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May 30, 2024

HP Sees Boost in Computer Sales Amid Optimism for AI PCs

HP Inc. has reported a positive quarterly revenue that exceeded analysts’ expectations, highlighting the first increase in PC sales in two years. This development is seen as a hopeful indicator of a potential rebound in the market.

In the fiscal second quarter, HP’s computer unit revenue rose by 3% to $8.43 billion, surpassing analysts’ estimates of $8.28 billion. This growth marks a significant turnaround from the consistent decline experienced since May 2022. The increase was primarily driven by a 6% rise in commercial sales, which reached $6.24 billion. However, consumer sales continued to decline, dropping by 3% to $2.18 billion, as disclosed by HP in their statement on Wednesday.

The PC market has endured a historic downturn over the past two years. This decline followed an initial surge in purchases by consumers, businesses, and educational institutions during the early months of the pandemic. Recently, there have been signs of recovery, with industry analyst IDC reporting a 1.5% increase in shipments during the first quarter, marking the first rise since the end of 2021. PC manufacturers are hopeful that these numbers indicate an end to the slump and anticipate accelerated growth in 2024. This growth is expected to be fueled by the introduction of new machines running the latest version of Microsoft Corp.’s Windows software and hardware capable of supporting artificial intelligence tools.

HP is optimistic about the future of AI PCs, with CEO Enrique Lores announcing the company’s plans for these advanced machines. He revealed that AI PCs, such as those unveiled at a recent Microsoft conference, are projected to account for about 10% of total shipments in the latter half of the year. Lores further predicted that the financial impact of AI PCs will become significantly more substantial in 2025 and 2026, with expectations that they will comprise around 50% of shipments three years post-launch.

Despite these advancements, HP’s shares remained relatively unchanged in extended trading, closing at $32.80 in New York. This year, the stock has seen a 9% increase, although it still trails behind Dell Technologies Inc., whose value has more than doubled due to the excitement surrounding its AI-capable servers. HP has not yet received similar enthusiasm, though analyst Toni Sacconaghi from Sanford C. Bernstein suggests that the adoption of AI PCs could potentially enhance HP’s valuation.

In the quarter ending April 30, HP’s total sales saw a slight decline of less than 1%, amounting to $12.8 billion, which is still above the analysts’ average projection of $12.6 billion. Excluding certain items, the profit stood at 82 cents per share, aligning closely with Wall Street estimates.

HP’s printing business experienced an 8% decrease in sales, totaling $4.37 billion. Earlier this year, the company launched a subscription plan for printers, which CEO Lores mentioned has been successful. HP is also considering a similar subscription model for consumer-oriented computers.

Looking ahead, HP has projected a profit, excluding certain items, ranging from 78 cents to 92 cents per share for the fiscal third quarter. Analysts have averaged their estimates at 85 cents, according to data compiled by Bloomberg.

HP’s recent performance and future projections indicate a cautious optimism, particularly with the anticipated growth in AI PC shipments. As the market gradually rebounds, the company’s strategic focus on AI and subscription models may play a crucial role in sustaining its growth trajectory.

Read more Business related news on R9 News
Jhumpa Lahiri

Jhumpa Lahiri

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