HP cites strong demand for AI PCs as it beats expectations on revenue, but investors aren’t impressed – News

HP Inc.’s stock traded lower in extended trading late today after initially rising in the wake of its third-quarter financial results.

The company surpassed analysts’ expectations on earnings and revenue and said it’s seeing solid demand for its new generation of artificial intelligence-capable personal computers, but its guidance for the current quarter failed to reflect that optimism.

The PC and printer manufacturer reported earnings before certain costs such as stock compensation of 75 cents per share, matching Wall Street’s forecast. It also delivered total sales of $13.9 billion, up 3% from a year earlier and ahead of the $13.69 billion consensus estimate.

The slight bump in revenue helped HP to boost its bottom line, and it reported net earnings of $763 million in the quarter, up from $640 million in the same period one year ago.

HP President and Chief Executive Enrique Lores (pictured) hailed the company’s fifth consecutive quarter of revenue growth, saying this was the result of strong momentum in key growth areas. “These results demonstrate our agility and focused execution in the quarter, reinforce the strength of our strategy, and our commitment to be a leader in the future of work,” he added.

HP’s stock quickly rose around 2% on the report, but the initial momentum faded and those gains were soon pared back, and it was trading almost 3% lower at the time of writing.

A lot of attention was paid to Lores’ comments on a conference call with analysts, who were eager to find out how U.S. trade tariffs are impacting the company. While some technology hardware is exempted from the heaviest tariffs imposed by U.S. President Donald Trump due to ongoing investigations, HP is not totally immune to the country’s shifting trade policies.

Lores insisted that the company is “executing with discipline” in a dynamic environment. He explained that the company managed to avoid some of the heaviest China tariffs by moving manufacturing away from that country to other nations, where there are currently no tariffs for PCs.

However, he admitted that the company’s printer business didn’t come through completely unscathed. “We have been impacted by the trade changes across the board by the reciprocal tariffs, and what we have been doing is rebalancing manufacturing into the countries that were more favorable, driving more accelerated cost reductions, and also in some cases, selectively taking prices up to compensate for that,” Lores explained.

HP’s stock has declined 17% in the year to date, not only from ongoing concerns about the impact of tariffs, but also fears of weakness in the PC market. But Lores said the company was seeing stronger-than-expected demand for PCs, especially in the consumer segment.

The CEO said sales of PCs were boosted due to the growing interest in its so-called “AI PCs,” which are fitted with powerful chipsets to process AI workloads on the device. According to him, AI PC sales rose by double-digits on a sequential basis, and he believes this is a trend that will accelerate next year. “If you are buying a new PC now, you don’t want to buy a PC that will not be able to take advantage of all these improvements that will continue to come to market in the coming months and years, so you better upgrade to an AI PC,” Lores said.

The PC business is also getting an annual boost due to the “back-to-school” season, which Lores said has “started strong” so far. In addition, HP also stands to benefit from the imminent end of support for Microsoft Corp.’s Windows 10 operating system. That company is planning to stop providing software updates and technical support for Windows 10 users at the end of October, unless customers pay an additional fee.

Lores said that just over half of the Windows installed base has made the transition to Windows 11 so far, which suggests that many more are likely to upgrade their PCs soon.

Despite Lores’ apparent optimism, HP’s forecast for the third quarter was a tad conservative. The company said it’s expecting third-quarter earnings of between 87 and 97 cents per share, the midpoint in line with Wall Street’s forecast of 92 cents per share.

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