HP sees AI computers as ‘accelerator of demand’ in PC market, growing in ’25 and ’26

HP Inc. (NYSE:HPQ) sees artificial intelligence personal computers being a demand accelerator in the PC market.

The company also aims to integrate AI into its portfolio to enable a hybrid work environment, which would significantly improve productivity for employees.

HP’s CEO Enrique Lores was speaking at the Goldman Sachs Communacopia + Technology Conference on Monday and responded to questions on the company’s recent earnings, AI and future growth catalysts, among other things.

Discussing the recent fiscal third quarter earnings, wherein HP missed non-GAAP EPS estimates, Lores said that the most important thing was that the company returned to growth, as it had not been growing for a few quarters.

“We expect the PC market to be to slightly grow in 2024 and to grow more in 2025. On the other side, we shall continue to see decline on the Print side,” added Lores.

Regionally, China continued to see significant decline, while the company saw significant growth in India, which it sees as a source of future growth, according to Lores.

Talking about the PC market, Lores noted that HP expects the market to grow in 2025 more than it would in 2024, mainly due to three reasons.

Firstly, due to a large and aging installed base on PCs, as any of these systems were bought during COVID and now they would have to be replaced. Secondly, HP sees an opportunity driven by the Windows 11 refresh that is starting now. Microsoft had announced that it would start discontinuing support from the previous versions, and it ties with the replacement and upgrade.

Thirdly, the introduction of AI PCs, with some this year, but more in 2025 and 2026. “We think that the introduction of AI PCs, especially a software vendors will start taking advantage of the new functionality and new capabilities,” said Lores. He added that this is going to be an “accelerator of demand on the PC side.”

Lores stated that HP’s business is close to 75% commercial, 25% consumer. “So for us the Commercial PC business is way more relevant not only in units, but especially in pricing where we see higher prices, higher ASPs and therefore, also better margins on the commercial side.”

For the consumer side, he noted that overall consumer spend in hardware categories has been soft. However, Lores stated that at some point though, refresh would have to happen. Besides aging, the company thinks that AI is also going to have an impact on the consumer side.

“And more and more applications will start taking advantage of that, whether it’s in gaming or in other areas, this will drive demand. And we think it will also have an impact on in consumer,” Lores noted.

Speaking on AI PCs outlook, Lores said that three years from now, AI PCs will be around 50% of shipments in the market and that they will drive between a 5% and 10% average selling price, or ASP, increase of the total PC category.

The HP chief added that the impact in 2024 is going to be small but it will be more in 2025 and even more in 2026.

Next-generation AI PCs are only starting to be available, according to Lores. He added that HP made the first announcement in June with Qualcomm (QCOM), and in July with AMD (AMD) and shipments are only starting.

Lores also spoke about HP investing in the headsets, speakers, and camera space, both in the commercial side and in the gaming side, noting that consumers spend significant amount of money in peripheral.

“And this was an area where we were underrepresented and now, we have some portfolio in both cases that will help us to drive growth,” Lores commented.

He added that gamers spend three times more money in peripheral than they do in their PC and with HyperX, HP now has a strong portfolio of gaming peripherals, which are margin accretive for the company, and where it sees growth opportunity by improving a touch.