1: Our as-a-service annualized revenue run rate, or AIR, of $796 million was up 36% year-over-year.

Our as a service annualized revenue run rate or <unk> of $796 million was up 36% year over year.

Speaker 1: The growth of our AIR is particularly noteworthy because this recurring revenue stream is high-quality and high-margin.

The growth of our AI is particularly noteworthy because this recurring revenue stream is high quality and high margin.

Speaker 1: During our Security Analysts meeting last month, Tarek shared that more than 60% of our AIR makes is software and services.

During our security analyst meeting last month tonic shift that more than 60% of our AI. Our mix is software and services and we believe that portion will grow to more than three quarters in the next three years.

Speaker 1: And we believe that Porsche will grow to more than three quarters in the next three years.

Speaker 1: Our AIR gross margins are well above our corporate average gross margins today, and the addition of high-value software content will drive margins even higher.

Our gross margins are well above our corporate average gross margins today and the addition of high value software content will drive margins even higher.

Speaker 1: Our Pivot to Analysis Service company is enabled by HP Financial Services, which increased fiscal year 2021 financing volume 3% year over year, driven by strong growth within HP GreenLake.

Our pivot to an as a service company is enabled by HP financial services, which increased fiscal year 2021 financing volume, 3% year over year, driven by strong growth within HB three lake.

Speaker 1: We continue to advance our leadership in our HPE GreenLake offering. In September , we introduced HPE GreenLake for Data Protection, which are cloud services designed to protect data across edge-to-cloud, overcome runs-aware attacks, and deliver rapid data recovery.

We continue to advance our leadership in our <unk> offering in September we introduced the HP Green Lake for data protection, which our cloud services designed to protect data across edge to cloud overcome brands of Wheeler attacks and deliver rapid data recovery.

Speaker 1: This new set of solutions marks our entry into the growing data protection as a service market.

This new set of solutions marks our entry into the growing data protection as a service market our acquisition of Zephyr enable us to add market, leading data protection to our cloud services portfolio to help enterprises take cyber threats and ransomware attacks at all.

Speaker 1: Our acquisition of Zerto enabled us to add market-leading data protection to our cloud services portfolio to help enterprises take cyber threats and ransomware attacks head-on.

Speaker 1: We also launched HPE GreenLake for Data Analytics, which includes the industry-first unified modern hybrid analytics and data lake platform.

We also launched HD accumulate for data analytics, which includes the industry first unified modern hybrid analytics and data Lake platform.

Speaker 1: This strategically important solution positions HPE in the growing unified analytics market and helps customers accelerate modernization initiatives for all data across H2 clouds.

Strategically important solution positions HPE in the grow with unify analytics market market and helps customers accelerate modernization initiatives for all data across edge to cloud.

Speaker 1: We continue to see incredible response to our HP GreenLake offering. We added more than 300 new GreenLake customers during fiscal year 21, bringing our customer count to more than 1,250.

We continue to see incredible response to what HP connect offering we added more than 300, new Green Lake customers during fiscal year, 'twenty, one, bringing our customer count to more than 1250.

Speaker 1: New GreenLake logos represent an increasing share of orders, with approximately one quarter of Q4 GreenLake orders coming from your customers.

You can elect logos represent an increasing share of orders with approximately one quarter of Q4 getting like orders coming from new customers today more than 900 partners sell HB Green Lake one of the largest partner ecosystems selling as a service offerings in the industry, we added more than one.

Speaker 1: Today, more than 900 partners sell HPE GreenLake, one of the largest partner ecosystems selling Azure service offerings in the industry.

Speaker 1: We added more than $1.5 billion of GreenLake total control value over the last year, bringing the total to more than $5.7 billion.

$5 billion of Green Lake total contract value over the last year, bringing the total to more than $5 $7 billion.

Speaker 1: Examples of new GreenLake logos include Trinqueiro Family Estates, the second largest family-owned winery in the world, which adopted HP GreenLake through our channel partner PKA Technologies to add flexibility and scale its capacity to meet the increasing demand of automation.

Examples of new Green Lake logos inclusive drink Caito family States. The second largest family owned winery in rewards, which adopted the HB Green Lake through our channel partners PK technologies to add flexibility and scale.

Its capacity to meet the increasing amount of alto and <unk>.

Cloud formation.

Speaker 1: The HV Green Lake solution powers the wine in this automated warehouse, where approximately 60 different types of wines are produced, bottled, packaged, and prepared for shipping while reducing overall IT costs.

The <unk> solution powers. There one is ultimate the warehouse, where approximately 60 different types of wines are produced mobile package and prepared for shipping while reducing overall costs.

Speaker 1: We also want to deal with ONGC, India's largest oil and natural gas company, which is using the HPE GreenLake platform to make one of the largest SAP implementations in the world more manageable and flexible.

We also won a deal with <unk> and GC Indias largest oil and natural gas company, which is using the <unk> platform to make one of the largest ACP implementations in the world more manageable and flexible.

Speaker 1: RQ4 rounded out an impressive year for HPE and I'm proud of all we have accomplished.

Our Q4 rounded out an impressive year for HPE and I'm proud of all with IHOP accomplished we have made incredible progress in transforming to become the edge to cloud leader.

Speaker 1: We have made incredible progress in transforming to become the edge to cloud leader, executing a strategy to help customers in truly differentiated ways, and positioning ourselves for sustainable, profitable growth for our shareholders.

Executing on our strategy to help customers truly differentiated ways and position ourselves for sustainable profitable growth for our shareholders.

Speaker 1: At the same time, we have advanced our ESG initiatives, which in Q4 earn us a position on a highly competitive Dow Jones Sustainability Award Index, placing in the 98th percentile.

At the same time, we have advanced our ESG initiatives, which in Q4 earn us a position on the highly competitive Dow Jones Sustainability Award index, placing in the 98 percentile.

Speaker 1: We exceeded our commitments in fiscal year 21, and our momentum is strong as we enter fiscal year 22 with a strategy more relevant to customers than ever before and a sharp focus on execution.

We exceeded our commitments in fiscal year 'twenty, one and our momentum is strong as we enter fiscal year 'twenty, two with a strategy of more relevant to customers than ever before and a sharp focus on execution.

Speaker 1: With that, I will turn it over to Tarek to share additional details about the quarters. Tarek, over to you.

With that I will turn it over to Patrick to share additional details about the quarter static over to you.

Thank you very much Antonio.

I will start with a summary of our financial results for the fourth quarter of fiscal year, 'twenty, one and as usual I'll be referencing the slides from our earnings presentation to guide you through our performance in the quarter.

Speaker 2: Antonio discussed the key Fiscal Year 21 highlights on slides 1 and 2. So now let me discuss our Q4 performance starting with slide 3.

And Tony will discuss the key fiscal year 'twenty, one highlights on slides one and two so now let me discuss our Q4 performance starting with slide three.

Speaker 2: I am very pleased to report that we continue to see unprecedented demand across all our businesses with robust order growth, up 28% year-over-year.

I am very pleased to report that we continue to see unprecedented demand across all our businesses with robust order growth up.

Up 28% year over year.

Speaker 2: Building on the strength from the last quarter, we delivered Q4 revenues of $7.4 billion, up 7% from the prior quarter, above normal sequential seasonality, and this despite increased supply chain challenges that we foreshadowed at SAM last month.

Building on the strength from the last quarter, we delivered Q4 revenues of $7 $4 billion.

Up 7% from the prior quarter above normal sequential seasonality and this despite increased supply chain challenges that we foreshadowed at Sam last month.

Speaker 2: It's also worth highlighting that $7.4 billion of revenue represents the highest level since Q1 of fiscal year 19, well before the pandemic.

It's also worth highlighting that $7 $4 billion of revenue represents the highest level since Q1 or fiscal year 19, well before the pandemic.

Speaker 2: Our non-gap gross margin was 33%, which was up 230 basis points from a prior year.

Our non-GAAP gross margin was 33%, which was up 230 basis points from our prior year and this was driven by our deliberate actions to shift towards higher margin software rich offerings strong pricing discipline and cost takeout.

Speaker 2: This was driven by our deliberate actions to shift towards higher margin, software-rich offerings, strong pricing discipline, and cost takeout.

Speaker 2: As previously indicated, ROS margins were pressured from prior quarter levels due to an increasing industry-wide shortages of certain components that have resulted in extended lead times and higher commodity costs underpinning backlogged orders.

As previously indicated gross margins were pressured from prior quarter levels due to an increasing industry wide shortages of certain components that have resulted in extended lead times and higher commodity cost underpinning backlogged orders.

Speaker 2: We continue to take proactive inventory measures and display healthy price discipline to minimize the impact of recent disruptions.

We continue to take proactive inventory measures and display healthy price discipline to minimize the impact of recent disruptions.

Speaker 2: We expect this dynamic supply chain situation to last well into calendar year 2022.

We expect this dynamic supply chain situation to last well into calendar year 2022.

Speaker 2: We also continue to invest in high-growth, margin-rich areas of our portfolio.

We also continued to invest in high gross margin rich areas of our portfolio.

Speaker 2: We've made investments in our overall go-to market to accelerate our growth and our shift to another service model.

We've made investments in over in our overall go to market to accelerate our growth and our shift to an Azure service model.

