HP Inc. slipped about 3% in premarket trading Thursday after cutting its full-year profit outlook on a continued downturn in its printing unit.
The disappointing profit forecast overshadowed the company’s first revenue gain in two years, suggesting an end to a long slump in demand for personal computers.
Profit, excluding some items, will be $3.35 a share to $3.45 a share in the fiscal year ending in October, HP said Wednesday in a statement. That’s down from its previous outlook of as much as $3.60.
Printing unit sales fell 3% to $4.14 billion, a steeper loss than expected by analysts. Despite providing a smaller portion of total revenue than PCs, the printing business is much higher-margin and makes up a disproportionate share of the company’s earnings. Printer supply revenue is HP’s leading profit driver, said Woo Jin Ho, an analyst at Bloomberg Intelligence.
Sales declines in the printing business are expected to continued at least through the end of the year, Chief Executive Officer Enrique Lores said in an interview, adding that businesses have little incentive to upgrade their printers at this point.
Fiscal third-quarter sales rose 2.4% to $13.5 billion, HP’s first year-over-year sales increase in two years. The growth was led by a resurgence in PC sales to businesses, Lores said. An aging pool of computers and the looming end-of-support for Microsoft Corp.’s Windows 10 helped push companies to upgrade their equipment, he said. Sales of consumer-oriented PCs declined 1% — a smaller drop than expected by analysts.
Profit, excluding some items, was 83 cents a share in the period ended July 31, compared with analysts’ average estimate of 86 cents, according to data compiled by Bloomberg.
The PC market had seen a historic decline over the last two years after many consumers, businesses and schools purchased laptops in the early months of the pandemic. A long-awaited rebound began to materialize this year. In the second quarter, shipments picked up 3% — the second increase since the end of 2021 — industry analyst IDC said in July.
Palo Alto, California-based HP and peers such as Dell Technologies Inc. recently embarked on a marketing blitz for a new type of computer they are dubbing “AI PCs,” promising artificial intelligence features embedded in laptops and desktops. Lores said the devices have seen “good momentum,” but at this point remain a small share of the company’s overall business.
The company also announced a $10 billion share buyback program, its first since February 2020.
