A sign is placed in front of a Hewlett-Packard (HP) office on May 29, 2024 in Palo Alto, California.
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HP On Tuesday, it expected first-quarter earnings to fall short of Wall Street expectations, a sign of continued volatility in demand in the personal computer market.
Computer makers have seen demand decline from its peak during the pandemic, when customers stocked up on tech products. Furthermore, demand for AI-powered computers has remained weak in the mass market even as demand has increased in the corporate and education sectors thanks to companies and organizations looking to upgrade their machines.
While AI-powered PCs are expected to account for 43% of total PC shipments by 2025, they only account for an estimated 17% this year, according to research firm Gartner. AI-powered PCs have not boosted overall demand for PCs, as “buyers have yet to see their clear benefits,” said Mikako Kitagawa, an analyst at Gartner.
According to research firm IDC, global shipments of traditional PCs fell 2.4% from a year earlier to 68.8 million units in the third quarter.
HP expects adjusted earnings per share to be between 70 cents and 76 cents for the first quarter, below analyst estimates of 85 cents, according to data compiled by LSEG.
“Our stock compensation expenses are higher in the first quarter and improve in subsequent quarters,” CFO Karen Parkhill said.
“We are taking pricing and cost actions to offset some of the margin headwinds in personal systems and that will have a more significant impact in the back half.”
The company reported a 1.7% increase in revenue to $14.1 billion for the fourth quarter ended October 31, compared to estimates of $13.99 billion.
The PC maker's adjusted earnings of 93 cents per share met expectations.
For fiscal 2025, the company expects adjusted earnings to range between $3.45 and $3.75 per share, the middle of which is in line with analyst estimates.
