HP Inc Delivers A Mixed Report But The PC Market Hasn't Recovered As Much As Hoped

Last Wednesday, HP Inc HPQ issued a mixed fiscal third quarter report. Following the promise of CEO Enrique Lores that better results are coming with the AI-powered PCs ramp up and cost cuts, stock jumped 4% the following day.

HP followed the trend previously shown by its rival Xerox Holdings Corporation XRX. With its latest earnings report, Xerox also reported weak earnings and issued a cautious guidance. But unlike Xerox that reported a revenue decline in its second quarter, HP Inc reported its first sales increase in two years, fueled by resurgence of corporate computer purchases and Microsoft Corporation MSFT deciding to end support for Windows 10, forcing its users to make upgrades.

HP’s Mixed Fiscal Third Quarter Highlights

The printer and PC maker reported revenue rose 2.4% to $13.5 billion.

Consumer PCs reported a 1% sales drop while commercial sales improved 8% as like in the previous quarter, commercial consumers were upgrading their equipment ahead of the Microsoft Corporation ending support for Windows 10 that is scheduled for October 2025. HP and Microsoft have one of the longest standing strategic alliances o its kind in the global industry. Titled the HP and Microsoft Frontline Partnership, HP and Microsoft joined their strengths in technology, engineering and other resources to develop solutions for improving productivity across the globe. But in the new era in the making, the alliance between HP and Microsoft evolved from enhancing PCs to the cloud, and now to data center innovations and emerging technologies of all sizes.The entire division reported an overall 8% increase in sales.  IDC issued that during the second quarter of 2024, worldwide PC shipments rose 3% YoY as they reached 64.9 million, but the market hasn’t recovered as much as HP had hoped. 

As for the struggling printing division, overall sales dropped 3% YoY to $4.14 billion, with consumer printing sales rising 2% and commercial sales contracting by 5%. The segment’s operating margins shrinked to 17.3%, down from last year’s comparable quarter when they amounted to 19%. 

Adjusted earnings per share amounted to 86 cents.

A weak short-term guidance from both HP and Xerox.

Due to PC pricing not having improved as much as HP hoped, and the printing segment remaining the biggest concern of analysts with a continued decline due to stiff price competition and the shift to home offices, HP cut its full-year profit outlook. HP guided for full fiscal year adjusted profit between $3.35 a share and $3.45 a share. It previously expected profit of $3.60 per share.

A brighter long-term outlook

Despite a 10% revenue decline and a lowered annual outlook, even Xerox CEO is anticipating a turnaround. Like another one of its peers, Dell Technologies Inc DELL HP is hoping the so-called AI PCs will spur the much-needed enthusisasm but despite the good momentum, they still make only a fraction of the business. Therefore, for the good of the above companies, may the AI-era upgrades continue!

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