HP Q3 Earnings: CEO Lores Calls AI PCs ‘An Incredible Growth Opportunity’ For Partners

HP will 'continue to invest in our partners so they can take advantage of this opportunity,' CEO Enrique Lores tells CRN in an interview.

HP CEO Enrique Lores called the emerging artificial intelligence PC market “an incredible growth opportunity” for solution providers and encouraged them to leverage the computer maker’s certification resources to get ready for the AI wave – while acknowledging a slower recovery than expected for printers.

“We have been building training programs for them because we think this is an incredible growth opportunity, and we need to make sure that they are ready for that,” Lores told CRN as part of a briefing ahead of HP’s third-quarter earnings release on Wednesday. “We launched a certification program on AI for our channel partners – both for, let's say, product-oriented and service-oriented partners.”

Lores said that the program has had “a very good reception” so far and pledged that the Palo Alto, Calif.-based vendor will “continue to invest in our partners so they can take advantage of this opportunity that we think is fantastic for them.”

HP Q3 Results

HP has about 250,000 channel partners worldwide, according to CRN’s 2024 Channel Chiefs.

The vendor reported earnings Wednesday for the third quarter of its 2024 fiscal year. The quarter ended July 31.

During the conference call CRN participated in with Lores, the CEO also said that HP is “pleased with the momentum that we are building,” with HP returning to revenue growth during the quarter driven in part “by strong performance in commercial PCs.”

When asked on the conference call about how AI PC sales are going, Lores said, “Things are going (as planned). But it is early. … We just did the launch a few weeks ago. … Orders are as (planned). But we are only (just) starting.”

Lores said that AI PCs should help the commercial and consumer markets, with faster adoption by consumers.

“Commercial customers, especially big customers, need to go through an evaluation process that takes a few weeks or a few months,” he said. “This is naturally going to delay the adoption of AI PCs, but this is what we're expecting. So nothing different from what we're expecting a few months ago when we started to define the category.”

Lores continues to expect that next-generation AI PCs “will represent around 50 percent of the total PC category three years after launch, and that they will drive an average price increase of between 5 and 10 percent.”

Slower Recovery In Printers

HP continues “to navigate dynamic and competitive markets,” with the print market not recovering “as we were expecting,” Lores said on the conference call. “We are taking actions to compensate for that … to accelerate our structural cost savings to compensate for some of the market slowdown.”

When asked for more details on the conference call, Lores said that HP is seeing the slowdown “especially in the office space in the hardware side.”

“Hardware for office is not growing as we were expecting,” he said. “We have seen return to growth in the home side, in consumer … where we saw growth for the first time in multiple quarters. And supplies, and especially usage, are going as (planned).”

The other printer segments’ performances lead Lores to believe that commercial print’s slower recovery “is temporary.”

Although Lores did not detail on this call specific changes HP has made to manage and reduce costs, he said that HP has started doing “cost reduction activities” this year instead of waiting until next year.

“We were we were expecting to achieve by the end of the year 70 percent of the savings, and we are going to achieve now 80 percent of the savings of the program we announced two years ago,” he said.

HP expects a strong fourth fiscal quarter and is “confident in the path forward.” HP’s “Future Ready” plan continues to pay off, Lores said, with innovation investments “enabling us to deliver industry leading experiences, especially around AI and hybrid.”

AI PCs have “had very positive reactions from customers,” Lores said, with HP starting OmniBook X and EliteBook Ultra AI PCs in June. HP’s Workforce Experience platform has reached 250,000 devices connected or managed, “exceeding expectations.”

HP Chips Act Project

When asked on the conference call about the $50 million in federal funding HP stands to get under the U.S. Chips and Science Act for a fabrication plant in Oregon, Lores said that the fab is responsible for some manufacturing and design related to semiconductors for ink cartridges.

Over the last few years, HP has been developing the next generation of the technology used at the fab under the internal name of G5, Lores said.

With the funds, “we are going to accelerate the exploration of how to use this technology in other spaces, like, for example, life sciences or sensors.”

Q3 In Depth

HP reported net revenue of $13.5 billion for the quarter, up 3 percent year over year ignoring foreign exchange. HP saw free cash flow of $1.3 billion.

The personal systems segment brought in $9.4 billion in net revenue, up 5 percent year over year. Consumer PS net revenue fell 1 percent year over year. Commercial grew 8 percent.

Total units grew 1 percent. Consumer units fell 6 percent and commercial units grew 6 percent, according to HP.

Printing net revenue fell 2 percent year over year ignoring foreign exchange, resulting in $4.1 billion for the quarter.

Consumer printing net revenue grew 2 percent. Commercial fell 5 percent. Supplies net revenue fell 1 percent ignoring foreign exchange. Total hardware units fell 2 percent – with consumer printing units flat and commercial units down 4 percent.