HP Inc. (HPQ) reported disappointing profit for its most recent quarter, but its CEO says the tech giant will see better results as AI PCs gain popularity and the company cuts costs.
CEO Enrique Lores told me on Yahoo Finance that the company will be “more aggressive” with cost cutting to improve profits, particularly in the printing business. The cost savings are part of a $1.6 billion plan hatched nearly a year ago.
The company’s revenue in the third fiscal quarter was mixed.
Consumer PC sales fell 1% in the quarter, while commercial sales improved 8%. PC sales as a whole rose 5%.
Similar to the previous quarter, business customers are upgrading their computers before Microsoft (MSFT) ends support for Windows 10 in October 2025.
Worldwide shipments of traditional PCs in the second quarter reached 64.9 million, up 3% year over year, according to data from IDC. It marked the second quarter of growth after eight consecutive quarters of declines. China was the only weak spot, IDC said.
“Make no mistake, the PC market, like other technology markets, will face near-term challenges due to maturity and headwinds,” said Ryan Reith, vice president of IDC’s worldwide device tracker.
HP continues to face challenges in the printing sector, due to fierce price competition and shifts in the market, such as more people working from home instead of in the office.
Print sales were down 3% year-on-year. Consumer print sales were up 2%, while commercial print sales were down 5%.
Operating margins for the print segment fell to 17.3% from 19% a year ago, the main culprit for earnings falling short of Wall Street expectations.
HP’s results follow weak earnings and cautious guidance from printing rival Xerox (XRX).
“Demand for laser and inkjet printers remains muted (particularly in China + Europe), which is having a negative impact on HP’s home printing and supplies business,” said Evercore ISI analyst Amit Daryanani. “We also note that aggressive pricing from competitors (who are benefiting from a weaker yen) is creating competitive headwinds for HP.”
The overview of the profits
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Net sales: $13.5 billion (+2.4% yoy) vs. $13.37 billion estimation
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Sales of personal systems: $9.4 billion (+5% YoY) vs. $9.1 billion estimate
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Print sales: $4.1 billion (-3% year-on-year) vs. $4.25 billion estimate
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Diluted earnings per share: $0.83 (-3% YoY) vs. $0.86 estimate (Guide: $0.78-$0.92)
What else caught our attention?
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