Shares of Hewlett Packard Enterprise (HPE) are slipping on Thursday despite the company beating third quarter earnings expectations. HPE CEO Antonio Neri sits down with Yahoo Finance Executive Editor Brian Sozzi to discuss the latest earnings and the company's outlook as AI becomes more widely adopted.

Neri explains that HPE had "terrific" revenue growth during its third quarter. In particular, the AI business converted more revenue this quarter than its second quarter, improving its operating margins on the server side by 70 basis points year over year — the highest margins for servers in the industry, he says. However, the company's overall gross margins are down, which Neri attributes to a dip in revenue on the networking side of the business. He tells Yahoo Finance, "That has to do with the cyclicality we see in this current period of the market in the networking business, in line with the peers that have announced in the prior few weeks."

As the AI race heats up, Neri says that HPE leaders are "very disciplined" in their approach to business, specifically when it comes to pricing and operating expenses. He attributes this outlook to the growth of HPE's server business despite a "very competitive" market.

Nvidia's (NVDA) most recent earnings disappointed investors looking for returns on their AI plays, despite posting a beat on both the top and bottom lines. While many worry that this could be the burst of the AI bubble, Neri disagrees. He argues that the issue will come down to "the adoption of AI in the enterprise, which ultimately is what the realization of the value really happened." He adds, "And that's why HP is uniquely positioned to accelerate time to value to these transformative technologies," pointing to the synergy of the networking hybrid cloud and AI through its GreenLake platform.

Looking forward, Neri believes HPE will complete its transaction to acquire Juniper Networks, an AI networking company, by early 2025 in the US. He highlights that the move has already received a regulatory approval in the EU, UK, India, and Japan. Once the acquisition is finalized, he believes the company will "change dramatically":

"Our current networking business, which is very much focused on the campus of branch segment of networking, is approximately $5 billion. When we add Juniper, we're gonna double, so it's gonna be more than $10 billion revenue with a significant higher margin profile, obviously, because that's the industry standard for networking. And it ultimately gives us the intellectual property and talent to deliver a modern AI-driven fabric, which obviously is required for both cloud and AI. And so from a shareholder perspective, we're gonna deliver significant value through the synergies."

This post was written by Melanie Riehl