HP Inc. CEO Lores: AI PC Adoption Will Be ‘Gradual’

‘The impact [of AI PCs] in 2024 will be small. … We need to have the PCs and the hardware ready. But more important, we need the applications to be ready. And this is going to take time. So this is why we think the adoption will be gradual,’ says HP President and CEO Enrique Lores.

A slowdown in HP Inc.’s revenue decline combined with a continued gain in PC market share are solid signs that HP and the market as a whole are stabilizing, company CEO and President Enrique Lores told press and analysts in a Wednesday meeting.

HP delivered a solid quarter while navigating a volatile market, which was reflected in the company’s first fiscal quarter 2024 financial results, Lores said.

“Operating profit grew 5 percent and non-GAAP EPS [earnings per share] grew 11 percent year on year,” he said. “We also saw a slowdown in the revenue decline for the third [straight] quarter, which we really see as a sign of market stabilization. I also want to highlight that we executed well. We gained PC market share for the fourth straight quarter. And in our growth areas, we saw several bright spots where businesses grew. And I want to especially highlight that both of our services businesses, consumer services and workforce solutions, grew this quarter.”

[Related: Analysis: 5 Takeaways On The State Of AI PCs And Why Big Channel Vendors Are Excited]

Lores also highlighted a number of areas of HP innovation, including the fact that it won over 100 awards at January’s CES event.

“And we have great momentum in developing and designing the AI PC, which you are going to all see later this year,” he said. “I will be sharing some exciting news. Another exciting thing personally for me is tomorrow we are going to be launching the new consumer print subscription program that will integrate hardware for the first time, and it’s a major step in getting us closer to offering our full portfolio as a subscription. It’s an important step forward.”

Lores also said that HP next week will be bringing its top worldwide resellers together at an event in Las Vegas where the company will share news about the additions to its portfolio of products and solutions. Joining the company on stage, either in person or virtually, will be the CEOs of Microsoft, Google, Nvidia, Intel, AMD, and Qualcomm.

During the question-and-answer period after Lores’ prepared remarks, he responded to a question about the plan for introducing AI PCs by saying HP will have more details about the company’s product line a week after the reseller event, but that it will be discussing the overall direction of the industry at the event.

When asked about potential short-term risks to the AI PC market from business users not knowing how to use them initially, Lores said the risk is there, but that it should not be material.

In terms of how fast revenue will shift from traditional PCs to AI PCs, Lores said HP thinks it will be gradual.

“We have shared before that three years after launch we expect the mix to be between 40 [percent] and 60 percent AI PCs versus traditional PCs,” he said. “But it's going to take time until this happens. The impact in 2024 will be small. … We need to have the PCs and the hardware ready. But more important, we need the applications to be ready. And this is going to take time. So this is why we think the adoption will be gradual.”

When asked about how PC demand is impacting HP, Lores said HP is seeing a lot of caution from the commercial side.

“Second, we are starting to see signs of stabilization on the SMB side, on the education side, which will also [be included] as part of commercial,” he said. “And regionally we also saw positive PC growth in Europe, which had not happened in a while. … We saw weakness, or softness, in the enterprise side and the federal side in the U.S., and especially in the month of January. So again, we continue to see a volatile environment. We see stabilization happening, but it's not happening at the same time across the board.”

Lores, responding to a CRN question about how HP’s channel business has changed in the past year, said HP’s channel performance is absolutely connected to the company’s performance.

“We are a channel company, and a big majority of our business is through channels, so no big deviations there,” he said. “I think as we shift to subscriptions, all our models are really designed to build them and to grow them in collaboration with channel partners. It’s not about moving direct. It’s really about how do we do it together. And this has been the goal for the company and will continue to be. So what we are doing is really offering additional business and an additional way for the partners to work with us.”

HP By The Numbers

For its first fiscal quarter 2024, which ended Jan. 31, HP reported total revenue of $13.19 billion, down 4.4 percent from the $13.80 billion the company reported for the same period of fiscal 2023.

That included product revenue of $12.42 billion, down from last year’s $13.04 billion, and services revenue of $766 million, up from last year’s $754 million.

HP also reported personal systems revenue of $8.81 billion, down 4 percent, with commercial personal systems revenue falling 5 percent to $6.05 billion and consumer personal systems revenue falling 1 percent to $2.76 billion.

HP’s printing business revenue for the quarter fell 5 percent to $4.38 billion, with supplies revenue flat at $2.86 billion, commercial printing revenue down 12 percent to $1.23 billion, and consumer printing revenue falling 22 percent to $285 million.

For the quarter, HP also reported GAAP net earnings of $622 million, or 62 cents per share, up from last year’s $469 million, or 47 cents per share. On a non-GAAP basis, HP reported net earnings of $808 million, or 81 cents per share, up from last year’s $731 million, or 73 cents per share.