(Bloomberg) — Hewlett Packard Enterprise Co. Chief Executive Officer Antonio Neri said the company expects to weather a slimming of profit margins as it enters a new era of artificial intelligence-driven demand. 

Though the operating margin in HPE’s server unit narrowed to 6.4% last quarter, compared with 10.8% a year earlier, Neri predicted that the figure would return to roughly 10% by the end of the current period. 

Neri also talked up the potential of HPE’s recently completed Juniper Networks acquisition, which will vault the company further into the networking industry. The remarks helped soothe the concerns of investors, who sent the shares higher after an initial slide when HPE delivered its third-quarter earnings report. 

“I am excited for HPE’s next chapter,” Neri said on a conference call with analysts. “The completion of our Juniper acquisition positions us to win in networking as the market enters a new era of IT and business transformation where AI, cloud and networking converge.” 

HPE shares rose 1.5% in late trading. They had been up 6.9% to $22.82 this year at the close in New York.

Even as some margins narrowed in the third quarter, HPE’s sales and profit topped predictions. Revenue increased 18% to $9.14 billion in the period, which ended July 31. Profit was 44 cents per share, excluding some items. Analysts had estimated sales of $8.65 billion and earnings of 43 cents. 

Profit will be 56 cents to 60 cents a share in the October quarter, excluding some items, the company said. Analysts projected 59 cents. HPE predicted sales of $9.7 billion to $10.1 billion, compared with an estimate at the top end of that range. 

Last week, HPE rival Dell Technologies Inc. delivered an underwhelming quarterly report. That company suffered a stock rout after saying that profit margins on AI servers were lower than Wall Street expected.

HPE and Dell have been benefiting from demand for server computers that can help handle a flood of AI software and services. But pricey chips from Nvidia Corp. and others have made the equipment less profitable. 

On the plus side, the impact of trade turbulence is easing, Neri said. Tariffs are expected to negatively affect adjusted profit by 4 cents per share this year, down from the previous expectation of 7 cents a share, he said.

HPE closed the Juniper acquisition last quarter and expects to see at least $600 million in cost savings from combining operations over the next three years.

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