HPE Securities Analyst Meeting 2023: Capitalizing on opportunities across edge, hybrid cloud and AI to accelerate value for shareholders
OCTOBER 19, 2023 • BLOG POST • ANTONIO NERI, PRESIDENT & CEO
IN THIS ARTICLE
- Our bet on the Intelligent Edge is paying off
- Our future hybrid cloud business is positioned to become a sustainable center for profitable growth through the scale of HPE GreenLake
- AI has expanded our market opportunity and we are well positioned to capture customer demand
- We plan to continue to shift our portfolio to these areas to deliver profitable revenue growth for our shareholders
HPE well positioned for sustainable, profitable growth
Today, my leadership team and I are gathering with the financial community for HPE’s Securities Analyst Meeting. This event serves as our opportunity to illustrate for investors and financial analysts the relevance of HPE’s strategy, the differentiation of our portfolio, our strategy to capture market opportunities, and how we intend to accelerate value for shareholders in the near- and long-term.
As I prepare to share the opportunities we see for HPE in the next three years, I also reflect on the last three years and what they have demanded of HPE and enterprises around the world. In that time period, HPE has transformed to become the edge-to-cloud company. We have anticipated customer needs, accelerated our unparalleled innovation, and executed with discipline. We have diversified our business to expand our software- and services-rich portfolio and capitalize on new markets. And we have delivered for our shareholders.
Since the start of FY21, we have grown revenue 13.4%1,2, increased our annual non-GAAP diluted net earnings per share1,3 43.5%, and added 310 basis points to our non-GAAP gross margin1,3, all compared to the last trailing 12 months. We have generated a more than 121% total shareholder return as compared to a 37% return for the S&P 500 over the same period4.
These strong, consistent results would have been impressive in any period, but I am particularly proud of them coming out of such a turbulent three years. We delivered when it mattered most.
As we look ahead, we are well positioned to continue to accelerate value for our shareholders by capitalizing on the growing markets at the edge, in hybrid cloud and in AI. We anticipate our Total Addressable Market (TAM) rising to more than $340 billion by FY26, up more than $100 billion from the end of FY225. We intend to capture this growing TAM by accelerating innovation in key markets where HPE already enjoys a strong position, as well as expansion in high-margin adjacent markets.
- Edge and Networking - We have invested nearly $6 billion in our HPE Aruba Networking business organically and inorganically since I became CEO. It is on track to be a more than $5 billion annual business in FY23 and beyond, generating sustained revenue growth and the highest profitability of our business segments. We intend to capture a growing edge and networking TAM opportunity by gaining share in campus and branch, expanding coverage in data center networking, and entering new security and 5G markets.
- Hybrid Cloud - Recognizing the strategic importance and size of this market opportunity, last month we announced a new Hybrid Cloud business segment, which will go into effect on November 1, 2023. Reflecting the maturity of our offering, this new segment will bring together all Storage and Compute aaS offerings, inclusive of our HPE GreenLake Private Cloud and Software offerings, enabling greater focus and efficiency, faster execution, and a superior, cloud-native experience for all customers and partners. We intend to capture a hybrid cloud TAM we anticipate growing to $164 billion by 2026 by taking share in storage, scaling our private cloud offering, and expanding into infrastructure management software.
- AI - AI is driving the next wave of investment in innovation, resulting in value creation in the IT market and the global economy. HPE is uniquely positioned to capitalize on this technology inflection point with our end-to-end portfolio designed for the full spectrum of enterprise AI workloads and use cases – spanning large-scale model development, training, and inferencing – as well as unique liquid cooling data center services expertise. These capabilities and the investments we continue to make in unique supercomputing and AI intellectual property position us favorably in a TAM in this space that we see growing by roughly 2.4 times to almost $150 billion by 2026.
- Compute -- The engine that powers our ability to capture these opportunities is Compute, which produces cash flow to invest in our business and deliver capital return to our shareholders. Demand for compute spans cloud repatriation, new edge workloads, telco sector and service provider needs, and the emerging and growing call for AI-inferencing. It’s a steady market and we have a strong competitive position in it.
- HPE Financial Services – HPE Financial Services continues to be a critical competitive advantage for HPE. This business creates smarter IT lifecycle solutions for our customers and partners through offerings that combine insights, financial expertise, and a deep-rooted focus on sustainable IT. Going forward, we see even higher demand from our customers as they put more emphasis on finding ways to accelerate their sustainability goals through our services and circular economy solutions.
I am confident in our ability to capture these opportunities for a few key reasons. First, while some macroeconomic challenges remain, I am optimistic about demand. HPE is more relevant than ever because we have innovated in the categories that are most important to our customers now and in the future.
Second, we have made very sound investment choices to pivot our portfolio to a diverse set of businesses with greater profitability potential, and they are paying off.
Finally, we have an experienced and passionate leadership team who executes with vision, a sense of urgency and a commitment to culture.
Our foresight and innovative spirit have always served us well and position us to realize the full benefit of what is on the horizon for us and our industry. I feel an incredible amount of excitement for the year ahead and am more confident than ever in our winning strategy and team.
1 Calculations represent growth from Oct. 31, 2020 through trailing twelve months ended July 31, 2023.
2 In constant currency. A description of HPE's use of non-GAAP financial information is provided at the end of the 2023 Securities Analyst Meeting presentation, posted at the meeting’s conclusion.
3 A description of HPE's use of non-GAAP financial information and reconciliation of adjustments to GAAP results for prior periods are included at the end of the 2023 Securities Analyst Meeting presentation posted at the meeting’s conclusion.
4 Source: Bloomberg. Period from Oct. 31, 2020, through Sept. 30, 2023.
5 HPE’s total addressable market (TAM) opportunity spans the impacts of the megatrends we believe are shaping the IT industry, including at the edge, hybrid cloud, and artificial intelligence. For more information, please refer to the 2023 Securities Analyst Meeting presentation posted at the meeting’s conclusion.
This blog contains forward-looking statements subject to risks; results could differ materially. For more cautionary language regarding forward-looking statements, refer to our slides presented at, or the press release issued in connection with, the 2023 Securities Analyst Meeting, both available at investors.hpe.com.
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