Speaker 2: Even with these investments, our non-GAAP operating margin was 9.7%, up 120 basis points from the prior year, which translates to a 16% year-over-year increase in operating profit.

Even with these investments our non-GAAP operating margin was nine 7% up 120 basis points from the prior year, which translates to a 16% year over year increase in operating profit.

Speaker 2: Within other income and expense, we benefited from further strong gains related to increased valuations in our Pathfinder Venture Portfolio and outstanding operational performance in H3C that I will address in more detail later.

Within other income and expense we benefited from further strong gains related to increased foundations in our pathfinder venture portfolio and outstanding operational performance in <unk> that I will address in more detail later.

Speaker 2: With strong execution across the business, we ended the quarter with non-gap EPS of $0.52, up 27% from the prior year, and at the high end of our outlook range for Q4.

With strong execution across the business, we ended the quarter with non-GAAP EPS of <unk> 52.

Up 27% from the prior year and at the high end of our outlook range for Q4.

Speaker 2: Excluding $2.2 billion of after-tax proceeds received from Oracle's satisfaction of the judgment in the Itanium litigation, Q4 cash flow from operation was $784 million and free cash flow was $94 million.

Excluding $2 2 billion of after tax proceeds received from Arco satisfaction over the judgment in the Italian litigation Q4 cash flow from operation was $784 million and free cash flow was $94 million.

Speaker 2: For fiscal year 21, this brings our total cash flow from operations to $3.7 billion, up $1.5 billion from the prior year, and our free cash flow to $1.6 billion, up $1 billion from the prior year, driven primarily by an increase in earnings.

For fiscal year 'twenty. One this brings our total cash flow from operations was $3 7 billion up $1 $5 billion from the prior year and our free cash flow to $1 6 billion up $1 billion from a prior year driven primarily by an increase in earnings.

Speaker 2: Our strong execution and cost optimization and resource allocation program has effectively put us one year ahead of schedule with respect to delivering our previous free cash flow target.

Our strong execution on cost optimization and resource allocation program has effectively put us one year ahead of schedule with respect to delivering our previous free cash flow targets.

Speaker 2: Finally, the strength of our cash flow has positioned us to return substantial capital to our shareholders. We paid $157 million of dividends in the current quarter and are declaring a Q1 dividend today of $0.12 per share payable in January .

Finally, the strength of our cash flow has positioned us to return substantial capital to our shareholders, we paid $157 million of dividends in the current quarter and are declaring a Q1 dividend today of <unk> 12 per share payable in January we.

Speaker 2: We also reinstated our share repurchase program in Q4, buying $213 million in shares, reflecting our confidence in future cash flow generation and our view that the stock is undervalued.

We also reinstated our share repurchase program in Q4 buying $213 million in shares reflecting our confidence in future cash flow generation and our view that the stock is undervalued.

Speaker 2: Slide four highlights key metrics of our accelerating as a service.

Slide four highlights key metrics of our accelerating as a service business. We have made significant progress over the last year by adding over 300, new enterprise screen like customers to over 250 today and increasing our <unk> by over $1 5 billion.

Speaker 2: We have made significant progress over the last year by adding over 300 new Enterprise GreenLake customers to over 1,250 today and increasing our TCV by over $1.5 billion to a current lifetime TCV of over $5.7 billion.

So our current lifetime TCE of over $5 7 billion.

Speaker 2: For Q4 specifically, our ARR was $796 million, which was up 36% year-over-year, as reported, and total as-a-service orders were up 114% year-over-year, which represents an acceleration from Q3, demonstrating the strong momentum we are experiencing in this period.

For Q4, specifically, our IRR was $796 million, which.

Which was up 36% year over year as reported and total as a service orders were up 114% year over year, which represent an acceleration from Q3, demonstrating the strong momentum we are experiencing in this business.

Speaker 2: It's also important to remember the incremental disclosure we provided at SAM 2021, highlighting the significant proportion of software and services in our offerings that together make up more than 60% of the ERR mix today.

It's also important to remember the incremental disclosure we provided at Sam 2021, highlighting the significant proportion of software and services in our offerings that together make up more than 60% of the mix today.

Speaker 2: We expect this mixed percentage to expand to more than 75% by fiscal year 2024 as we add more software capabilities driving further gross margin improvement.

We expect this mix percentage to expand to more than 75% by fiscal year 'twenty four as we add more software capabilities driving further gross margin improvement.

Speaker 2: Overall, based on strong momentum this year, I'm very happy with how this business is progressing, which gives us confidence to increase our ARR growth targets by 5 points to a 35-45% giga from FY21 to FY24.

Overall based on strong momentum this year I'm very happy with how this business is progressing which gives us confidence to increase our.

Growth targets by five points to a 35% to 45% CAGR from fiscal year 'twenty, one to fiscal year 'twenty four.

So, let's now turn to our segment highlights on slide five.

Speaker 2: Our growth businesses, which now represent nearly 25% of our total company revenue, generated record levels of orders up strong double digits.

Our growth businesses, which now represent nearly 25% of our total company revenue generated record levels of orders up strong double digits.

Speaker 2: In the intelligent edge, revenue grew 2% year-over-year in Q4, and for fiscal year 21 was up 13%.

In the intelligent edge revenue grew 2% year over year in Q4 and for fiscal year 'twenty, one was up 13%.

Speaker 2: Demand continued unabated in Q4, with order growth up over 50% year-over-year, but the component shortages we foreshadowed at SAM were more pronounced in our Aruba business.

Demand continued unabated in Q4 with order growth up over 50% year over year, but the component shortages, we foreshadowed that Sam were more pronounced in our Aruba business.

Speaker 2: Additionally, our Edge-as-a-Service offerings were up triple digits year over year, significantly contributing to our ARR.

Additionally, our as our edge as a service offerings were up trip tree.

<unk> digits year over year significantly contributing to our AR.

Speaker 2: We delivered a multi-million dollar NAS network-as-a-service deal in Q4 for a large U.S. customer, which represented more than 800 basis points headwind in the short term to Aruba Revenue in Q4, but will help our long-term financial profile in the business.

We delivered a multimillion dollar Nash network as a service deal in Q4 for a large U S customer, which represented more than 800 basis points headwind in the short term to our revenue in Q4, but will help our long term financial profile in the business.

Speaker 2: Aruba services also continue to grow strongly up high single digit.

Aruba services also continued to grow strongly up high single digits looking.

Speaker 2: Looking forward, we expect it will take some time for supply chain challenges to ease, but we finish Fiscal Year 21 with over $4 billion in orders, which will give us strong momentum through Fiscal Year 21.

Looking forward, we expect it will take some time for supply chain challenges to ease, but we finished fiscal year 'twenty, one with over $4 billion in orders, which will give us strong momentum through fiscal year 'twenty two.

Speaker 2: In HPC and AI, demand strengthened even further with another record level of orders. Revenue grew 35% sequentially and was flat year over year with a difficult compare. We did have customer acceptances of some large contracts get pushed out into fiscal year 22, and we now have $2.7 billion of awarded contract in addition to the $2 billion contract awarded by the NSA, giving us confidence for next year and beyond.

In HBC Nai demand strengthened even further with another record level of orders revenue grew 35% sequentially and was flat year over year with a difficult compare we.

We did have customer acceptances of some large contracts get pushed out into fiscal year 'twenty two and we now have $2 $7 billion of awarded contract. In addition to the $2 billion contract awarded by the NSA, giving us confidence for next year and beyond.

Speaker 2: We expect robust revenue growth in fiscal year 2022 to get us back within the range of our original long-term 8% to 12% CAGR output.

We expect to robust revenue growth in fiscal year 'twenty two to get us back within the range of our original long term, 8% to 12% CAGR outlook.

Speaker 2: In compute, order growth was up strong double digits. Revenue grew 4% quarter over quarter, reflecting above normal sequential seasonality, and was up double digits year over year when normalizing for the Q4 FY20 backlog.

In compute order growth was up strong double digits revenue grew 4% quarter over quarter, reflecting above normal sequential seasonality and was up double digits year over year when normalizing for the Q4 FY 'twenty backlog.

Speaker 2: Operating margins of 9.4% were up 280 basis points from a prior year due to disciplined pricing and the right sizing of the cost structure in this segment.

Operating margins of nine 4% were up 280 basis points from prior year due to disciplined pricing and the right sizing of the cost structure in this segment.

Speaker 2: Within storage, order growth accelerated and was up double digits year over year.

Within storage order growth accelerated and was up double digits year over year revenue grew 2% year over year, and 7% quarter over quarter ahead of normal sequential seasonality driven by strong growth in software defined offerings.

Speaker 2: Revenue grew 2% year-over-year and 7% quarter-over-quarter ahead of normal sequential seasonality driven by strong growth in software-defined offerings.

Speaker 2: All flash arrays grew 7% year-over-year, led by Primera, up strong double digits.

All flash arrays grew 7% year over year led by primary up strong double digits nimble grew 4% year over year with ongoing strong the ACI momentum growing double digits year over year.

Speaker 2: Nimble grew 4% year-over-year with ongoing strong DHCI momentum growing double digits year-over-year.

Speaker 2: Storage operating profit margin was 13.8%, reflecting OpEx investments to continue driving product makeshift towards more software-rich platforms, including our cloud data service.

Storage operating profit margin was 13, 8%, reflecting opex investments to continue driving product mix shift towards more software rich platforms, including our cloud data services.

