(Bloomberg) – Antonio Neri, CEO of Hewlett Packard Enterprise Co., said the company hopes to survive slim profit margins as it enters a new era of artificial intelligence-driven demand.
HPE's server units operating margins shrunk to 6.4% in the last quarter compared to 10.8% in the previous year, but Neri predicted that the figures would return to about 10% by the end of the current period.
Neri also spoke about HPE's recently completed acquisition of Juniper Networks. The statement helped ease the concerns of investors who sent stocks high after the first slide when HPE provided its third quarter earnings report.
“I'm excited about the next chapter on HPE,” Neri said during a conference call with analysts. “When Juniper's acquisition is completed, we can win with networking as the market enters the new era of IT and the business transformation where AI, cloud and networking converge.”
HPE shares rose 1.5% with a delayed trading. They rose 6.9% this year to $22.82 at the end of New York.
Even as some margins narrowed in the third quarter, HPE's sales and profits exceeded expectations. Revenue rose 18% to $9.14 billion over the period ended July 31st. Earnings were 44 cents per share, except for some items. Analysts reported revenues of $8.65 billion and revenues of 43 cents.
The company said profits will be one share per share in the October quarter, from 56 cents to 60 cents. Analysts predicted 59 cents. HPE forecasts revenues between $9.7 billion and $10.1 billion compared to estimates at the top of its range.
Last week, HPE rival Dell Technologies Inc. provided an overwhelming quarterly report. The company suffered a stock loss after saying that AI servers' profit margins were lower than Wall Street's expectations.
HPE and Dell benefit from the demand for server computers that help handle flooding of AI software and services. However, expensive chips such as Nvidia Corp. are decreasing the profitability of the equipment.
On the positive side, the impact of trade turbulence has been moderated, Neri said. Tariffs are expected to have a negative impact on adjusted earnings of 4 cents per share this year, down from forecasts of 7 cents per share this year, he said.
HPE shut down its Juniper acquisition last quarter and expects it to see a cost savings of at least $600 million over the next three years by combining its operations.
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