On Wednesday, HP beat Wall Street estimates for Q2 revenue, signaling a recovery in the personal computer (PC) market as customers upgrade their systems. HP PC demand is the first increase in its sales in two years, an optimistic signal for a long-awaited rebound in the market.
Like other PC makers, HP experienced a boom in sales during the pandemic as consumers, businesses and schools stocked up on tech products and then a subsequent two-year sales slump. For HP that slump in PC sales is just now easing.
HP earnings
Revenue from HP’s computer unit increased 3% to $8.43 billion in the fiscal Q2, 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 at HP, which rose 6% to $6.24 billion. Consumer sales continued to decline, slipping 3% to $2.18 billion, the company said Wednesday in a statement.
HP upgrades and AI
HP is hoping to ride a wave of upgrades after Microsoft last week unveiled a bevy of new AI features designed to work on a new generation of PCs.
As per Chief Executive Enrique Lores, he expects about 10% of HP’s PC sales to come from such “AI PCs” in the second half of the company’s fiscal 2024.
“The AI PCs will be really more meaningful in 2025,” Lores said on Wednesday.
“Our (fiscal) year finishes (by the) end of October. So we will really be at the very beginning still of the next-generation AI PC space.”
Lores said education customers drove sales in the second quarter, with schools upgrading their systems after a nearly two-year long demand slump following COVID-19.
HP Q2 revenue
HP posted Q2 revenue of $12.8 billion, above analysts’ average estimate of $12.6 billion, according to LSEG data.
The company now expects fiscal 2024 adjusted profit to be in the range of $3.30 to $3.60 per share, compared with its previous outlook of between $3.25 and $3.65 per share. The midpoint of the full-year range was $3.45, above analyst estimates of $3.43.
It expects adjusted profit per share with a midpoint of 85 cents in the third quarter ending in July, in line with analysts’ average estimate of 85 cents.
HP overall sales
“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% 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% 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.
HP outlook
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, as per report.
HP stock update
Shares of HP were little changed in extended trading after closing at $32.80 in New York. HP stock has gained 9% this year.