With respect to <unk> operational services, including nimble services orders accelerated and we're up high single digits in Q4 and up mid single digits for fiscal year 'twenty one.

Speaker 2: With respect to Pointnext operational services, including Nimble services, orders accelerated and were up high single digits in Q4 and up mid-single digits for fiscal year 21.

Speaker 2: Most importantly, revenue also grew, as reported overall for Fiscal Year 2021, the first time in several years.

Most importantly revenue also grew as reported overall for fiscal year 'twenty one the first time in several years.

This is again very important as we enter fiscal year 'twenty, two with strong momentum in our most profitable business.

Speaker 2: Within HPE Financial Services, volume increased 18% year-over-year, driven by strong double-digit growth in GreenLake.

Within HPE financial services volume increased 18% year over year, driven by strong double digit growth in Green Lake.

Speaker 2: Revenue was up 3% sequentially and flat year-over-year.

Revenue was up 3% sequentially and flat year over year.

Speaker 2: Our profitability is also benefiting from higher residual values realization and lower borrowing costs as we continue to securitize our U.S. portfolio via the ABS market.

Our profitability is also benefiting from higher residual values realization and lower borrowing costs as we continue to securitize, our U S portfolio of via the ABS market.

Speaker 2: Our operating margin was 14.1%, up 630 basis points from the prior year, and our return on equity at 23.8% is well above the 18% plus target set at SAM 2021.

Our operating margin was 14, 1% up 630 basis points from the prior year and our return on equity at 23, 8% is well above the 18% plus target set at some 2021.

Speaker 2: Slide 6 highlights our revenue and EPS performance, where you can clearly see the strong rebound from last year and sustained momentum throughout fiscal year 21.

Slide six highlights our revenue and EPS performance, where you can clearly see the strong rebound from last year and sustained momentum throughout fiscal year 'twenty one.

Speaker 2: As mentioned previously, Q4 revenue of $7.4 billion is the highest level we've delivered since Q1 2019.

As mentioned previously Q4 revenue of $7 $4 billion is the highest level, we have delivered since Q1 19.

Speaker 2: With a strong demand environment, our strategic business makeshift and execution of our cost optimization and resource allocation program, we increased our Q4 non-GAAP EPS to $0.52, up 27% year-over-year.

With a strong demand environment, our strategic business mix shift and execution of our cost optimization and resource allocation program. We increased our Q4 non-GAAP EPS to <unk> 52, <unk> up 27% year over year.

Speaker 2: Turning to slide 7, we delivered non-GAAP gross margins in Q4 of 33%.

Turning to slide seven we delivered non-GAAP gross margins in Q4 and 33%.

Speaker 2: While rates were impacted as expected sequentially from the supply chain challenges previously discussed, we expanded gross margins up 230 basis points from the prior year.

While rates were impacted as expected sequentially from the supply chain challenges previously discussed we expanded gross margins up 230 basis points from the prior year.

Speaker 2: This was driven by strong pricing discipline and a positive makeshift towards high margin, software rich businesses.

This was driven by strong pricing discipline, and a positive mix shift towards high margin software rich businesses.

Speaker 2: In total, in fiscal year 21, we delivered nearly $900 million of incremental gross profit.

In total in fiscal year 'twenty, one we delivered nearly $900 million of incremental gross profit.

Speaker 2: Moving forward, we will face lingering supply chain challenges in the near term, but longer term, structural gross margins will improve from continuous makeshift towards the intelligent edge, on IP storage, GreenLake and all of our other service offerings.

Moving forward, we will face lingering supply chain challenges in the near term, but longer term structural gross margins will improve from continuous mix shift towards the intelligent edge on IP storage Green Lake and all of our Azure service offerings.

Speaker 2: Moving to slide 8, you can see we have utilized some of the incremental gross profits to make targeted growth investments while simultaneously expanding non-GAAP operating profit margins.

Moving to slide eight you can see we have utilized some of the incremental gross profit to make targeted growth investments while simultaneously expanding non-GAAP operating profit margins, we have increased our investment levels in R&D to fuel our long term innovation engine and field selling cost to accelerate our growth and our shift to our Azure service peers.

Speaker 2: We have increased our investment levels in R&D to fuel our long-term innovation engine and field selling costs to accelerate our growth and our shift to our as-a-service pivot.

It.

Speaker 2: Even with these investments to drive long-term growth, we delivered operating margins in Q4 of 9.7% of 120 basis points from the prior year.

Even with these investments to drive long term growth, we delivered operating margins in Q4 of nine 7% up 120 basis points from the prior year.

Speaker 2: On slide 9, we want to highlight our unique setup in China through our investment in H3C that has and continues to generate tremendous value for our shareholders.

On slide nine we wanted to highlight our unique setup in China through our investment in <unk> that has and continues to generate tremendous value for our shareholders.

Speaker 2: Our investment and commercial agreement gives us a route to market in the second largest, fastest growing IT market in the world.

Our investment and commercial agreement gives us really a route to market in the second largest fastest growing it market in the world.

Speaker 2: As you know, we do not consolidate revenue and operating profit from H3C, but recognize our 49% share of H3C's earnings through the equity interest statement line on our P&L as part of other income and expense.

As you know, we do not consolidate revenue and operating profit from HSBC, but recognize our 49% share of <unk> earnings through the equity interest statement line on our P&L as part of other income and expense.

Speaker 2: H3C has delivered outstanding operational performance throughout the year and generated $257 million of equity interest in FY21, which was up 21% from the prior year. This makes our business in China a very large contributor to our P&L, one that no other multinational has been able to replicate.

<unk> has delivered outstanding operational performance throughout the year and generated $257 million of equity interest in fiscal year, 'twenty, one which was up 21% from the prior year. This makes our business in China, a very large contributor to our P&L. One net no other multinational has been able to replicate.

Speaker 2: Turning to slide 10, we finished fiscal year 21 generating $3.7 billion of cash flow from operations and $1.6 billion of free cash flow, and this excluding obviously the $2.2 billion of after-tax cash received from Oracle's satisfaction of the Itanium litigation.

Turning to slide 10, we finished fiscal year 'twenty, one generating $3 7 billion of cash flow from operations and $1 6 billion, our free cash flow and this excluding obviously the $2 2 billion of after tax cash received from Oracle satisfaction of the Italian litigation.

Speaker 2: Pre-cash flow was up $1 billion over a year and is $600 million more than the midpoint of our outlook at the start of fiscal year 2020, primarily driven by increased earnings.

Free cash flow was up $1 billion year over year, and a $600 million more than the midpoint of our outlook at the start of fiscal year 'twenty, primarily driven by increased earnings.

Speaker 2: Our cash flow profile is becoming more predictable and aligned to profitability as our restructuring costs diminish and we grow our as-a-service business beginning to recognize more deferred revenues from software and services.

Our cash flow profile is becoming more predictable and aligned to profitability as our restructuring cost diminish and we grow our Azure service business beginning to recognize more deferred revenues from software and services.

Yeah.

Moving onto slide 11, we have made further progress enhancing our balance sheet strength with a strong free cash flow and payment from Oracle.

Speaker 2: Following the receipt of the cash from the Itanium litigation, we redeemed early our $1 billion 4.65% coupon outstanding 2024 notes, and this in a positive NPV transaction that is net debt neutral.

Following the receipt of the cash from the outstanding litigation, we redeemed early our $1 billion for 65% coupon outstanding 2024 notes.

And this in a positive NPV transaction that is net debt neutral.

Speaker 2: The make-all premium paid was a gap-only expense in Q4 and we will realize meaningful interest expense savings over the next three years.

The make whole premium paid was a GAAP only expense in Q4, and we will realize meaningful interest expense savings over the next three years.

We are now in an operating company net cash position of $1 $8 billion.

Speaker 2: Bottom line, our improved free cash flow outlook and cash position ensure we have ample liquidity available to balance long-term growth investments with consistent return of capital to our shareholders.

Bottom line, our improved free cash flow outlook and cash position and ensure we have ample liquidity available to balance long term growth investments with consistent return of capital to our shareholders.

Now turning to our outlook on slide 12.

Speaker 2: At our Securities Analysts meeting last month, we provided our outlook for Fiscal Year 22, and I would like to encourage you to review my presentation for a more detailed discussion of that outlook.

At our Securities Analyst meeting last month, we provided our outlook for fiscal year 'twenty, two and I would like to encourage you to review my presentation for a more detailed discussion of that outlook.

Speaker 2: Having said that, let me reiterate a drill down into a few key components.

Having said that let me reiterate a drill down into a few key components.

Speaker 2: We expect fiscal year 2022 revenue growth in constant currency of 3% to 4%. As discussed, the supply chain environment remains very dynamic and we expect component shortages with increased commodity costs, expedite and shipping fees to last for the next few quarters, impacting near-term revenue and gross margin.

We expect fiscal year 'twenty to revenue growth in constant currency of 3% to 4%.

As discussed the supply chain environment remains very dynamic and we expect component shortages with increased commodity cost expedite and shipping fees to last for the next few quarters impacting near term revenue and gross margins.

Speaker 2: In a nutshell, we expect to have more of a back-and-loaded year in FY22, with the supply chain risk that we discussed reflected in our FY22 guidance.

