HP Posts Steady Q2, Despite Notebook Slump

Solid commercial sales buoy the IT giant’s earnings while stymied consumer activity drags on the balance sheet, impacting both PCs and printing business.

Despite a dip in notebook sales and sagging consumer PC and printer revenue, HP Inc. saw modest gains in the second quarter with revenue of $16.5 billion (up 3.9 percent year-over-year) and executives remain confident in the face of supply chain woes.

The Palo Alto, Calif. IT powerhouse noted that revenue in its printing business had dropped 7 percent and consumer net revenue was down 6 percent. Total units shipped were down 17 percent, with notebook revenue taking the biggest hit – down a sizeable 23 percent.

On the print side revenue sank 7 percent year over year. Consumer print revenue was down 12 percent and commercial print net revenue was down 4 percent. Total hardware units shipped were down 23 percent.

On the bright side, personal systems net revenue was $11.5 billion, up 9 percent year over year.

During a press briefing just prior to the earnings call, HP CEO Enrique Lores said he was happy with the results. “We continue to deliver consistent results, while at the same time building a stronger HP,” he said. “I’m really pleased with our performance this quarter as we beat consensus for both revenue and (earnings per share). This was our record quarter for personal systems, driven by demand created by hybrid work solutions.”

Lores noted that commercial personal systems revenue grew by 18 percent and makes up 65 percent of HP’s total personal systems business. He also said peripherals and gaming grew by 40 percent each, driving $5.6 billion in revenue by the end of the first half of fiscal 2022. “We delivered on the commitments for the quarter and we continue to grow our new portfolio.”

Responding to a question about the drop in notebook revenue, Lores attributed some of the drop to a return to the office for many workers – with some of that business naturally shifted back to desktops and workstations. “The key message is really strong demand overall in commercial,” he said.

Lores admitted that the company will not escape impacts from the COVID-19 lockdowns that have impacted suppliers in China. Apple and Lenovo both warned investors of significant future losses from supply chain snarls created by those closures in and around Shanghai, one of China’s biggest tech manufacturing regions.

“We’ve already had some impact (from COVID China lockdowns) this quarter,” Lores told CRN. “But because of the location of our factories and where the lockdowns happened, I will say that the impact on our side has been smaller than what other companies have seen. Of course, we were impacted because some of our suppliers are based in the Shanghai area – that’s also impacting us from a logistics perspective because we have several logistics centers in that area.”

One partner said earnings announcement came as a pleasant surprise, but it may be a bittersweet victory as lagging consumer sales often translates to an overall slowdown. “I wasn’t expecting the earnings report to be this solid,” said Mike Turicchi vice president of Gaineville, Va.-based NCS Technologies (an HP Inc. partner). “The drastic drop in notebook shipments – that’s a little concerning for the future. It spells a little trouble on the horizon, but honestly, it’s something we expected to see. We’re on the brink of a recession in general.”

Turicchi said even if a bigger economic slowdown comes to pass, diversification may help ease the pain. He said his company and other channel partners have shifted to include focus on more peripherals and noted HP’s $3.3 billion purchase of peripheral giant Poly. “We really have to keep looking forward,” he said.