HP lowers profit forecast amid declining PC demand

In the context of the ongoing challenges in the global technology market, HP has forecast its first-quarter adjusted profit between 70 cents and 76 cents per share, which is below the analysts' expectations of 85 cents. This projection is indicative of a larger trend affecting the personal computer sector, where demand has significantly declined since the peak experienced during the pandemic. According to research conducted by Gartner, AI-powered PCs are expected to grow in market share, but their current representation stands at only 17% of total PC shipments. Although this category of PCs is expected to account for 43% of shipments by 2025, the current market sentiment reflects uncertainty as customers have not yet recognized the distinct benefits offered by these devices. Amid these challenges, Chief Financial Officer Karen Parkhill indicated that the company is experiencing heightened stock-compensation expenses in the first quarter, which will improve in successive quarters. HP has reported a slight increase in revenue, reflecting a 1.7% rise to $14.1 billion for the fourth quarter ending October 31, which slightly exceeds analysts' predictions. The slight growth in revenue is primarily attributed to HP's strategic pricing and cost actions aimed at mitigating margin pressures. The decline in the overall demand for personal computers can be traced back to a significant retreat from the buying spree that characterized the pandemic era, when consumers and businesses hastily acquired technology products. This shift has resulted in a contraction in the global shipments of traditional PCs, which dropped by 2.4% in the third quarter compared to the previous year, reaching 68.8 million units according to data from IDC. As the demand for AI PCs remains muted in the mass market, companies continue to seek opportunities to invest in technology upgrades within the corporate and educational sectors, where adoption rates appear to be healthier. As HP navigates these turbulent waters, the company's forecasts suggest a more cautious approach to planning for the future. The projected earnings adjustment reflects a broader trend of adaption across the industry as tech companies adjust to evolving market demands. HP's estimated adjusted profit for the fiscal year 2025, ranging from $3.45 to $3.75 per share, aligns more closely with analyst expectations, indicating a stabilizing view for the future if current efforts are maintained.