In a nutshell, we expect to have more of a backend loaded year in fiscal year 'twenty two with the supply chain risk that we discussed reflected in our fiscal year 'twenty two guidance.

Speaker 2: We expect non-GAAP EPS to be $1.96 to $2.10 and free cash flow to be $1.8 to $2 billion.

We expect non-GAAP EPS to be <unk>.

<unk> 96 to $2 10, and free cash flow to be one 8% to $2 billion.

Speaker 2: We expect Free Cash Flow to be more in line with historical seasonality where the second half is a stronger generator of cash than the first half.

We expect free cash flow to be more in line with historical seasonality, where the second half is a stronger generator of cash than the first half.

Speaker 2: Now specific to Q1 revenue, given the very strong backlog balanced by supply chain constraints, we expect revenue to be in line with normal sequential seasonality of down mid-single digits from Q4 of FY21 and are comfortable with current consensus levels.

Now specific to Q1 revenue given the very strong backlog balanced by supply chain constraints, we expect revenue to be in line with normal sequential seasonality of down mid single digits from Q4 of fiscal year 'twenty, one and are comfortable with current consensus levels.

Speaker 2: We also expect cross-margins to be pressured in the short term, given supply chains.

We also expect gross margins to be pressured in the short term given supply chain.

Speaker 2: As a result, for Q1-22, we expect gap-diluted net EPS of $0.19 to $0.27 and non-gap-diluted net EPS of $0.42 to $0.50.

As a result for Q1 'twenty two we expect GAAP diluted net EPS of 19% to 27.

And non-GAAP diluted net EPS of 40 to 50.

Speaker 2: So overall, I'm very proud of our progress throughout a strong fiscal year 21.

So overall I am very proud of our progress throughout our strong fiscal year 'twenty one.

Speaker 2: As Antonio said, we exceeded all our key financial targets in fiscal year 2021, often by a significant margin.

As Antonio said, we exceeded all our key financial targets in fiscal year 'twenty, one often by a significant margin.

Speaker 2: The demand environment has been incredibly strong across our business with acceleration in the second half of fiscal year 21, demonstrating that our edge-to-cloud strategy is working well and that we are entering fiscal year 22 with strong momentum.

The demand environment has been incredibly strong across our business with acceleration in the second half of fiscal year 'twenty, one demonstrating that our edge to cloud strategy is working well and we are entering fiscal year 'twenty two with strong momentum.

Speaker 2: We are now well positioned to capitalize on the opportunity in front of us and deliver against our fiscal year 22 outlook. Now with that, let's open it up for questions.

We are now well positioned to capitalize on the opportunity in front of us and deliver against our fiscal year 'twenty two outlook now with that let's open it up for questions.

Speaker 3: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

We're using a speakerphone please pick up your handset before pressing the keys.

Speaker 3: To withdraw your question, please press star then 2.

To withdraw your question. Please press Star then two we also request that you only ask one question.

Speaker 3: We also request that you only ask one question.

Speaker 3: Our first question is from Shannon Cross with Cross Research. Please go ahead.

Our first question is from Shannon Cross with Cross Research. Please go ahead.

Speaker 4: Thank you very much. I wanted to dig a little bit more into the ads of service.

Thank you very much I wanted to dig a little bit more into the ads of service.

Speaker 4: performance, you know, obviously orders are extremely strong during the quarter. How much of that was from the one-time – well, not one-time, but from the large contract sign? How should we think about, you know, the longer-term growth potential, how it flows through the model as we look to the next, you know, year or two? And I don't know. Maybe if you can give a little bit more on the composition of the as-of service, is there any one product or service that's really driving that business at this point in time?

Performance, obviously orders are extremely strong during the quarter how much of that was from the the onetime not onetime but it's on the large contract signed how should we think about.

But longer term growth potential of how it flows through the model.

And so we look to the next year or two and I don't know, maybe if you can give a little bit more on the composition of the as a service is there any one product or or service, that's really driving that business at this point in time. Thank you.

Speaker 1: Well, thank you, Shannon. I will start. And obviously, I would like to to comment on the model in itself. Listen, we are super proud of the momentum we have in the market with HP GreenLake. We believe is truly differentiated in the market. And as we show you some, you know,

Well, thank you, Sean I'll start and obviously I would like to comment on the Marpol in itself.

And we are super proud of the momentum we have in the market with HP Green Lake. We believe is truly differentiated in the market and as we show you some.

Two thirds of that is already in the software and services and we believe in three years will be more than 75% of it which obviously come with higher margin.

Speaker 1: Two-thirds of that is already in the software and services, and we believe in three years will be more than 75% of it, which obviously come with high margin and more durable revenue in many ways. What customers like about the model is the ability to procure everything from edge to cloud from one integrated platform.

And more durable revenue in many ways what customers like about the model is the ability to procure everything from edge to cloud from one integrated platform.

Speaker 1: And it's not just what I call infrastructure as a service or hardware as a service on-premises in Acolo or at the edge. It's the fact that they can consume anything from network as a service, subscription to Aruba products, to what I call private cloud to data services, which is part of the transformation we are driving in our storage portfolio.

And it's not just.

What I call infrastructure are also service or hardware as a service on premises in a colo or at the edge is the fact that they can consume anything from network as a service subscription to outerwear products too.

What I call private clouds.

Two data services, which is part of the transformation we are driving in our.

Storage portfolio.

Speaker 1: And as we said, $5.7 billion already in total contra value. And in Q4, that growth was accelerated by a number of new logos, which again, we are the 300 in fiscal year 21.

And as we said $5 $7 billion already in total contract value and in Q4. The growth was also rated by a number of new logos, which again, we have a 300 in fiscal year 'twenty one.

Speaker 1: which dropped the order growth to 114%.

Each drove the order growth to 114%. Okay. So when you think about this we have been delivering 40 50 60 and in Q4 was 114% and Aruba is one key component of that but what we see now Shannon is also the storage bundled is growing very rapidly and thats why I am.

Speaker 1: Okay, so when you think about this, we have been delivering 40, 50, 60, and in Q4 was 114%. And Aruba is one key component of that, but what we're seeing now Shannon is also the storage part of this is growing very rapidly. And that's why I'm excited about next year because we also are adding new capabilities to that platform, particularly, you know, in the early part of 2022.

Excited about next year, because we also are adding new capabilities to the platform, particularly.

The early part of 2022.

Speaker 1: So overall, I will say this has been a home run. We believe we have years of advantage. We are disclosing all our numbers, as you see, versus some other competitors that are not sharing anything, as far as I can see. And what I'm really pleased is that we have now 900 partners selling with us, co-selling, and you will see their offers in our platform here soon, because that's the way we drive pull and push from both sides, direct and indirect. So Tarek, you wanna talk about modeling?

So overall I will say this has been a homerun. We believe we have years of advantage. We are disclosing OLED numbers as you see versus some of our competitors are not showing anything as far as I can see and what I'm really pleased that we have now 900 partners selling without cole sell it and then you will see that offers in a platform here soon.

Because that's the way, we drive pull and push from both sides of direct and indirect synthetic you want to talk about the modeling.

Speaker 2: So, yes, I mean, Antonio said already quite a few things. So, first and foremost, this first and largest network as a service contract contributed to orders in Q4 substantially, but did not contribute to the RR because the revenue would be recognized over time.

So, yes, I mean, Antonio said already quite a quite a few things so.

First and foremost this one.

One.

The first this first and largest network as a service contract contributed two orders in Q4 substantially but did not contribute to the IRR because the revenue will be recognized over time.

Speaker 2: But notwithstanding that, the ARR, if you really look at our ARR progression quarter after quarter in fiscal year 2021, it's outstanding. We did $649 million in Q1 of ARR.

But notwithstanding that.

<unk>, if you really look at our AR progression quarter after quarter in fiscal 'twenty. One it is outstanding we did $649 million in Q1 of IRR.

Speaker 2: grew that to 678 million in Q2, 705 million in Q3, and now approaching 800 million, 796 million to be precise in Q4. So the momentum in this business is extremely strong and there isn't a particular.

Grew that to $678 million in Q2 $705 million in Q3, and now approaching $800 million 796 million to be precise in Q4. So the minute the momentum in this business is extremely strong and there isn't a particular a.

Business unit that is contributing we're executing an integrated strategy that is about edge cloud and data right now the main contributors are the various parts of the organization that fit the three pillars.

Speaker 2: Aruba is one of them, the Storage Business Unit is another one. We will also continue to expand our as-a-service offerings in HPC and AI because we see a tremendous opportunity there. And the future will tell us how big that opportunity will be for us. But we firmly believe it.

Aruba is one of them in the storage business unit is another one we will also continue to expand our Azure service offerings and HBC NII, because we see a tremendous opportunity there.

The future will tell us how big that opportunity will be for us, but we firmly believe in it.

Speaker 3: Thank you, Shannon. Operator, next question, please. The next question is from Wamsi Mohan with Bank of America Merrill Lynch. Please go ahead.

Thank you Shannon Operator next question. Please. The next question is from <unk> Mohan with Bank of America Merrill Lynch. Please go ahead.

Speaker 5: Hi, yes, thank you. Antonio, I'm trying to reconcile your comments around strong backlog, which you guys have been very consistent about.

Hi, yes. Thank you.

Antonio Im trying to reconcile your comments around strong backlog, which you guys have been very consistent about.

