Server Business Growth and Future Prospects in 2025

The server business thrives with strong demand, backed by a $3.5 billion backlog and innovative liquid-cooling technology.

### Strong Growth and Strategic Moves in the Server Business
* 📈 The server business continues to experience rapid growth, driven by **strong demand in both traditional CPUs and AI technologies**, with over **$3.5 billion in backlog** indicating market momentum.
* 💻 The hybrid cloud business has also performed exceptionally well, showcasing a **significant uptick in enterprise AI pipeline**, which is **multiple times larger than the current backlog**.
* 🌊 As the company transitions to liquid-cooled technologies with Blackwell, **more than one-third of the backlog** is already attributed to this new architecture, expected to **fuel continued growth into 2025**.
* 🏗 The demand spans four distinct segments: **Mall Builders**, **Hyperscalers**, **Tier two and three service providers**, and the **rapidly growing sovereign sector**, highlighting **diverse market interest**.
* 🚚 While supply chain issues have been noted, particularly with Blackwell, the company remains confident that shipments will **align with demand** as they ramp up production in early 2025.
* 💰 In Q4, **$1.2 billion in new orders** were booked, although a specific order was not recorded due to concerns about associated risks, emphasizing the company's focus on **reliable customer relationships**.
* 🛡 The acquisition of Juniper Networks is expected to close in early 2025, with **strong global support indicating a pro-competitive outcome**, enhancing the company's ability to **compete internationally**, especially against **Chinese firms**.
* 🌍 Hewlett Packard Enterprise currently leads the supercomputer market, owning **seven of the top ten systems**, positioning itself strategically for **future growth and national security interests**.

What's interesting about the server business was that it's still growing fast, but as it's called sequentially, are you feeling confident about the purchases here?
Well, good morning, Carol, and thank you for having me today. We have an exceptional quarter and

obviously one of the flagship elements of that quarter was. But I have to say it was model and it was also our hybrid cloud business performing exceptionally well and the server business in general because ultimately we have growth both on the traditional CPU and obviously on the AI side, but

the demand continues to be very, very strong. You know, as of today we have more than three and a half billion dollars in backlog that shows the momentum that's there in the market. Now we are seeing a significant uptick in the pipeline in enterprise AI.

But in total, we have a pipeline that's a multiple of the backlog. So as we go into 2025, obviously there is a transition to the liquid-cooled set of technologies with Blackwell and Grace Blackwell. And as you know, two months ago we announced a new architecture, which is

100% fanless direct liquid cooling, an industry first, and more than one-third of that three and a half billion dollar backlog is already on Blackwell. So we expect continued growth as we go into '25. How are those backlog shipments

looking?
How certain? Well, definitely is. It's all very consistent with what we have seen. The number of customers continues to grow. The demand across different segments continues to be very solid. You know, when I think about they are

You think about four distinct segments. I call them the Mall Builders and the Hyperscalers. Then the Tier two, Tier three service providers, and the sovereign sector, which is growing very rapidly in terms of interest and sales cycle. So, a little bit longer there.

But are you talking about large-scale deployment? We are in the process of building in the UK, the Bristol Cloud, and in Japan. Then there's the enterprise sector, which obviously has significantly lower order values, but

the number of transactions is significantly higher. But the supply side has been the issue, with Blackwell in particular. How swiftly are those shipments arriving? How on track do you now feel it is?
Yeah, I will say, you know, the supply

will come in due time because of the transition that Jensen and his team are driving. I wouldn't say it's problematic. It's just a transition in the early part of 2025. Today we continue to ship, you know, hundreds in H1 and hundreds in H2.

But as I said earlier, we already have more than one-third of that—more than three and a half million dollars—already in Blackwell. And a lot of that has to do with companies that lead with that technology because they want to get better

performance, better image density, and ultimately lower the cost for training. Your articulation of the breadth of demand coming from that, mentioning sovereign as well as enterprise, for example, was really interesting. How resilient is that demand? What's interesting about your backlog,

which you say is very resilient and strong, but there was a $700 million deal booking. How confident are you in some of these purchases, in some of these deals that have been signed? Yeah. So in our current, more than three and a

half billion dollars, we are very, very confident. In Q4, we booked $1.2 billion of new orders, and we decided not to book a specific order because we had specific concerns about the risk associated with that order. And we have very, very strong controls

in place. And we felt that because of the risk associated with even the financing side, we felt this was not worth the headache. And honestly, we decided to focus on the number of growing customers we have and allocate the supply to the right customers.

So that's why we decided not to book that specific order. Caroline: You're also doing deals, of course, we are hearing conference calls on the Juniper Networks acquisition for early 2025. Is that just going to sail through DOJ,

do you expect, with the next administration? Yeah. Well, first of all, we have received pretty much all the approvals around the world with, you know, what I call unconditional support. Basically, it tells you that the rest of the world sees this as pro-competitive.

And with the DOJ, we have had a very collaborative process throughout the last several months and we expect the transaction to close in the early part of 2025, which is still within the original timelines we stated when I announced the deal on January 10th.

2024 or the early part of calendar year 2025.
And so if nothing changes, that will not be the case.
And then in addition, for the United States, this is good not just
pro-competitively, but also for U.S.

national security, because ultimately
the combination of Juniper and HP provides a better ability for us to
compete outside the United States, particularly with Chinese
competitors around the globe. And remember that for the United States,
we provide the largest supercomputers

in the world. We also provide AI, and that
requires a lot of networking. And today, Hewlett Packard Enterprise
owns seven of the top ten supercomputers; number one, number two,
and number three are HP systems.

HPE CEO Neri on AI Sales Boost

Welcome to the Bloomberg Technology YouTube channel. Subscribe for original series and mini-docs on game-changing technologies, profiles on innovators, live conversations with experts, and breaking technology news & analysis from Bloomberg TV.

Bloomberg Technology

Strong Server Business Growth and Backlog

Server business continues to grow rapidly, particularly in AI.

Exceptional quarter driven by strong hybrid cloud and server performance.

Over $3.5 billion in backlog, with significant uptick in enterprise AI pipeline.

Transition to liquid-cooled technologies (Blackwell and Grace Blackwell) in 2025.

Over one-third of the backlog is already on Blackwell.

Market Segmentation and Demand Resilience

Four distinct market segments: hyperscalers, tier 2/3 service providers, sovereign sector, and enterprise.

Enterprise sector has high transaction volume but lower order values.

Supply side issues, particularly with Blackwell shipments.

Blackwell Shipments and Supply Chain Transition

Transition to Blackwell is ongoing, but not considered problematic.

Companies leading with Blackwell technology seek better performance and lower training costs.

High confidence in over $3.5 billion backlog.

One order was not booked due to risk concerns and focus on allocating supply to reliable customers.

Juniper Networks Acquisition and DOJ Approval

Expecting Juniper Networks acquisition to close early 2025.

Received most global approvals, viewed as pro-competitive.

Collaborative process with DOJ, expecting closure within original timeline.

Acquisition beneficial for US national security due to increased global competitiveness.

HP owns seven of the top ten supercomputers globally.