HP Inc. surpassed first-quarter revenue expectations, fueled by robust performance in its personal systems division and the increasing demand for AI-powered systems. This positive news was tempered by the announcement of additional layoffs and a lower-than-expected Q2 profit projection.
The company revealed plans to cut an additional 1,000 to 2,000 jobs as part of its ongoing restructuring plan. This move is anticipated to yield approximately $300 million in savings by fiscal year 2025. Despite exceeding revenue expectations, HP’s stock dipped over 3% in after-hours trading following the release of their second-quarter adjusted profit per share guidance. The projected range of 75 to 85 cents fell short of the 86-cent consensus estimate from analysts.
Several factors are contributing to the complex dynamics of the PC market. The impending Windows 10 end-of-support deadline in October is expected to trigger a significant refresh cycle, compelling millions of users to upgrade their devices. Furthermore, the introduction of AI-capable PCs, equipped with high-performance processors designed for AI workloads, is projected to fuel demand.
However, concerns regarding profit margins are escalating. Recent trade tensions and potential tariffs on Chinese goods pose a challenge to manufacturers like HP. In response to these concerns, HP CEO Enrique Lores stated the company is actively diversifying its supply chain. By the end of October, HP anticipates that over 90% of its products sold in North America will be manufactured outside of China.
Recent market analysis indicates a sustained period of growth in the PC sector. Data from Canalys revealed a 5% increase in global PC shipments during the fourth quarter, marking the fifth consecutive quarter of growth.
For the first quarter ending January 31, HP reported revenue of $13.5 billion, exceeding the average analyst estimate of $13.36 billion. The Personal Systems segment, which includes desktop and notebook PCs, saw a 5% revenue increase to $9.2 billion, with commercial PS net revenue growing by 10%. This growth underscores the continued importance of the PC market and HP’s strong position within it.
In conclusion, HP’s first-quarter results present a mixed picture. While the company exceeded revenue expectations driven by strong PC sales and growing demand for AI-powered systems, the announced layoffs and lower-than-expected Q2 profit guidance highlight the challenges and uncertainties facing the industry. The company’s strategic efforts to diversify its supply chain and capitalize on the upcoming Windows 10 refresh cycle will be critical to its continued success.