Speaker 5: Relative to what happened in the quarter and the guide here for in the near term, it sounds like component shortages were a major reason for that, but you're maintaining your full year guide. So just trying to understand like what gives you the confidence that these will resolve itself and what gives you the confidence that this is this back and loaded year is going to pan out as you're seeing it now.

Relative to what happened in the quarter and the guide here for in the near term. It sounds like component shortages were a major reason for that but you're maintaining your full year guide. So just trying to understand like what gives you the confidence that these will resolve itself.

And what gives you the confidence that this is this back end loaded year is going to Pan out as you are seeing it now.

Speaker 1: Sure. Well, I mean, if you look at our results, right, once it rises, so we grew orders, total company orders 16% year over year, but our revenue in actual dollars was up 3%. Obviously, there is a big divergence there between 16 and 3%, right. And that's driven by the supply availability, despite the fact that we continue, I think do a great job navigating through the challenge.

Sure Walt.

I mean, if you look at our results for iphones. The rightful saw we grew orders total company orders, 16% year over year, but our revenue in actual dollars was up 3%, obviously, there's a big divergence there between <unk> and 3%.

And thats driven by the supply availability. Despite the fact that we continue to I think do a great job in navigating through the challenge and the one area Im really particular pleased once <unk> is the fact that linearity in the business.

Speaker 1: And then one area I'm really particularly pleased, one say is the fact that linearity in the business.

Speaker 1: you know, in the way we approach customers book orders is now more front end and back end in the quarter itself. Always talk about quarters having 13 weeks.

And the way we approach customers that will book orders is now more front end and backend in the quarter itself always talk about quarter to 713 weeks and what is amazing to me in the last couple of quarters. The bookings have been more on the front end the back end, which allows us actually is a little bit counterintuitive, if you think about it.

Speaker 1: And what is amazing to me in the last couple of quarters, the bookings have been more on the front end than the back end, which allows us actually, is a little bit counterintuitive if you think about it. The more orders I bring early on, the more I can convert despite the supply chain challenges because I have more time and more velocity, if you will.

The moral of those bring early on but what I can convert despite the supply chain challenges because they have more time and more velocity. If you will so.

Speaker 1: So, listen, as Tarek said, and I said in my remarks, short term, we're gonna continue to navigate. This is an industry-wide challenge, but we're very confident in the actions we are taking ourselves. And the fact of the matter is that, you know, that backlog is very durable. People ask me early on, have you seen cancellation? I can tell you right now, zero, no cancellations whatsoever. And the orders coming in every day, every week is incredibly strong.

Listen Athletics, Ed in our southern Mato marks short term, we're going to continue to navigate this is an industry wide challenge, but we're very confident the actions we have taken ourselves.

And the fact that the math is that.

The backlog is very durable people asked me early on Hudson cancellation I can tell you right now zero no cancellations whatsoever and the orders coming in every day every week is incredibly strong. So we have to navigate the next quarter or two and then based on our understanding and the work we have done with <unk>.

Speaker 1: So we have to navigate the next quarter or two, and then based on our understanding and the work we have done with our suppliers, the second half will be better. And then also remember, we have, you know, I think world-class capabilities, both on the supply chain operations and our engineering capabilities to be able to adjust components based on the BOM.

Our suppliers the second half will be.

Better and then also remember we have I think world class capabilities, both on the supply chain operations and out of engineering capabilities to be able to adjust components based on the ball.

Speaker 1: And then also, remember, a big chunk of the backlog is related to acceptances in the customer base with HPC, which is already built and shipped.

And then also I remember a big chunk of the backlog is related to acceptances in the in the customer base with HBC, which is already built and shipped but as you know we cannot recognize revenue until full accept that this quarter, we recognize a customer.

Speaker 1: But as you know, we cannot recognize revenue until fully accepted. This quarter, we'll recognize a customer, which had a large order in HPC. But remember, in 2022, we have the large exascale deals. And one of them is gonna be very important for us as we think about the back half of the year. So that's why Tarek and I are very confident on that three to 4% guidance. And let's remind ourselves in that three to 4% guidance, we have one to a one and a half point.

Which had.

A larger order than HBC, but amendment in 2022, we have the large scale deals and one of them is going to be very important for us as we think about the back half of the year.

<unk>.

That's why I started can I, a better confidence on that 3% to 4% guidance and let's remind ourself in that 3% to 4% guidance. We have one two or one and a half point of headwind because of the transition towards a service right, which is great is durable and long.

Speaker 1: of headwind because of the transition towards the service, which is great. It's durable. It's long-term growth.

Long term growth and so you normalize for that it's more like five to five and a half if you will and then on top of that you have to have the currency, which obviously is.

Speaker 1: And so you normalize for that is more like five to five and a half, if you will. And then on top of that, you have to add the currency, which obviously is a is a headwind in the sense that the three to four is constant currency. So if you add all of that, we are more like in the seven to eight percent growth.

Headwinds in the sense that the three to four is constant currency. So if you add all of that they were more like in the 7% to 8% growth and remember that Q4 was $7 $4 billion the largest quarter. Despite the supply chain going all the way back to 2019.

Speaker 1: And remember that Q4 was $7.4 billion, the largest quarter despite the supply chain going all the way back to 2018.

Speaker 3: Thank you, Wamsi. Operator? The next question is from Simon Leopold with Raymond James. Please go ahead.

Thank you operator.

The next question is from Simon Leopold with Raymond James. Please go ahead.

Speaker 6: Thanks for taking the question on this 28% order growth. I'm wondering if you could unpack maybe some of the factors that that contributed to it. And what I'm thinking about is, is there an aspect here of customers trying to get in ahead of price increases or an aspect of customers placing orders earlier because of extended lead times. If you could just help us understand what you see contributing to that massive number. Thanks.

Thanks for taking the question.

On this 28% order growth I'm wondering if you could unpack maybe some of the factors that contributed to it and what I'm thinking about is is there an aspect here of customers trying to get in ahead of price increases.

Or an aspect of customers, placing orders earlier because of extended lead times. If you could just help us understand.

What you see contributing to that massive number thank you.

Speaker 7: We're glad you call it massive because we we agree with you is a strong momentum and clearly was stronger in Q3 and Q4 than the first half of the year. I think it's a combination, Simon. I think that obviously there is a market demand out there, you know, driven by the recovery in the economy.

We're glad you call it massive because we agree with you.

He is a strong momentum.

And clearly was stronger in Q3 and Q4 than the first half of the year I think it's a combination.

<unk>, sorry, I'm on I think that obviously there is market demand out there.

Driven by the recovery in the economy I think customers also worry about the impact of the supply that we will have in the.

Speaker 7: I think customers also worry about the impact of the supply that we'll have in the short midterm.

Short mid term, but on the same time, we should not underestimate the power of our portfolio because I got this question early on do you think this double bookings, perhaps in the commodity space, but not on the value space. We believe Aruba is unique and differentiated this is not.

Speaker 1: But at the same time, we should not underestimate the power of our portfolio because I got this question early on. You think there's double bookings, perhaps in the commodity space, but not in the value space. We believe Aruba is unique and differentiated.

Speaker 1: This is not something you can swap by somebody else. And that business is a true mobile-first, cloud-native approach.

Something you can swap by somebody else and businesses through mobile first cloud native approach.

Speaker 1: which drives a unique experience at the edge. And the momentum has happened for a number of quarters now, despite the short-term challenges of supply. HPC, we are the clear number one leader with 35% market share and 14 points advantage against the second competitor.

Each drives a unique experience at the edge and the momentum has happened for a number of quarters now.

The short term challenges supply HBC, we are the clear number one in either with 35% market share and 40 points advantage against the second competitor.

Speaker 1: I don't think there's anybody that can match us, you know, 35% of the top 100 supercomputers are all Hewlett Packard Enterprise, and we're going to deliver the exascale in 22. And GreenLake, again, the question about...

And then the supercomputer the I don't think there's anybody that can match us.

<unk>, 5% of the top 100 supercomputers, all Hewlett Packard enterprise and we're going to deliver the exoskeleton in 'twenty, two and Green Lake again. The question about Green Lake is through hybrid differentiated offerings from edge to cloud and I think.

Speaker 7: is a true hybrid differentiated offering from edge to cloud. And I think that's been in the making now for a number of years.

That has been in to make it an apples number of years and the pipeline is just amazing to me and now, we're getting better and better and closing deals faster.

Speaker 7: And the pipeline is just amazing to me. And now we're getting better and better in closing deals faster and deploying that solution, which remember, it's not just deploying it. It's also driving usage.

And deploying the solution, which remember it's not just deployment is also driving usage.

Speaker 1: And so it's a combination of growth in the current install base and new logos, which I commented 300 new logos.

And so it's a combination of growth and accordingly store base and new logos, which I've commented 300, new logos. So we believe there may be some in the commodity space, but the rest is because of whether it's the cloud offering which is resonating in the market and we believe that's going to celebrate in 2022.

Speaker 7: So we believe there may be some in the commodity space, but the rest is because of our H2 cloud offering, which is resonating in the market. And we believe that's going to accelerate in 2022.

Speaker 3: Thank you, Simon. Operator, the next question is from Kyle McNeely with Jeffries. Please go ahead.

Thank you Simon operator.

