HP's performance slightly better than expected, raised full-year EPS guidance, stock price rose 6.7% after hours | Financial Report Insights

On Wednesday, May 29th, HP released its Q2 quarterly financial report (ending April 30, 2024). Overall, HP's total revenue slightly declined to $12.8 billion, a decrease of less than 1%, but still exceeded analysts' expectations of $12.6 billion; adjusted earnings per share were $0.82, in line with analysts' expectations of $0.81.

By segment, in Q2, HP's computer division saw a 3% year-on-year increase in revenue to $8.43 billion, higher than analysts' expected $8.28 billion. This marks the first year-on-year growth for the division since May 2022, providing important clues to the recovery of the personal computer market.

In detail, the growth in the computer division is mainly attributed to strong growth in commercial sales, with commercial sales increasing by 6% year-on-year to $6.24 billion. Consumer sales, on the other hand, continued to decline, falling by 3% year-on-year to $2.18 billion.

At the beginning of the pandemic, as many consumers, businesses, and schools purchased a large number of laptops, the global personal computer market saw a surge in sales, with demand brought forward leading to a decline in PC sales over the following two years. It wasn't until April this year that signs of recovery in the PC industry began to emerge. Data released by industry analysis firm IDC shows that in the first quarter of 2024, PC shipments saw their first growth since the end of 2021, with an increase of 1.5%. Some analysts also point out that with Microsoft planning to launch a new version of Windows operating system in 2024 equipped with AI tools, the personal computer market will accelerate its growth.

In response, HP CEO Enrique Lores also expressed optimism, stating that with the AI-equipped personal computers launched by HP at the recent Microsoft conference, the shipment volume of AI personal computers is expected to account for around 10% of the company's total shipments in the second half of 2024. Three years after the launch, this proportion is expected to rise to about 50%, which will significantly impact the company's financial performance in 2025 and 2026. Bernstein analyst Toni Sacconaghi also pointed out that the proliferation of AI PCs is expected to drive up HP's stock price and market valuation.

Looking ahead, HP expects adjusted earnings per share for the third quarter to be between $0.78 and $0.92, which is essentially in line with analysts' expectations of $0.85; full-year adjusted EPS is expected to be between $3.30 and $3.60, compared to the company's previous estimate of $3.25 to $3.65.

After the financial report was released, HP's stock price rose by 6.7% in after-hours trading on the US stock market, bringing its year-to-date gain to about 9%. However, compared to peers such as Dell Technologies, HP's performance still lags behind. Dell's stock price has doubled this year due to the strong prospects of its artificial intelligence servers