HP Inc reported sales and profit that topped analysts’ estimates on steady demand by companies upgrading computer systems.
Still, the results pointed to some potential issues ahead for the hardware company as consumer spending fell for personal computers and printers.
Fiscal second-quarter revenue increased 3.9% to $16.5 billion, Palo Alto, California-based HP said Tuesday in a statement. Analysts, on average, projected $16.1 billion. Most of the gains came from business demand for desktop computers. Fiscal second-quarter profit, excluding some items, was $1.08 a share, topping estimates.
HP said Personal Systems division revenue increased 9.2% to $11.5 billion, led by commercial sales. But consumer sales declined 6% and notebook units declined 23% in the period, which ended April 30. Printing revenue declined 7% to $5 billion, with total hardware units down 23%.
The consumer slowdown was particularly acute on low-end products and in Europe and China, while premium machines and gaming saw “strong demand,” HP chief executive officer Enrique Lores said in an interview.
PC shipments industrywide declined 6.8% in the first three months of the year, spurred by reduced demand particularly for Chromebooks used by schools.
Rival PC-maker Dell Technologies Inc reported earnings that beat analyst estimates last week. “The difference is Chromebook exposure. Dell didn’t have as much Chromebook exposure – HP does,” said Bloomberg Intelligence’s Woo Jin Ho. HP is also more exposed to the consumer market, which may be more affected by macroeconomic concerns like inflation, Ho said.
“Despite the softer consumer, we’re certainly seeing strength on commercial,” said HP chief financial officer Marie Myers in an interview. “The commercial side is approximately 65% of our portfolio now and I think that’s a trend that’s going to continue.”
The shares rose about 2% in extended trading after closing at $38.84 in New York. The stock has gained 3% this year, running counter to a general decline in technology shares.
In March, HP acquired Poly, formerly known as Plantronics Inc., which sells phone headsets and other audio and video accessories, in a $3.3 billion deal to add equipment for remote work. The company expects to complete the takeover by the end of 2022, pending shareholder and regulatory approval. It’s projecting annual growth for Poly of about 15% in the first three years after the deal closes.
While components are easier to procure than last year, supply chains continue to be a barrier to meeting demand, Lores said.