Next question is from Kyle Mcnealy with Jefferies. Please go ahead.

Speaker 8: Hi, thanks for the question. I was wondering if you could drill down a bit more in the areas that are driving your compute segment results. They were a bit higher than we expected and certainly consensus. I get that there's some effects in there. You quantified that, but are there segments of the market that have been stronger for you that you can contextualize? And can you give us a sense for unit growth for compute and maybe a split of how much ASP growth comes from memory versus product mix versus general price increases?

Hi, Thanks for the question I was wondering if you could drill down a bit more in the areas that are driving your compute segment results they were bit higher than we expected and certainly the consensus I get that theres. Some FX in there you quantified that but but are there segments of the market that had been stronger for you that you can contextualize and can you give us.

For unit growth for compute.

And maybe a split of how much ASP growth comes from memory versus product mix versus general price increases.

Speaker 7: Go ahead, Tarek, and then I will comment on the end on the back. Sure, Kyle.

Yes go ahead, Patrick and then I'll comment on that sure Kyle so.

Speaker 2: In terms of customer segments, the demand remains very strong across the board in large enterprise customers, SaaS companies, telcos. And we see very robust demand from all these customers. With respect to unit growth, units have been roughly...

In terms of customer segments. The demand remains very strong across the board in large enterprises.

Customers.

SaaS companies telcos.

And we see very robust demand from all of these customers.

With respect to unit growth units.

Ben roughly.

Flat quarter on quarter, but the right comparison is a normalized year over year comparison.

Speaker 2: If you normalize for Q4-20 units that were sold, but for orders that were generated in Q1 and Q2, you remember the dynamics of this Q20, units have grown 13% Q4-21 over normalized Q4-20, which is an excellent result for us. We're very pleased with it.

If you normalize for Q4 'twenty.

The units that were sold but for orders that were generated in Q1 and Q2 as you remember the dynamics of history of 20 units.

Have grown 13% Q4, 'twenty one over normalized Q4, 'twenty, which is an excellent result for US we're very pleased with it and this comes together with very strong disciplines.

Speaker 2: And this comes together with very strong disciplines from our management team there in the compute space. We've executed a number of price increases ahead of price hikes of commodities and logistic costs coming up by way of expedite fees and container costs that have been rising quite dramatically, as you know.

From our management team there in the compute space, we've executed a number of price increases ahead of.

Price hikes of commodities and logistics costs coming up.

By way of.

The expedite fees and then container costs that have been rising quite dramatically as you know.

Speaker 2: The AUP have risen overall at about 3%.

The AEP have risen overall at about.

3%.

Speaker 2: Um, when you think about this on a normalized basis, um, we feel pretty good about our performance in compute, both on.

When you think about this on a normalized basis.

And we feel pretty good about our performance in compute both on.

Speaker 2: on the P, the price, and the quantity. We feel that there is still strong demand moving forward, particularly in fiscal year 22 with the order book that we have been able to generate and the backlog that we have in that segment, but that comment that I just made is true and very true for Aruba where we feel a very strong order demand in Aruba and also in storage, so we feel pretty good about fiscal year 22 as Antonio commented a moment ago.

The P the price and the quantity.

And we feel that there is still strong demand moving forward.

Particularly in fiscal year 'twenty, two with the order book that we have been able to generate in the backlog that we have in that segment, but that comment I. Just made is true and very true for Aruba, where we feel a very strong.

Order demand in Aruba and also in storage. So we feel pretty good about fiscal year 'twenty two as Antonio commented a moment ago.

Speaker 7: Yeah, just a few comments in a simple terms. This is the way I think about it. So first of all, our computer orders were up more than 10% in 2021.

Yes, just a few comments.

In a simple terms there is a way to think about it. So first of all our computer orders were up more than 10% in 2021.

Speaker 7: Our units normalized for remember the 2020 backlog if you remember when the COVID started we had a 750 million dollars backlog Which we clear 500 million in Q3 2020 and 250 million dollars in Q4 when you normalize for that units are up Obviously AUPs are up for two reasons number one cost and number two structural changes

Our units normalized four remember that 2020 backlog if you remember when the Covid started we had that $750 million backlog.

Which we cleared $500 million in Q3 2020 into $150 million in Q4, when you normalize for that units are up.

<unk> set up for two reasons number one cost the number two structural changes as we introduced the next generation of our compute platform call. It Gen 10, five and 11, you're going to see more options and more density in those are platform, which drive structural changes.

Speaker 7: As we introduce the next generation of our compute platform called Gen 10.5 and 11, you're going to see more options and more density in those platforms, which drives structural changes, which we believe those structural changes are sustainable, irrespective of the changes of the commodity costs.

We believe those are structural changes are sustainable irrespective of the changes or the commodity costs.

Speaker 7: And then if you listen to what we said in 2020 and 2021, our pivot to different segments of the market. We said we want to focus on growing segments of the market while enterprise is still super important. SAS, Telco, and Edge are three growing markets where we have been benefited from.

And then if you listened to what we said in 2020 and 2021, our pivot to different segments of the market. We said, we want to focus in growing segments of the market, while enterprise still super important SaaS telco edge three growing markets, where we had been benefits.

Telco, obviously with a <unk> deployment, our intelligent edge solutions at the edge, particularly in retail manufacturing and hospitality and then obviously the focus on SaaS, which is not the big cloud providers, but software as a service companies, which are driving quite significant growth and.

Speaker 7: Telco obviously with the 5G deployment are intelligent solutions at the edge.

Speaker 7: particularly in retail, manufacturing, and hospitality. And then, obviously, the focus on the SaaS, which is not the big cloud providers, but software as a service companies, which are driving quite significant growth. And then we have our own value built into the platform with Silicon Root of Trust and manageability. And all of this, by the way, is all now being delivered to HP GreenLake as well. So GreenLake is a force multiplier for the growth in compute.

Then we have our own value built into the platform with Silicon, who took frost and Manageability and all of this by the way is all now being delivered through HPE getting lake as well. So it is a force multiplier for the growth in compute because the more we sell off the service the more recurring revenue and computer we're gonna have overtime. So I hope that answer the question.

Speaker 7: because the more we sell as a service, the more recurring revenue and compute we're gonna have over time.

Speaker 3: Kyle, thank you very much. Operator, the next question is from Katie Huberty with Morgan Stanley . Please go ahead.

Thank you very much operator.

The next question is from Katy Huberty with Morgan Stanley. Please go ahead.

Speaker 4: Yes, thank you. Antonio, how should we reconcile your commentary on incredibly strong order growth in just about every business?

Yes. Thank you Antonio how should we reconcile your commentary on an incredibly strong order growth in just about every business and orders up 16% in fiscal 'twenty, one with the 3% revenue growth that you reported last year and a similar 3% to 4% revenue growth for fiscal 'twenty two is.

Speaker 9: orders up 16% in fiscal 21 with the 3% revenue growth that you reported last year and the similar 3 to 4% revenue growth for fiscal 22. Is there a point that

They're a point that.

Speaker 9: these really strong orders convert to a meaningful acceleration of revenue growth, and if so, which quarter of fiscal 22 do you think we could see that backlog flush?

He has really strong orders convert to a meaningful acceleration in revenue growth and if so which quarter or fiscal 'twenty. Two do you think we could see that backlog flush.

Speaker 2: Yeah, I will let Tarek start and then I will add a few comments. Yeah. So, Katie, the most important comment I would make to you with respect to orders is that the acceleration of orders manifested itself very strongly in the second half of fiscal year 21. And it's continuing from here on. The demand remains very strong. We're getting orders every day and the linearity is better.

Yes, I will let <unk> start and then I'll add a few comments yeah. So kenny.

Most important.

Comment I would make to you with respect to orders is the acceleration of orders manifested itself very strongly in the second half of fiscal year 'twenty one.

And its continuing from here on the demand remains very strong we're getting orders.

Every day in the linearity is better.

Speaker 2: even this quarter than it was in the prior quarter last year. The trough for our business was hit in the second quarter of 2020, ever since revenue has been edging up. And we're now at a point in Q4 21 where we hit the revenue that is at the high water mark that is on the par with the first quarter of fiscal year 19, roughly.

Even this quarter than it was in the prior quarter last year.

The trough for our business was hit in the second quarter of 2020 ever since revenue has been edging up.

And we're now at a point in Q4, 'twenty, one where we hit the revenue that is at the high watermark.

That is on par with the first quarter of fiscal year 19, roughly.

Speaker 2: We do see the acceleration of the revenue growth year over year manifesting itself on a full year basis, but timing-wise, we did say in my script, and hopefully it was understood, that the fiscal year 22 is going to be back and loaded.

We do see the acceleration.

The revenue growth year over year manifesting itself on a full year basis, but timing wise, we did say in my script and hopefully it was understood.

The fiscal year 'twenty, two is going to be backend loaded why is that it's because we still have to navigate supply chain constraints and those supply chain constraints are probably not going to abate before the end of fiscal year 'twenty, two and most likely calendar year 'twenty two.

Speaker 2: Why is that? It's because we still have to navigate supply chain constraints and those supply chain constraints are probably not going to abate before the end of fiscal year 22 and most likely calendar year 22.

