HPE Tells Investors Networking Is Now Its Growth Engine After Juniper Deal

Operating profit for the networking business is expected to rise from $1.6 billion to $2.5 billion over the same period, according to the company's investor day announcement. HPE now forecasts networking revenue growth in the high-teens to low-20% range in fiscal 2027, up from the 14% to 17% it guided on its last earnings call, and has set a long-term target of high-teens compound annual growth through fiscal 2029 with operating margins in the mid- to high 20s.

"AI is reshaping the technology stack, making the network more strategic," said Rami Rahim, executive vice president and general manager of HPE Networking and the former Juniper chief executive. Rahim said HPE's product breadth and sales reach distinguish it from other networking vendors, provided that execution holds.

Rahim said the integration is ahead of plan. HPE merged the two companies' sales organizations about six months after closing under "one catalog, one compensation plan," and every seller now carries the full portfolio. Cost synergies have grown beyond the original target: the $450 million goal set at announcement rose to at least $600 million at close and now stands at $800 million in annual run-rate savings by the end of fiscal 2028.

The remaining test is channel activation. Only about 10% of Aruba and Juniper partners overlap, and on Nov. 1 all 60,000 HPE partners move to a single program. HPE presents the cross-sell opportunity as large, though partner transitions are a point where integrations often slip.

Data center networking is the fastest-growing segment, with HPE targeting low to high 50% compound annual growth through fiscal 2029 against a market it pegs at 44%. Rahim said companies can spend billions on GPUs, but if the network cannot meet performance demands, "those resources are not fully utilized."

Praveen Jain, senior vice president and general manager of data center, described scale-up as connecting graphics processing units within a rack rather than scaling out across racks. Juniper historically competed in scale-out and scale-across, and the AMD Helios rack brings HPE into scale-up. Rahim said Helios represents more than a $1 billion networking opportunity over the next two years, with orders for networking trays already exceeding $200 million.

At the event, HPE announced a $1.2 billion order from Vultr, its first for Helios. Each rack uses six HPE Juniper Networking QFX5252 scale-up Ethernet switch trays to connect 72 AMD Instinct MI455X GPUs. HPE also has a role in Oracle's gigawatt-scale AI buildout.

Full-rack deals tie up working capital, and Rahim said fiscal 2027 will be more back-end-loaded than usual as new systems ramp. On neoclouds he said, "Many neoclouds value the simplicity of buying a complete system from a single technology provider," adding that Juniper alone could not have won the Vultr deal. Asked during the analyst Q&A about financing models such as credit swaps and asset-backed purchases used elsewhere in that market, Rahim said the company has walked away from deals, and would walk away, when risk is too high.

Routing, long treated as a mature, low-growth business, is now forecast to grow in the low to high 20% range through fiscal 2029. AE Natarajan, senior vice president and general manager of routing infrastructure solutions, said that with AI, upstream and downstream traffic become similar, the traffic cannot be cached like video and AI agents generate it constantly. "Digital users don't fall asleep," he said. That plays to Juniper's MX and PTX platforms and its Trio and Express silicon, though Rahim did not dismiss the competition: "We were up against 800-pound gorillas in practically every market opportunity that we wanted to pursue." He said the growth is "very much unit-based" rather than driven by price increases, and that owning its own silicon is the edge HPE will need to keep funding.