HP reports increased computer sales with optimism rising for AI PCs

By Brody Ford

HP Inc. reported quarterly revenue that topped analysts’ estimates, including the first increase in PC sales in two years, an optimistic signal for a long-awaited rebound in the market.
 

Revenue from HP’s computer unit increased 3 per cent to $8.43 billion in the fiscal second quarter, compared with the $8.28 billion expected by analysts. The business had been declining since May 2022 on a year-over-year basis. The jump was due to commercial sales, which rose 6 per cent to $6.24 billion. Consumer sales continued to decline, slipping 3 per cent to $2.18 billion, the company said Wednesday in a statement.

The PC market had seen a historic decline over the last two years after many consumers, businesses and schools purchased laptops in the early months of the pandemic. In the first quarter, shipments picked up 1.5 per cent — the first increase since the end of 2021 — industry analyst IDC said in April. PC-makers have been hopeful those numbers signaled the end of the slump and that growth would accelerate in 2024 with the launch of machines equipped with a new version of Microsoft Corp.’s Windows software as well as hardware equipped with chips to handle artificial intelligence tools.

AI PCs, such as those HP unveiled last week during a Microsoft conference, will be about 10 per cent of total shipments in the second half of the year, Chief Executive Officer Enrique Lores said in an interview. The financial impact will be “much more relevant” in 2025 and 2026 as HP expects the number to climb to about 50 per cent of shipments three years after launch, he added. 

The shares were little changed in extended trading after closing at $32.80 in New York. The stock has gained 9 per cent this year — falling short of peer Dell Technologies Inc. which has more than doubled in value this year due to its excitement for its AI-capable servers. HP has failed to receive any similar “AI pixie dust” to boost its valuation, though adoption of the new AI PCs could change that, wrote Toni Sacconaghi, an analyst at Sanford C Bernstein, before the results were released.

“Along with growth in shipments, AI PCs are also expected to carry higher price tags, providing further opportunity for PC and component makers,” wrote Jitesh Ubrani, an analyst at IDC, said in April. 

In the period ended April 30, total sales declined less than 1 per cent to $12.8 billion, compared with analysts’ average projection of $12.6 billion. Profit, excluding some items, was 82 cents a share, about in line with Wall Street estimates. 

Sales in HP’s printing business fell 8 per cent to $4.37 billion. The company introduced a subscription plan for printers earlier this year, which Lores said has been seeing success. A similar plan for consumer-oriented computers is being explored, he added.

For the fiscal third quarter, HP projected profit, excluding some items, of 78 cents to 92 cents per share. Analysts, on average, estimated 85 cents, according to data compiled by Bloomberg.