Speaker 2: Specifically for Q1, we're comfortable with current consensus levels on revenue, and which also imply, as I said in my script, a seasonal decline of mid-single digits. But when you really look at the overall trend, year over year from now on, we do expect an acceleration of revenue that will be dampened a little bit by supply chain constraint that we're navigating day after day, month after month, and quarter after quarter.

Specifically for Q1, we're comfortable with current consensus levels on revenue and.

Which also imply as I said in my script, a seasonal decline of mid single digits.

But when you really look at the overall trend year over year from now on we do expect an acceleration of revenue that will be.

Dampened a little bit by supply chain constraint that we're navigating day after day month after month and quarter after quarter.

Yes, I think.

Speaker 7: Yeah, Katie, I think in addition to what Tarek said, first of all, I don't see the demand abating anytime soon. I actually see that continue to accelerate.

With product set first of all I don't see the demand abating anytime soon.

Actually to see that continue to accelerate.

Speaker 7: And what is amazing to me is that in the areas where we place a particular focus, we see amazing growth.

And what is amazing to me is that in the areas, where we place particular focus we see amazing growth.

Speaker 7: And what excites me is that knowing what I know about our new offerings and acceleration of innovation, particularly in the first calendar quarter, we believe that's going to be a tool for charge.

And what excites me is that knowing what I know about our new offerings and acceleration of innovation, particularly in the first calendar quarter. We believe that is going to be a turbocharge.

Speaker 7: Now, as you can imagine, I spend a lot of time with our global supply team driving the day-to-day operations with Tarek here. And obviously, we have to navigate the first two quarters of the year, but I feel pretty good about accelerating that in the back half, a combination of supply availability and customer acceptance.

Now.

As you can imagine I spend a lot of time with our global supply team.

Driving the day to day operations with Arctic here.

Obviously.

We have to navigate the first two quarters of the year, but I feel pretty good about a slower rate than that in the backhaul a combination of supply availability and customer acceptances, but again when you normalize the growth for everything I said earlier to warranty which is.

Speaker 7: But again, when you normalize the growth for everything I said earlier to 1C, which is including the as a service pivot, you should think about not three to four, but more like six to seven, because that's the way we should think about it. And then in that, remember the growth of the AIR is going to continue to accelerate at 35 to 45%, and hopefully in 2022, we're going to get the credit for the transformation we're driving this.

Included in the as a sort of its pivot you should think about not three to four more like six to seven.

That's the way, we should think about it and then in that remember the growth of the AAR is going to continue to us of about 35% to 45% and hopefully in 2022, we're going to get the credit for the transformation. We are driving this business.

Speaker 3: Thank you very much, Katie and Operator.

Thank you very much Katie and operator.

The next question is from Amit <unk> with Evercore. Please go ahead.

Speaker 10: Perfect, thank you. Yeah, maybe I want to talk a little bit on the intelligent edge side. And Tariq, maybe we could just talk about what's driving not just the revenue deceleration, but also the margin declines over there. The margin drops seem fairly material. So I would love to understand kind of what's happening there. How do you see that business ramp up to fiscal 22? And Antonio, I want to touch this with you, which is you've talked a fair bit about the conviction in the orders that you have and how good they are. And I think you've said about lack of cancellation.

Perfect. Thank you all.

I wanted to talk a little bit on the intelligence side and policy.

Talk about what's driving not just the revenue deceleration, but also the margin declines over there.

The margin dropped seem fairly material, so I would love to understand kind of what's happening there how do you see that business ramp up through fiscal 'twenty two.

And Tony I wanted to touch base with you, which is we've talked a fair bit about the conviction in the orders that you have and how good they are and I think you've spent a lot of cancellation being a pretty big driver for it we are confident.

Speaker 10: being a pretty big driver for it, driver for your confidence. I would imagine cancellations will only happen when supply chain issues alleviate versus right now. Is that fair? If so, are there other things you're looking at in your business that give you confidence that these orders will convert?

I would imagine cancellations will only happen when supply conditions alleviate versus right now is that fair.

Are there other things you're looking at.

Gives you confidence that you can.

Orders will convert.

Speaker 2: Tarek, you want to talk about the Aruba piece of it, which obviously the network as a service was a big component of that. Yeah, yeah. So let me take that, Antonio. Thank you. So, Amit, as we shared in our scripts, we signed a very substantial network as a service contract for the first time with a large U.S. retailer. And this had a headwind on revenue growth in Aruba of about 800 basis points.

With product I want to talk about.

<unk> piece of it which obviously the network service was a big component of it yes. So let me take that I'm talking to thank you.

As we shared in our scripts, we signed a very substantial network as a service contract for the first time with a large U S retailer.

And this had a.

A headwind on revenue growth of about 800 basis points.

Speaker 2: and a headwind on operating margins of about 500.

And a headwind on operating margins of about 500 basis points.

Speaker 2: So if you were to normalize for it, you still realize, you would realize that the double-digit growth in Aruba and high teens margins are still there. And we're very comfortable they're there. For us, Aruba is a 40% business, meaning we do see the top-line growth to be in the high teens and the margins to be in the high teens as well, approaching a sum of 40% overall. Nothing has changed. We feel very comfortable, particularly knowing.

So if you were to normalize for that you're still realize you would realize that the.

Double digit growth in Aruba, and high teens margins are still there and we're very comfortable they're there for US everybody is a 40% business, meaning we do see the topline growth to be in the high teens and the margins to be in the high teens as well approaching a sum of 40% overall nothing has changed.

We feel very comfortable particularly knowing.

Speaker 2: that the order book remains very strong. If anything, if there was one part of our company that suffered a little bit more of supply chain constraints, in Q4 it is Aruba, but it's just simply deferring revenue that could have been realized in Q4 into Q1 and Q2 of fiscal year 22. The order story remains incredibly strong and the demand there is super solid, so we're very confident about the prospects of Aruba for fiscal year 22.

The order book remains very strong if anything if there was one part of our company that suffered a little bit more of a supply chain constraints in Q4. It is aruba, but there's just simply deferring revenue that could have been realized in Q4 into Q1 and Q2 of fiscal year 'twenty two the order story remains incredibly.

Strong and the demand there is super solid so we're very comfortable confident about the prospects of a robot for fiscal year 'twenty two.

Speaker 7: Yeah, I mean, I think Tarek covered pretty much everything. You know, remember what we said in our commenter, right, that this is the first year that Aruba crossed the $4 billion mark in orders. You know, I remember when I acquired Aruba in 2015 and then we merged it with the rest of HP business, you know, it was in the high twos. Now we are $4 billion. And we, again, to Tarek's point, we believe this business is gonna continue to grow double digits.

Yeah.

Think that cover pretty much every thing remember what we said in our commentary that this is the FERC under Aruba across the $4 billion Mark in the orders.

I remember when <unk> quite a robot in 2015, and then we merger with Arista HP business.

It was in the high twos.

Now we are $4 billion and we again to <unk> point, we believe this business is going to continue to grow double digits.

Speaker 7: We obviously have to think about this business long-term growth, particularly as we pivot more as a service.

We obviously have to think about this business long term growth, particularly as we pivot more as a service.

Speaker 7: Because the network as a service is a nascent market, but the subscription side.

Does the network as a service is a nascent market, but the subscription side is actually a growing and more established market. So remember there is two different value proposition again, I subscribe to a Wi Fi connectivity or a loan port that's today the triple digit growth.

Speaker 7: is actually a growing and more established market. So remember, there's two different value proposition here. I subscribe to a Wi-Fi connectivity or a LAN port. That's today the triple-digit growth that Tarek talked early on on the Azure service side. And then there is the nascent network as a service, which the hardware component of that is totally deferred over the length of the contract. And when you have an excess of $100-plus million deal, obviously, that has a...

Eric talk early on the Azure service side and then there is the nascent network as a service, which the hardware component of that is totally deferred over the length of the contract and when you have an excess of a 100 plus million dollar deal.

Obviously that has a huge impact but is good for the long term durability and Thats why we are very bullish about this business and listen as I said earlier to pay these we believe you know.

Speaker 7: But it's good for the long-term durability, and that's why we are very, very bullish about this business.

Speaker 7: And listen, as I said earlier to Katie, we believe, you know, over time, this is going to alleviate the supply and we're going to convert more of that. But we actually with a backlog I've never seen in my life and obviously customers need connectivity to operate in this.

Over time, this is going to alleviate the supply when and convert more of that.

We exited with a.

Backlog had never seen in my life, and obviously customers need connectivity to operate in this digital economy.

Speaker 7: And so then the second part of his question was, do we believe that orders get cancelled when supply chain... No. Yeah, well, I mean, listen, my view is not, because a lot of those orders are also related to GreenLake as well, not just transactional business.

And so then the second part of his question was do we believe that orders get canceled when the supply chain.

Yes.

Listen.

And my view is not because we have all of those orders are also related to green Lake as well not just transactional business and obviously, we prioritize all of those in a way that drives the profitability of the business and mission critical requirements for our customers.

Speaker 1: And obviously we prioritize orders in a way that drives the profitability of the business and mission critical requirements for our customers.

Speaker 7: And therefore, we don't believe that's going to be the case. Our job is to convert as many as we can as fast as we can. Thank you very much.

And therefore, we don't believe that's going to be the case.

Our job is to convert as many as we can as fast as we can.

Thank you very much on it and operator why don't we take two more questions. Please and the next question will be from Sidney Ho with Deutsche Bank. Please go ahead.

