HPE storage is doing so well that HPE is publicly reporting its numbers again as part of an AI-focussed financial reporting revamp, with Alletra Storage MP taking the lead role.
This was revealed at a Securities Analyst Meeting it held in New York on October 15, to convince the analysts to recommend HPE shares to their clients. CEO and President Antonio Neri said the company has five strategic priorities: build a new networking industry leader – with acquired Juniper helping; capture profitable growth in the AI infrastructure market with a focus on sovereign and enterprise customers; accelerate high-margin software and services growth through GreenLake; capitalize on unstructured data market growth with its own IP through Alletra MP; and transition customers to next-generation server platforms.
The drivers here include, of course AI, and that is boosting networking and the cloud business model. HPE used to have its own storage IP; remember acquired 3PAR and Nimble and SimpliVity? The 3PAR line became Primera and this then evolved to the Alletra brand which included the old Nimble arrays. But HPE sold a lot of its ProLiant servers running other supplier’s software-defined storage; think Nutanix for example.
Neri had HPE’s financial reporting drop public exposure of its storage revenues at the end of its fy2023 year, with that number subsumed into its Hybrid cloud business. Then along came VAST Data, with its disaggregated and separately scalable compute and storage based on all-flash NVMe storage enclosures and fast internal networking.
HPE responded and introduced its Alletra Storage MP system in April 2023 with block and file storage supported. There were ProLiant-based controllers (compute) and separate storage nodes. It actually OEM’d the file storage SW from VAST. HPE introduced its own object storage SW in November 2024.
The Alletra Storage MP system prompted a renaissance in HPE storage sales, with it recording triple-digit year-over-year growth for the third consecutive quarter in September this year. HPE claimed it has the second largest share of the primary block all-flash array (AFA) market, based on IDC numbers. HPE’s the third overall AFA supplier, behind Dell and NetApp.
Neri and his execs are seeing AI driving an enormous change in the IT system supplier business, boosting demand for GPU servers and pulling along networking and storage behind it. As a consequence, it’s revising its public financial reporting which has had, up until now, been structured as Server, including HPC and AI, Networking, Hybrid Cloud, Financial Services and Other.
Now we have Cloud and AI as the top segment, with Campus & Branch, DataCenter Networking, Security, and Routing as the sub-segments. Analysts were provided with backdated numbers to Q1 fy2024 and that’s allowed us to chart HPE’s recent revenue history with a separate storage line;
We can readily see the boost to its revenues from the AI-led server boom with storage paralleling at a lower revenue number and less pronounced rises. HPE’s customers are buying servers for AI processing but storage sales are lagging behind. The customers are not yet storing significantly more unstructured data (file and object) for AI inferencing or training.
However HPE Alletra storage sales are rising and Neri and his team want to capture more storage sales using HPE’s own intellectual property. We charted Dell storage, HPE storage, NetApp and PureStorage revenues, using HPE’s newly-revealed numbers;
We can see that Dell sales are trending down, NetApp and HPE and Pure – look closely – are rising.
Our understanding is that HPE will be selling storage as part of an overall AI system sale, led by servers and networking. NetApp and Pure don’t have the advantage of a server- and/or networking-led sales motion. We would think that their storage has to stand out, with clear advantageous differentiation, to overcome an inherent coupling of storage as an ancillary to server/networking AI system sales. Building their own disaggregated architecture along with an AI data pipeline SW stack on their storage software base is one way to do it.
NetApp (AFX) and Pure (FlashBlade//EXA) have both introduced their own disaggregated compute and storage node architectures, and AI pipeline software stacks. We think Dell will do something as well.
A final question; can HPE storage grow fast enough to withstand Pure’s growth and overtake NetApp? We’ll see. These are interesting times.
