HP Inc. (HPQ) beat second-quarter earnings estimates, reporting revenue of $12.8 billion (versus $12.6 billion expected) and adjusted earnings per share of $0.82 (versus $0.81 expected), and slightly revised its full-year outlook. The computer company also reported higher PC sales as industry demand rebounded on hopes of AI innovation.
HP Inc. CEO Enrique Lores sat down with Yahoo Finance Editor-in-Chief Brian Sozzi to discuss revenue numbers, consumers' need to “refresh” and upgrade their personal technology, and what HP is bringing to the table with its AI-powered devices.
“This is because our PC business is growing. [was] The commercial sector, particularly large and small businesses, is leading the way [small and medium-sized businesses]”We have an older install base and a strong need to modernize now. We also believe that AI will have a huge impact, but it will take time to become widespread,” Lores said, adding:
Lores expects AI PCs to grow from 10% of the market at launch in 2024 to 46% in three years, explaining that the HP computers will have two processors to handle the workload: “We've done a lot of work to ensure we're not just meeting customer demand, but exceeding their expectations.”
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This post Luke Carberry Morgan.
Video Transcript
HP has announced their latest results.
Now let's turn to Enrique, the CEO of HP, who is always excited to have some fun with you all.
So my takeaway from this quarter's results is that the PC market is finally stabilizing.
Is that a fair assessment compared to three months ago?
I think that's a good valuation, not just compared to three months ago, but compared to a couple of quarters ago.
This is the first quarter in eight that the company has seen growth in its PC business, driven in particular by its commercial divisions in both enterprise and SMB.
Therefore, we are pleased with the progress made by P CS and expect this progress to continue in the second half of the year.
Well, I think the commercial side of the business might surprise some people on the PC side.
Enrique, the driving force behind this is getting back to work.
Well, more and more people were coming into the office and they realized that their computers were four or five years old and no longer worked.
I think it's a combination of factors, one of which is, as you say, the installed base is aging and now small businesses and large enterprises are realizing they need to change.
We are approaching a big window, a refresh window, 11 refresh.
This will also impact growth and the need to accelerate P CS renewal.
And I think it's because with all the innovations that we've brought to market, things like AI integrating better communication for P CS, there's been a lot of innovations that customers are beginning to recognize that can have a very positive impact from a DVD perspective.
Are you surprised to see businesses, and to a lesser extent consumers, upgrading their computers in anticipation of the AI PC era?
Why go to such lengths now when you can get something even more powerful by waiting a few minutes, or even a few dollars?
Well, first of all, Lewis, the installed base is old and there's a real need for a refresh right now.
Second, we believe AI will be hugely impactful, but it will take time for it to become widespread.
This year, we expect AI in P CS to be only 10% higher in the second half of the year, growing to 46% three years after launch.
So, change isn't going to happen anytime soon.
The quarterly guidance provided by HP will need to be revised, and that will take time.
Well, um, my surprise might surprise some people.
How much have you built in in terms of early shipments?
There are two new A IP CS.
Well, there's some integration, but the main driver is coming from the update cycle due to the move to Windows 11 that I mentioned before.
In the United States, budgetary restrictions led to increased federal government business in the first half of the year, which impacted our federal government business, but we expect this business to accelerate going forward.
Now, in the second half, pitch me on AI PC Enrique.
So two big things and three big things.
The first is a significant increase in productivity.
Second, it's personalized based on how you use it.
For example, it optimizes battery life and, thirdly, it offers a much safer solution than anything we have had before.
These computers will run a variety of AI bots and applications.
How do these computers handle this processing power?
Why don't some of these computers melt?
I'm not saying computers are going to melt, but a lot of things are going to happen with these computers.
How can they handle all this?
Well, there are many innovations in new products.
And from a performance perspective, it's going to have the same processors as before, for example, it has two processors.
And then there's the special TPU or GP U that handles all the AI work.
So essentially your PC has two processors, each specialized for each type of activity.
Plus, of course, we've redesigned the entire board to include faster, larger memory than ever before.
That's why we have put in a lot of work to ensure that we are not only able to meet our customers' demands but also exceed their expectations.
HP is not the only company considering building an A IP CS.
Um, can you get the chips needed to build these?
Yes, we do not foresee any limitations in terms of availability of the P CSs we have introduced or that we plan to introduce in the coming months.
On the printer side, you and I have discussed this business.
Yep, a lot over the years.
Enrique, this is a tough quarter for the printers business, not so much in terms of margins, but in terms of revenue.
Do you think we'll see any inflection points in printer sales over the next 12 months?
Yes, I think it was a difficult quarter, but the results were in line with expectations.
And now, as we look ahead to the second half of the year, we are beginning to see stabilization and recovery.
Therefore, we expect the second half of the year to perform better than the first half. Part of the pressure on sales is that Japanese competitors are being forced to offer lower prices than their U.S.-based counterparts.
Well, obviously, the G has a huge advantage over all its Japanese competitors right now.
That's why we're aggressively reducing costs and working even more aggressively in the second half of the year to ensure we achieve our goal of driving profitable growth.
We are not interested in selling units with low or negative margins.
We want to sell units at a profit and have adjusted our costs to be competitive in this new environment.
I'd love to hear about Printer Enrique's deal.
I'm just saying that I really want to care.
Well, if you want a great deal, sign up for our subscription program which includes both Instant Ink and Instant Paper.
With our all-in-one offers, you can get a fully featured printer for a very small amount of money and meet all your needs.
Okay.
Well, you saw me at AI PC and A and you saw the great prices on printers.
Enrique.
Lares.
Well, HPC O, it's always nice to see you.
I'll talk to you soon.
Good to meet you, Brian.
thank you.