Speaker 3: And the next question will be from Sidney Ho with Deutsche Bank. Please go ahead.

Speaker 6: Hi, this is Jeff Randolph for Sydney. Thanks for taking the question. You continue to grow your inventory on your balance sheet. Can you talk about how your inventory strategy has changed with the supply constraints and what type of impact you're expecting from higher inventory on free cash flow in fiscal year 2022?

Hi, This is Jeff Rand on for Sidney Thanks for taking the question you continue to grow your inventory on your balance sheet can you talk about how your inventory strategy has changed with the supply constraints and what type of impact you're expecting from higher inventory on free cash flow in fiscal year 2022.

Speaker 2: Yeah, sure. So thanks for the question, Jeff. You know, we've been buffering inventory for the past five quarters to navigate supply chain constraints.

Yes sure so.

Thanks for the question Jeff.

You know we've been buffering inventory for the past five quarters to navigate supply chain constraints.

Speaker 2: Obviously, this leads to a situation where our inventory levels are higher.

Obviously this leads to a situation, where our where our inventory levels are higher than in some cases, we would like but it's necessary and it's okay. It doesn't really impact our free cash flow guidance for fiscal year, 'twenty, two which I'm very happy to reiterate we said we would be obtaining one $8 billion to $2 billion, our free cash flow.

Speaker 2: than in some cases we would like, but it's necessary and it's okay. It doesn't really impact our free cash flow guidance for fiscal year 22, which I'm very happy to reiterate. We said we would be attaining $1.8 to $2 billion of free cash flow in fiscal year 22, and the increase in inventory is factored into the guidance. The guidance is more attained on free cash flow by way of earnings growth, number one.

In fiscal year, 'twenty, two and the increase in inventory is factored into the guidance. The guidance is more attained on free cash flow by way of earnings growth number one number two also by a reduction of restructuring costs as our restructuring programs are winding down and then yes, there is a bit of an offset.

Speaker 2: Number two, also by reduction of restructuring costs as our restructuring programs are winding down. And then, yes, there is a bit of an offset headwind from inventory increases, but...

Headwind from inventory increases, but it's absolutely defined when youre, having your order book.

Speaker 2: It's absolutely fine when you're having your order book in the way we have it.

Way, we have it you got to get the ahead of the curve by way of buffering inventory and that's what we've been doing for the past five quarters and will continue to do so in fiscal year 'twenty two.

Speaker 7: Yeah, I will say, first of all, since the question was not asked, but I maybe answer proactively is, you know, Tarek talked about the restructuring. We are winding down that program and we are well on track to deliver that commitment that we made for our shareholders. Remember, it was the net $800 million at the time.

Yes, I will say first of all since the question was asked but maybe answer proactively.

Talk about the restructuring we are winding up and we are well on track to deliver the commitment that we've made for our shareholders to remember was there.

$800 million.

Jim.

Speaker 7: So, very pleased with that, which makes us a more lean and agile company, and part of that is also the ability to execute faster. One of the big changes we made also was the way we compensate ourselves for.

So we're pleased with that and which makes us a more lean and agile company.

And part of that is also the ability to execute faster to one of the big changes. We made also was the way we compensate our sales force.

Speaker 7: On orders and this is what you see, you know, we were not confident based on our systems implementation If you recall we started three years ago, and we're also getting close to that completion

On orders and this is what you see.

We are now confident based on our systems implementation. If you recall, we started three years ago and we are also getting close to that completion allowed us to make some changes here and the way we drive the business going forward and I think this is all about operational excellence and execution on the inventory side.

Speaker 7: allowed us to make some changes here in the way we drive the business going forward. And I think it's all about operational excellence and excellence.

The thing out.

Article job driving working capital and.

But also at the same time, making them.

The right long term bets on this inventory, which give us not just the ability to convert but pricing power.

And as I said, the Michigan at the analyst meeting, we tend to be the market leader in Tianjin prices.

And we will continue to do so.

Because it's the right thing to do at the right time.

And so we will continue to manage that inventory.

We needed for our customers and for delivering those numbers.

Thank you very much and operator, let's make this our last question.

Speaker 3: And our final question will be from Samekh Chatterjee with J.P. Morgan. Please go ahead.

Final question will be from Simon <unk> with Jpmorgan. Please go ahead.

Speaker 11: Hi. Thanks for squeezing me in here. I guess I wanted to get your thoughts on H3C. You had a strong year with 20% plus growth in equity income. How should we think about kind of Fiscal 22 there and what's the visibility into H3C navigating the supply chain constraints as well? And through the conference call today, you've mentioned multiple times about a back-end loaded year. So I just wanted to see if that's consistent with how we should think about H3C.

Hi, Thanks for squeezing me in here.

I wanted to get your thoughts on Asia III C. You had a strong 20% plus growth in equity income how should we think about.

Okay great.

What's the visibility into HTC navigating the supply chain constraints as well.

The conference call today, you've mentioned multiple times about a back end loaded deals. So just wanted to see if that's consistent with how we should think about each <unk> equity income, but thank you.

Yes.

Speaker 7: Patrick and I felt it was important to share with you how H3C contributes to our financial performance. You saw that slide that shows the equity interest of 49%, what value it drives for our shareholders, which is pretty important.

Product and I felt it was important to share with you of highways to see contributors to our financial performance.

So that slide that shows the interest of 49% book value for our shareholders.

Which is pretty significant and Src is an independent entity, which operates in China, obviously and.

Speaker 7: And H3C is an independent entity which operates in China, obviously, and they manage the business day to day. And they have done a remarkable job. I mean, they continue to grow their business in China. They are positioned extremely well in what they call the ICT business.

They manage the business day today.

And they have done a remarkable job I mean, they continue to grow their business in China.

They are positioned extremely well in the.

What they call the ICP business support telco to support enterprise customers on SMB.

Speaker 7: They support telco, they support enterprise customers and SMB.

Speaker 7: They have a unique value proposition in several products, which are very well received.

They have a unique value proposition in several products, which are very well received and we expect that business to continue to grow double digits and therefore is incredible clarity to what we do but also at the same time Athletic said is a unique setup, which no order a multinational really has been able to achieve.

Speaker 7: And we expect our business to continue to grow double digits. And the rapport is incredible and creative to what we do. But also, at the same time, as Tarek said, is a unique setup, which no other multinational really has been able to achieve. In a country, obviously, we've gone through a lot of changes here.

And our country, obviously that would have gone to a lot of changes here.

Speaker 7: And it's the second largest market on the planet, OK? So if you believe that market will continue to grow and they are very well positioned, this will continue to accrue to our shareholders. Now, as we said in previous quarters.

And as the second largest market on the planet. Okay. So if you believe that market will continue to grow and they are very well positioned as we will continue to accrete to our shareholders now as we said in previous quarters.

Speaker 7: are put expired at the May time frame. That's right. And as always, we will do what is the right thing for our shareholders, what is the best return for our shareholders, and we will make that decision at the right time.

Our put expire.

May timeframe, that's right and as always we will do what is the right thing for our shareholders. What is the best return for our shareholders and we will make that decision at the right time.

Speaker 2: And Antonio said it very well. I would simply add that the interesting data point on the slide that hopefully you will take away is that we're not in a rush. The value of our state continues to accrete. And we feel very, very good about our position in it.

And I'm trying to say it very well I would simply add that you know the interesting data point on the slide that hopefully you will take away is that we're not in a rush the value of our stake continues to increase and we feel very very good about our position in HCC.

Speaker 7: OK, well thank you everyone. Thank you Jeff. We appreciate you making the time to talk to us today. I hope you walk away with a clear view of how we are performing. I'm particularly pleased with the momentum we have as we enter 2022.

Okay.

Thank you everyone. Thank you Jeff we appreciate you, making the time to talk to us today.

Hope you walk away with.

Clear view of how we are performing particularly we're pleased with the momentum we have as we enter 2022.

Speaker 7: Our strategy could not be more on point. I think the demand is strong, not only because of the market, but because of our solution.

Our strategy could not be more on point.

I think the demand is strong not only because of the market, but because of our solutions.

Speaker 7: And I'm very excited about the ability to create an accelerated shareholder value in 2022. And we have some amazing things coming down the pipeline in terms of innovation that's going to differentiate us even further. And so I'm looking forward to 2022 while we navigate this short-term challenges supply. But we are very confident on the current guidance and the consensus out there.

And I'm very excited about the ability to create <unk>.

That's on our radar shareholder value in 2022, and then we have some amazing things coming down the pipeline in terms of innovation, that's going to differentiate us even further.

And so I'm looking forward to 2022, while we navigate this short term challenge and supply, but we are very confident on the current guidance and the consensus out there.

Speaker 7: And we hope to exceed that as we execute in the next quarter. If I don't speak to you in the next month or so, thank you very much. Be well. Happy holidays to everyone. And to a prosperous 2022. Thank you very much.

And we hope to exceed that as we we executed in the next quarter. If I don't speak to you in the next month or so thank you very much be well happy holidays to everyone and prosperous 2022. Thank you very much.

Speaker 3: Ladies and gentlemen, this concludes our call for today. Thank you.

Ladies and gentlemen, this concludes our call for today. Thank you.

Speaker 12: ??? ??? ??? ??? ??? ??? ???

Okay.

[music].

Yeah.